Google Inc is lifting restrictions on the use of trademarked terms in its U.S. online advertising system, a move that could increase friction between the Internet giant and brand owners.

The new policy will allow businesses to place trademarked terms directly in the copy of text advertisements that run in the US starting next month, the company announced in a blog post on Thursday.

The move, which Google said will improve the quality of its advertisements, comes as advertisers have begun bidding less money for the individual search terms that their ads appear alongside and as Google's revenue growth slows in the dismal economic climate.

Until now, Google has forbidden companies from placing trademarked terms in their advertising copy unless they owned the trademark or had explicit permission from the trademark owners.

That policy was the equivalent of a supermarket promotion in a Sunday newspaper that only listed generic products like discount cola instead of the actual products for sale, Google said in its blog post on Thursday.

The new policy will allow resellers and informational Web sites to use trademarked terms in their copy in certain situations without seeking permission from the trademark owners.

The move represents the second recent loosening of Google's policies on trademark use. Earlier this month, Google said it would allow companies in 190 countries outside the US to bid on trademarked keywords that act as the triggers for their own advertisements.

Google is also facing new legal challenges from trademark owners.

On Monday, Firepond, a Texas software company, filed a trademark infringement suit against Google seeking class action status for all Texas trademark owners.

Brand owners have historically had serious concerns about Google's policy with regards to trademarks, said Eric Goldman, Associate Professor of Law at Santa Clara University School of Law.

Google's latest policy change is kind of like pouring gasoline on the fire, he said.

The change may help consumers better understand sponsored search results, by allowing the advertiser to reference trademarks in their marketing pitches, Goldman said. But he predicted that the change could spark more legal challenges.

Google Senior Trademark Counsel Terri Chen acknowledged some people might be unhappy with the change, but she said she believed the ads would be well-received overall.

Chen said the policy was well-established legal principle in the US. Google is changing the policy now, she said, because it was more comfortable it had a process in place to monitor situations that don't comply with the new policy.

(Reporting by Alexei Oreskovic; Editing by Anshuman Daga)

Marketing Intellectual property law Google Advertising