Harvard professor Benjamin G. Edelman, is suing Google for typo-squatting. Edelman says that Google is profiting from typo-squatting by engaging with companies that are taking advantage of existing trademarks costing advertisers $30-50 million a year.

“This is one of the unsavory ways we all end up paying Google,” Edelman says in an interview. “Users don’t have to write Google a check to receive Google’s services. But, one way or another, Google manages to get users’ money.”

Typo-squatting is the practice of registering web sites addresses that are spelled similarly to the legitimate site with one or more letters that changed, removed or added eg. bankofdamerica.com. In this case there is a “d” in the domain address and apparently there are 251 variations of the domain Bank of America registered for the purpose of typo-squatting.

According to Edelman, Google profits from typo-squatting websites that run ads using Google’s Adsense. When a user mistypes the web address they end up on the typo-squatted site and if they click an ad on that site they get paid by Google and the advertiser gets charged for it. Google splits 20-60% of the amount charged with the typo-squatting site.

Typo-squatters have devised many ways to increase traffic to their sites and increase clicks on their sites and hence increase their revenue – the advertiser gets charged and the revenue is shared between Google and the typo-squatted site. The typo-squatter Bankofdamerica.com, for example, has a sponsored link to the real Bank of America website. Typo-squatting, Edelman says, is illegal.

“There sure are a lot of these sites, in the millions,” Edelman said. “The overall majority show Google ads.” He said the top 2,000 web sites in the U.S. have over 80,000 typo-squatted domains including sites such as eBay, Facebook, Craigslist and MySpace.

Just as a thought experiment, Edelman estimated that if each typosquatting site earns $25 from Google each year, Google would might charge advertisers between $32 and $50 per year to place ads on just one of these sites. “With a million domains, that would be $32 – 50 million in gross revenue for Google,” Edelman said.

Edelman said that he thinks that these estimates are too conservative, and suggested that there are likely more than one million typosquatting domains and that the $25-per-year estimate for typosquatters’ revenue is too low.

Google attorney Maria Moran says Edelman’s allegations are “misguided,” and that Google is doing nothing illegal because it “merely distributes third-party advertisements.” She said Google is immune from liability and that the company removes infringing domains at the request of the trademark owner.

Google also stated that it has “no reason to know” whether a domain in its advertising program “could infringe a valid trademark” nor did Google provide any details on the revenue generated from typo-squatting.

Edelman, however, said Google is attempting to confuse two laws: the Anti-cybersquatting Consumer Protection Act with the Digital Millennium Copyright Act. “There is no similar safe harbor doctrine as to trademark infringement or typo-squatting,” said Edelman. And that Google is invoking a notification safe harbor as a defense to typo-squatting.

The law simply says, “do not typo-squat. Do not register, traffic in or use infringing domain names or confusingly similar names of trademarks,” Edelman says, referring to the Anti-cybersquatting Çonsumer Protection Act of 1999.

The class action lawsuit represents any American trademark holder whose Web sites have been targeted by typosquatters. “We believe class action adjudication is the most efficient way to resolve these companies’ complaints,” Edelman said. “It would be unreasonably complicated, costly, and time-consuming for all trademark holders to sue separately.”