Google Inc., no stranger to lawsuits, suffered a setback in the U.S. Court of Appeals this week after the court upheld parts of an appeal by Hyperphrase Technologies concerning Google's AdSense and the Autolink feature of its popular toolbar for browsers.

Charges filed in April of 2006 alleged that Google's features infringed on four patents held by Hyperphrase concerning the contextual linking and display of information. The U.S. District Court for the Western District of Wisconsin found in Google's favor in the case and dismissed the suit. Hyperphrase appealed and now has gotten some headway within the U.S. Court of Appeals for the Federal Circuit.

Revolving around the argument that the patents held by Hyperphrase concern "data reference," the Court of Appeals decided that two of the infringement allegations, which related to AdSense, did not apply and upheld the lower court's finding. Two others concerning the AutoLink technology were re-examined, however, and the court has remanded the case to the federal district court.

The Court of Appeals ruling stated that the lower district court used a faulty interpretation of "data reference," a term used in the patent to describe the way links are made between text in a website and an element contained in a database which contains the actual link information. The court found that AutoLink may in fact infringe upon the existing Hyperphrase patent.

The AutoLink feature reads through a web page's text and parses out information in familiar formats. Some examples are linking ISBN numbers to online book stores, tracking numbers to delivery status pages and even linking street addresses to further information. The connection between parsed text keywords and a database of information is what relates AutoLink to the Hyperphrase patents.

As AdSense does not parse information in the same way as AutoLink, but rather infers a topic and displays advertisements it finds relevant; the feature does not infringe upon the "data reference" patents, the Court of Appeals said.

This will likely not be the end of patent infringement cases for Google. Another such case brought by Northeastern University and a company called Jarg alleges that Google's method of breaking database queries into fragments to distribute amongst multiple computers touches on an existing patent. Google has not yet responded to the allegation and has until January 11 to do so.