July 1, 2003 4:40 PM PDT

Court says Gator-style ads are legal

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A federal court has ruled that pop-up ads for rivals of U-Haul International, placed atop the moving company's own site by a third-party software application, are legal.

The summary decision, handed down last week, was a blow to U-Haul in its lawsuit to bar software maker WhenU.com from delivering competitors' ads to visitors to U-Haul's site. The judge granted WhenU's motion to dismiss charges of trademark infringement, unfair competition and copyright infringement.

A full opinion from the Eastern District Court of Virginia is expected in coming weeks, along with decisions related to other claims such as a violation of the Virginia Business Conspiracy Act, according to the order, filed last Tuesday.

The early decision could influence lawsuits involving a more well-known ad-software, or "adware," company, Gator Corporation. Gator, like WhenU.com, develops an Internet "helper" application that often comes bundled with popular free software such as peer-to-peer applications. When downloaded, the programs from Gator and WhenU serve pop-up and pop-under ads to people while they are surfing the Web or at specific sites. Gator's software has landed it in court against The Washington Post, catalog retailer L.L. Bean, and hotel chain Extended Stay America.

Other companies, including Overstock.com, are targeting both WhenU.com and Gator, charging copyright and trademark infringement.

In February, Gator settled a case brought by The Washington Post, The New York Times, Dow Jones and other media companies, but its other lawsuits have been consolidated and will be decided by the Judicial Panel on Multidistrict Litigation in Atlanta, Ga.

Both WhenU and Gator have argued that their ad-sales and delivery tactics are legal because consumers agree to receive the ads when they download and install their software. Also, they've argued, it comes down to consumers owning their own desktops, which are inherently built to support many applications with multiple windows.

"We are pleased the court has dismissed the core of U-Haul's legal claims against WhenU.com," said Avi Naider, WhenU CEO.

"Ultimately," Naider said, "the Internet-enabled computer desktop is a competitive medium, where (advertisers) can impact consumer-buying decisions up to the moment. These are attempts to preclude that evolution, the future of Internet advertising."

U-Haul could not be immediately reached for comment.

WhenU.com still faces a lawsuit filed last week by Overstock.com, as well as suits by Wells Fargo and 1-800-contacts.com.


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