Actually, companies pay a lot of money for shelf space. Most of the generics want to be right next to what they are knocking off. Even some retail supermarkets and such will purposely put their generic brand right next to a trademarked brand. I think as a real world analogy goes, its closer than the alternative. The shelf analogy is better because neither the google searches or the shelves actually hijack the "recognition" of the brand, however money is spent based on trademarked brand names to capitalize on the popularity of that specific brand. They can't say, "we're really transformers" and neither way does really, so thats probably the biggest qualifier.

It doesnt need to be just coke or transformers. "Spam," "Treet," and "Potted Meat Food Product" are all the same bizarre sort of thing for instance. Someone can go to a random restaurant and ask for a "blooming onion" and get a custom generic made. Some people may walk into a store and perform nearly an identical search that you can make with google. Walk up to smocked person (or gooogle bot) and ask for "Spam", they reply "Aisle 5" and you will see Treet on the shelf there as well as the real brand. If they even carry the real thing.

Decius wrote:
I don't think there is a "physical world" analogy that perfectly captures the situation where one company purchases advertising under the name of another company.

There are two problems with your coke and transformers analogies. The first is that you are using those words in a context where the trademark has nearly become synonimous with a category of things. People, particularly in the south, think of pepsi as being "a kind of coke" instead of a kind of cola or pop. The situation I'm referring to does not have that aspect.

The second problem is that in neither scenario does the competitor (pepsi or gobots) pay money specifically to have their product categorized under their competitor's trademark, and I think that is a significant difference. Pepsi cannot print "a kind of coke" on their labels, and they cannot print up signs that say "coke" and ask their retaillers to put those signs next to the pepsi display in their stores. This is dillution at best and it is illegal.

RE: Google's broken Trademark precident