Judge Downs Pop-Ups in Contrary Decision

  |  December 23, 2003   |  Comments

A judge grants a preliminary injunction against adware company WhenU's pop-ups.

Bucking decisions made in two earlier cases, a U.S. District Judge this week enjoined New York adware company WhenU from popping up a competitor's ads over plaintiff 1-800 Contacts' Web site.

Saying users of WhenU's desktop software might be confused about the source of the pop-up ads, New York District Judge Deborah A. Batts said the adware firm could no longer display Vision Direct's ads over its competitor's site. Vision Direct is WhenU's client and a co-defendant in the lawsuit.

"Essentially we're pleased that the judge dismissed the copyright claims and disappointed that it was a split decision on the trademark," said Avi Naidern, CEO of WhenU. "There have been two judges that have already ruled that there is no use of a competitor's trademark when you target advertising this way. We're confident the ruling will be overturned on appeal."

Naidern said if the decision is not overturned, it could have far-reaching implications for search engine advertising.

"If this judge is deemed to be correct this will create major problems for search engine marketing in general on the Internet," Naidern said. "Using names of companies to target advertising is a fundamental part of advertising."

In October 2002, 1-800 Contacts sued WhenU and VisionDirect in New York over ads that appeared when users went to 1800contacts.com. 1-800 Contacts alleged that WhenU deliberately targeted offers from rivals based on the Web site that its users were visiting, and hence, the suit claimed, Vision Direct profited from its competitor's brand equity. The plaintiff relied on trademark and copyright law, and alleged that consumers don't realize they are seeing pop-up ads delivered by WhenU's software when they visit the 1800contacts.com site.

The New York judge granted 1-800 Contact's injunction based on trademark infringement.

"WhenU claimed there was no likelihood of confusion on the part of consumers because they had a disclaimer on the ad that said it was from WhenU, not the Web site where it appeared. The court rejected that argument and found it was likely that consumers would be confused," said Terence Ross of New York-based Gibson, Dunn & Crutcher, the law firm that represented 1-800 Contacts.

Other judges haven't agreed with Judge Batts' preliminary conclusions. On Nov. 19, a Detroit judge presiding over a similar lawsuit brought by Wells Fargo against WhenU ruled to the contrary, saying consumers were not likely to be confused by the source of the ads.

A similar case filed by U-Haul against WhenU around the same time as the 1-800 Contacts case went in WhenU's favor, too. U.S. District Court Judge Gerald Lee granted WhenU's motion to dismiss the meat of the charges brought against it by U-Haul.

"That case has been appealed to the United States Court of Appeals," Ross noted.

Ross was also involved in a case against adware maker Gator and a group of publishers including the New York Times Co. that was settled in February. A preliminary injunction had been issued against Gator. The companies settled on the eve of trial.

"That's the same court where the first WhenU case was. Different judges in the same court came to different conclusions. That points out that this is a novel area of the law that involves tricky applications of intellectual property law. You have two judges in the same court coming to opposite decisions and a judge in New York and one in Michigan coming to opposite decisions," said Ross.

"Ultimately the Supreme Court will have to take one of these cases and resolve the differences. But that will be a couple of years from now," he said.

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