Judge Says AdWare Is Legal

A federal judge said adware maker WhenU.com’s pop-up advertising does not infringe on the trademarks and copyrights of Web site publishers, in the first legal ruling favoring desktop advertising companies in their fight with Web site operators.

U.S. District Court Judge Gerald Bruce Lee released the opinion on Friday, two months after issuing a summary judgment in a case brought against WhenU by U-Haul. The moving company alleged WhenU violated its copyrights and trademarks by displaying pop-up advertisements when a user visited the U-Haul Web site. In his written opinion, Lee clearly sided with WhenU, which argued that Web surfers control their own computers and what appears on them.

“While at first blush this detour in the user’s Web search seems like a siphon-off of a business opportunity, the fact is that the computer user consented to this detour when the user downloaded WhenU’s computer software from the Internet,” Lee wrote.

WhenU offers users a program called SaveNow that displays ads based on a user’s browsing activity; in return users receive free software, such as music downloading programs or screensavers. Web site owners argue the ads are a violation of their trademarks and copyrights, also accusing the company of unfair business practices.

Lee ruled that the pop-up ads do not violate a Web site publisher’s trademark or copyright, since they appear in a separate window and are labeled as WhenU ads.

Lee’s summary judgment short-circuited the case at an early stage, just nine months after U-Haul filed it, and handed WhenU a key legal victory in establishing adware as a legitimate form of contextual advertising.

“Clearly the ruling is incredibly important in the sense that the Internet will be a very different place as a comparative shopping medium,” said Avi Naider, WhenU’s chief executive. “We’re at the tip of the iceberg with this type of technology.”

A U-Haul spokesman said the company was disappointed by the ruling and would evaluate its legal options.

“U-Haul has long believed that unwanted pop-up ads such as those provided by WhenU are the scourge of the Internet for both businesses and consumers, and that Web site owners have the right to display their Web sites without having their sites hidden behind such invasive advertisements,” said Tom Prefling, a company spokesman.

The case marks the first time a judge has ruled that a desktop advertising company’s business model is legal. A much-watched earlier case, brought against similar adware company Gator by a powerhouse group of publishers, including The New York Times and The Washington Post, ended with a settlement in February. The settlement’s details were not disclosed, but it is commonly believed Gator agreed not to serve ads while users are on the publishers’ sites.

A number of cases remain against WhenU, including suits brought by 1-800 CONTACTS, and Wells Fargo. Gator has cases pending against it from TigerDirect, UPS, Hertz, L.L. Bean, and PriceGrabber.com.

While coming down on the side of adware companies’ legal right to serve pop-up ads, Lee empathized with weary Internet users.

“Alas, we computer users must endure pop-up advertising along with her ugly brother unsolicited bulk email, spam, as a burden of using the Internet,” he wrote.

Naider said users had the right to decide for themselves whether to see pop-up advertisements, noting that 70 percent of the 100 million who have downloaded SaveNow have uninstalled it.

“In order to remain on the desktop, you have to offer a value proposition,” he said. “Our struggle is to increase the value proposition.”