Hotels.com Sued by Affiliate for Gator Ads

MetroGuide.com, an operator of travel-related Web sites, slapped its marketing partner Hotels.com with a lawsuit, claiming the USA Interactive-owned company violated its copyright and engaged in unfair business practices through its advertising relationship with controversial ad-supported software maker Gator.

The suit contends that Hotels.com and its president, Robert Diener, violated MetroGuide’s copyrights by popping up an ad that obscured the logo and content on MetroGuide’s HotelGuide Network. The company said the marketing was all the more egregious since HotelGuide is a Hotels.com affiliate.

“They’re supposed to be the back-end reservations system on my site and they’re taking Gator ads to take away business on the front end of the site,” said Mark Metz, MetroGuide’s chief executive.

Diener dismissed the suit’s claims, calling them “ridiculous.”

“Their allegations are wrong,” he said. “We plan to vigorously defend it.”

Metroguide’s Hotelguide’s variety of sites provide hotel listings in 170 cities worldwide, using Hotels.com for its online reservations system. It’s been a Hotels.com affiliate since January 2000.

Metroguide alleges that Hotels.com began engaging in unfair business practices when it altered its business strategy in March 2002 and began attempting to drive reservations from its own site rather than its affiliate network.

The company cites Hotels.com’s relationship with Gator as an example of unfair business practices. Calling Gator “predatory advertising,” the complaint argues that Hotels.com contracted with Gator to have pop-up ads for HotelDiscount.com appear when Gator users visit a HotelGuide site.

“Through the use of pop-up windows … [Hotels.com] has altered the appearance of MetroGuide Web pages to make it appear that the advertisement is in some way affiliated with or sponsored by MetroGuide,” according to the complaint.

Diener said Hotels.com experimented with a Gator ad campaign for a couple of weeks, not knowing where the ads would run. The company stopped using them, he said, deciding they were ineffectual. Still, he defended Hotels.com’s use of Gator, which he pointed out has hundreds of advertisers.

“We see no infringement of their copyright,” he said.

The complaint asks for compensation for past damages. According to Nielsen//NetRatings’ AdRelevance unit, Hotels.com parent USA Interactive, which operates a variety of online travel-related companies, was the No. 2 pop-up advertiser in December 2002, trailing only X10.

“I’m just heartbroken and disappointed it’s come to this,” Metz said. “We have to enforce our rights at some point and draw the line.”

Gator has been the subject of a number of legal complaints. The most watched case is that brought by a variety of publishers, including The New York Times Co. and The Washington Post Co., charging Gator with copyright infringement.

Redwood City, Calif.-based Gator provides free software, such as its digital wallet eWallet, which also comes with a program called Offer Companion that serves pop-up ads on users’ computers based on their online activity. Often, the ads are for competitors of the site users visit. It has argued that its advertising services are specifically requested by its 25 million users and do not violate any laws.

In November 2002, hotel chain operator Six Continents brought a copyright-and trademark-infringement suit against Gator, citing Hotels.com pop-up ads that obscured the Web sites of some of their hotel properties.

Hotels.com has suffered under the travel slowdown that’s persisted since Sept. 11. Earlier this month, it warned investors that its fourth-quarter earnings would be much lower than expected.

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