LVMH, Viaticum and Eurochallenges took action against Google
The European Court of Justice has ruled in favour of Google in a dispute with luxury goods maker LVMH.
The firm is owner of Louis Vuitton, Moet & Chandon champagne, Dior perfume and other brands.
It had claimed that Google's practice of selling keywords in advertising searches to the highest bidder damaged trademark law.
It means that people searching for branded products could also be shown rival brands or counterfeit goods.
Google's Adword service, which allows companies to bid for places in the sponsored listings at the top and to the right of the natural search results generated by a query, is a key source of revenue for the company.
"Google has not infringed trademark law by allowing advertisers to purchase keywords corresponding to their competitors' trademarks," the ruling found.
LVMH said that the ruling clarified the rules of online advertising.
"We want to work with all the players, including Google, to eradicate illegal practices online," said LVMH vice-president Pierre Code.
In a post written for Google's blog, intellectual property lawyer Dr Harjinder S Obhi commented that the result recognised "a fundamental principle behind the free flow of information over the internet."
Trademarks are "not absolute" added Dr Obhi, saying that if a user is looking for a particular model of car, for example, they expect to see other car dealers in addition to the manufacturer's own website included in search results.
The "bad user experience" of counterfeit good sales was also a separate issue Dr Obhi argued.
"(Google has) strict policies that forbid the advertising of counterfeit goods."