The Utah State legislature quietly passed through a bill outlawing advertising via search engines on competitor's keywords, stating that a company's name is an "electronic trademark" for the Internet.
Google claims the law violates both free commerce and free speech rules and things that the law will be held unconstitutional.
Here is a snippet from the Daily Herald Article:
This law is one of those bad ideas that should have been killed at birth. Not that anyone didn't try. The Legislature's own lawyers warned that the bill had a "high probability" of being deemed unconstitutional by the courts. Unfortunately, lawmakers chose to ignore the lawyers and put the state on a high-speed connection for litigation.
The bill is constitutionally flawed. Advertising enjoys a great deal of free-speech protection, especially on the Internet, which gets a constitutional analysis much like print. Utah's law is essentially a state-imposed gag on Google and other services, censoring attempts to deliver advertising because a Utah business has declared that words used in the search are part of its trademark.
If they allow individual states to have different rules and regulations, it's going to get very confusing very fast. Perhaps Google should provide a way to opt out of a specific region. Right now if you didn't want to show your ads in Utah, you would have to turn on local targeting for your campaign and select every stat except Utah. This would then display your ads as local, and add the little geography indicator underneath all of your ads, something an advertiser might not want when opting out of a specific state.