News Publishers, Gator Settle Suit

The legal battle between a group of publishers and adware maker Gator has ended, according to attorneys on the case.

The settlement, reached on Tuesday, includes a confidentiality agreement that binds either side from disclosing its details.

Last June, a handful of publishers — including The New York Times Co., The Washington Post Co., and Gannett — filed suit against Gator on the grounds that its ad-supported software infringed on their copyrights and trademarks by serving pop-up ads on users’ screens while they were on those companies’ news sites.

“I am allowed to confirm that this case has been settled and it is the end of active litigation,” said Terrence Ross, an attorney at Gibson, Dunn & Crutcher representing the publishers.

Janet Collum, an attorney with Cooley Godward representing Gator, confirmed the settlement.

The case was scheduled to go to trial on Jan. 27, but lawyers for both side asked the judge for more time to negotiate a settlement.

Gator, which claims more than 500 advertisers, has been at the center of a firestorm of controversy (and lawsuits) in the last two years. The company offers software utilities for things like filling in electronic forms. In exchange for the free software, a program called OfferCompanion is bundled with the utility. OfferCompanion displays pop-up ads on users’ screens based on their online behavior.

Publishers claimed that users often do not know they have OfferCompanion on their computer, mistakenly believing the pop-up ads come from the site they are visiting. Further, they claimed Gator unfairly infringes on their property by serving ads for competing products or services on top of their Web sites. Gator has responded that its 30 million users agree to receive the ads, know they are from Gator, and have the right to choose what is displayed on their desktops.

Gator still faces about a dozen lawsuits, according to Collum. In October 2002, UPS filed suit against the company, seeking an injunction against Gator serving ads to its users when they are on the UPS Web site. Hotel-chain operator Six Continents also brought a copyright and trademark infringement suit against Gator a month later.

While citing the case’s confidentiality agreement, Ross did say, ” It’s been settled to our satisfaction.”

Dave Morgan, chief executive of Tacoda Systems and a former lawyer in the newspaper industry, said the settlement is most likely an admission by Gator that its business model is untenable. (Tacoda Systems, which sells ad-targeting services to online publishers, counts some of the plaintiffs among its clients.)

“It was only a question about how hard they were going to fight it. It seems like they decided to go with the odds and settle,” he said. “[A settlement] would have to mean a change to the business model, because the core business model was what they were being sued over.”

One industry source said Gator might move alter its business model by serving ads when a user exits a site, instead of while on the site.

Morgan said such a move would alleviate one of publishers’ main complaints: Gator ads appearing over their sites, obscuring their content and trademarks with competitive advertising. Still, he said Gator would probably need to make further changes to have a non-adversarial relationship with publishers.

“If all they’re doing is settling with three of them, then they’re still going to face a whole bunch of lawsuits,” he said. “In the history of American jurisprudence, the big company wins because they have more money.”

Since the case was not a class action, any terms agreed to by Gator will not apply to sites other than those operated by the plaintiffs, Ross said.

“Some other cases are going to have to come along to tell us what the precedents are in this field,” he said.

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