The lawyer for Wings Over Scotland blogger Stuart Campbell said the activist was not a homophobe and that such an allegation was both “untrue” and “unfair”.
The pro-independence activist is seeking to protect his reputation as someone who has consistently supported the equal treatment of homosexual people, the court was told.
However, Ms Dugdale’s QC argued the blogger has to “thole” public comment when he tweets about public figures.
Mr Campbell is suing former Scottish Labour leader Ms Dugdale, 37, for defamation over a column she wrote in the Daily Record on 7 March 2017, referencing his “homophobic tweets”.
The tweet at the centre of the £25,000 action, made during the Conservative Party conference on 3 March that year, states: “Oliver Mundell is the sort of public speaker that makes you wish his dad had embraced his homosexuality sooner.”
Mr Campbell, 51, from Bath, has denied that it was a homophobic reference to Scottish secretary David Mundell being gay and has described it as “satirical criticism” of Scottish Conservative MSP Oliver Mundell’s public speaking skills.
Lawyers for both sides have been summing up their positions on the third day of the civil proof at Edinburgh Sheriff Court.
Mr Campbell’s QC Craig Sandison opened by telling the court the blogger “is not a homophobe”.
To accuse someone of homophobia would put “stain” on a person’s character and lower them in society’s eyes, he said, adding the article carried such an “innuendo”.
The QC later told the court of his client: “He continues to be deeply distressed by that allegation and by the insistance by the defender on its truth ...
“He is not a polite man, he doesn’t restrain himself in setting forth his views. He is not circumspect.
“But none of those are aspects of his character he is seeking to protect by this action. What he is seeking to protect is his distinct reputation ... as someone who has consistently supported equal treatment of homosexual people and indeed people generally.
“That’s why he’s so upset becase this attack on him is so untrue, so unfair.”
Mr Sandison claimed the defence of fair comment does not “get off the ground” in this case and said it was “not true” the blogger sent homophobic tweets during the Conservative conference.
The QC told the court that, if anyone was “abused” by the tweet, it was Oliver Mundell, based on his public speaking.
He said: “That statement about Oliver Mundell wasn’t based on his sexuality, it’s nothing to do with his sexuality. Was David Mundell then abused because of his sexuality? I say absolutely not.”
He said Ms Dugdale’s comment was “not fairly made” and claimed it was motivated in part by her “ill feeling” towards the blogger.
Roddy Dunlop QC, representing Ms Dugdale, described the Lothian MSP as “entirely credible and reliable”.
The true question in the case is whether someone was entitled to view the tweet as homophobic, he said.
The QC said: “The pursuer [Mr Campbell] quite clearly does not like the defender. He has been extremely rude about her on multiple occasions and on the one occasion she calls him out, he sues – and he sues her.”
Mr Dunlop said of the pursuer: “When he publicly tweets about two public figures, he is exposing himself to public comment and he has to thole that.
“There is a plain irony in the pursuer, a master of calumny, suing for defamation in this particular context.
“This is someone who has entered the political arena of his own volition, armed with a quiver of poisoned arrows which he will fire at anyone he chooses.
“He should not complain when an arrow is fired back.”
The case continues.