WhenU Wins Injunction Against Utah Spyware Law

  |  June 23, 2004   |  Comments

UPDATE: The decision further delays implementation of the law, but the attorney representing Utah remains undaunted.

Adware firm WhenU has succeeded in further delaying implementation of Utah's strict anti-spyware statute, until its case against the law can be heard.

Third Judicial District Court Judge Joseph Fratto Jr. has issued a preliminary injunction that keeps the Utah Spyware Control Act from taking effect. WhenU sued the state of Utah, arguing the act is unconstitutional because it regulates interstate commerce and hinders commercial speech.

"This is an important decision for the entire Internet advertising industry," said WhenU CEO Avi Naider in a statement. "WhenU supports anti-spyware legislation at the federal level, but unfortunately Utah's Act also impairs legitimate Internet advertising."

The act prohibits the installation of spyware on a person's computer. It also makes it illegal to "use a context based triggering mechanism to display an advertisement that... covers or obscures paid advertising or other content on an Internet Web site." The law would effectively make software by WhenU, along with that of rival Claria, illegal in Utah. Both make applications that employ behavioral information to target ads, which pop up while users are surfing Web sites.

Paxton Guymon, an attorney for Utah, said in April if the judge didn't grant the preliminary injunction, this would suggest Fratto didn't think WhenU could win its case. Asked if Tuesday's decision indicated the opposite, the attorney said no.

"The judge's comments seemed to indicate he thinks at least part of the statute is constitutional," Guymon said. "He specified in his closing remarks yesterday that he did not think WhenU could meet its burden of showing that the anti-spyware provisions of the statute are unconstitutional."

Guymon said the judge had expressed doubts as to the constitutionality of the law's provisions regarding pop-up ads. "Basically he's looking at the statute as having two different sets of provisions," Guymon said. "One set is the anti-spyware provisions. The other set is the one prohibiting pop-up advertisements."

Because the judge seemed to feel part of the statute is constitutional, Guymon said, he is hopeful of winning his case. "WhenU may have won the battle yesterday, but they are far from winning the war."

No court date has yet been set for the trial. Guymon said the trial could be "anywhere from four or five months to twelve months" from now. Guymon said the defense's next move will be to set up a scheduling order for discovery.

The anti-spyware law was originally set to go into effect at the beginning of May, but has been held up because of the delay in scheduling a hearing on the preliminary injunction.

The implementation hold-up hasn't hindered at least one plaintiff. Utah retailer Overstock.com has already filed a lawsuit against its competitor, SmartBargains.com, accusing it of violating the law by using adware to market its products.

Utah was the first state to pass an anti-spyware law, although California lawmakers are considering two separate bills that aim to regulate such software. Legislation is also pending at the federal level, and the Federal Trade Commission has been studying the issues, as well.

Attorneys for WhenU could not be reached for comment.

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