Google has dropped the Gmail name for its e-mail service in the UK following a long-running row with a small British company that has claimed the rights to the trademark.

The move is an embarassing blow for the most valuable media company in the world. Google has a market value of some $84.7 billion (£49bn) and more than $7 billion in cash in the bank.

In contrast, the Aim-listed Independent II Research (IIIR), a British financial research company, has a market value of just £3.23 million.

From today new users of Google's e-mail service will get an @googlemail.com address. Those that have already signed up will keep their @gmail.com addresses.

Google said it made the switch from Gmail to Google Mail voluntarily to avoid "distraction and confusion" for its users. It continues to dispute IIIR’s claims to the trademark and says the name change will not affect the way in which Google Mail users access or send mail.

The dispute has already dragged on for 18 months during which a flurry of sometimes heated correspondance has passed between the offices of IIIR and Google.

IIIR says it launched "G-MailTM web based email" in May 2002 - nearly two years before Google unveiled its own branded e-mail service, known at "GMailTM". IIIR’s version of G-Mail was developed by one of its subsidiaries, Pronet, which specialises in research about the currency markets for banks and other financial institutions.

However, Google’s legal team has highlighted that IIIR applied to register the trademark only after it launched its own e-mail service and said it would be wrong to consider the outcome as a David versus Goliath-type victory.

"We do not consider that [IIIR has] provided sufficient evidence to establish any common law rights based on the use in the large number of countries they are claiming use," Nigel Jones, Senior European Counsel for Google told Times Online.

"Despite what we regard as the tenuous nature of their claims we have tried to resolve the matter in negotiations … We are still working with the trademark offices to ensure our ability to use the Gmail name in the UK but given that this could take years to resolve and get a final settlement we decided that we want our users to have no distraction over their e-mail address."

In response to the name change, Shane Smith, chairman and chief executive of IIIR, said: "We've been asking them to change the name since 2004. We have been banging on the table and they have resisted. It now appears they have accepted the position on this.

"We will probably continue to use Gmail and seek the trademark to the name, because the confusion will have evaporated. But frankly I don't think Google come out of this bathed in glory, their behaviour in this is not what you'd expect from a top 100 company.

"Google has cost us time, effort and money. We will have to consider our position in terms of the legal case in the light of this."

Google has alleged IIIR’s motivation in the matter appeared to be "monetary" but that although it had engaged in financial negotiations, the two parties were too far apart to agree.

IIIR has valued the rights to Gmail at between £25 million and £34 million.

"Google does see some benefits in having a consistent name and does like the name Gmail and does like using it. However the sums of money that were demanded by this company were exorbitant," Mr Jones said.

Gmail also attracted criticism from privacy advocates who campaigned against the proposed storing of e-mails by Google and the possible attachment of content-linked adverts to personal messages.

However, Mr Jones said Google has no plans to revisit its processes for launching new products.

"Situations such as this can’t really be avoided. I don’t think it’s really necessary to revisit the way we do things. I think that such products because of their size and the profile of the company that’s releasing them will always get a certain degree of attention.

"I am not aware of what the next step is procedurally for either party, just that it will take a long time for the tradmark offices to resolve ... whether any application is successful either in Europe, the US or in any other countries," Mr Jones said.

Explore Industry Sectors

• Banking & Finance

• Construction & Property

• Consumer Goods

• Engineering

• Health

• Industrials

• Leisure

• Media

• Natural Resources

• Retailing

• Support Services

• Technology

• Telecoms

• Transport

• Utilities

Times Recommends

• B&B shareholders forced into funding rescue
• John Lewis department store sales plunge 8.3%
• Families turn to credit to cover mortgage bills