January 5, 2004 2:59 PM PST

Pop-up seller loses round in court

A U.S. district court judge recently barred WhenU from delivering pop-up advertisements to some Net visitors, going against decisions in favor of the software maker's controversial ad tactics.

In late December, as part of a lawsuit filed against WhenU by 1-800-Contacts, the United States District Court for the Southern District of New York granted a preliminary injunction that prohibits WhenU from triggering pop-ups when people visit 1-800-Contacts' Web site.

In the past, WhenU delivered pop-up ads that promoted rivals of 1-800-Contacts, including another defendant, Vision Direct. In issuing the injunction, the judge said the practice constitutes trademark infringement and violates the Lanham Act, the U.S. trademark act.

Enjoining WhenU from delivering pop-ups to visitors of 1-800-Contacts "will prevent (WhenU) from capitalizing on the goodwill and reputation that the plaintiff has earned through its own investment" and eliminate confusion for visitors, Judge Deborah Batts wrote in an 88-page decision.

The ruling, though preliminary, is the first against WhenU, despite complaints from other companies against its practices and those of the similar service Gator, which is now called Claria. Both companies distribute free software that is used to monitor Web-surfing behavior and serve targeted ads, including pop-ups. Gator, most notably, came under fire in 2002 from a group of high-profile newspaper publishers, including The Washington Post and Dow Jones, for its ad tactics, and the case was settled out of court in early 2003.

The latest WhenU opinion runs counter to such early closed-door settlements and to court decisions in favor of WhenU. In November, a federal court judge in Michigan's Southern Division dismissed Wells Fargo's motion to block WhenU's pop-ups. The judge ruled in favor of WhenU on the grounds that its users chose to install WhenU's SaveNow software and therefore consented to receive the comparative ads delivered atop Web sites. Also in September, a Virginia U.S. District Court judge ruled against U-Haul International in its similar case against WhenU. Previous complaints from Overstock.com and Triggerstreet.com had been dropped.

Still, at least one attorney called the latest decision significant. Jeffrey Neuburger, a partner at Brown Raysman, said it "certainly represents another way of viewing WhenU's and Claria's practices--that they may constitute trademark infringement."

1-800-Contacts had charged WhenU with unfair competition, trademark infringement and copyright infringement, among other violations. But the judge granted the preliminary injunction based only on trademark infringement, considering the likelihood that WhenU's pop-ups could mislead or confuse 1-800-Contacts visitors as to the origin of the ads.

"Obviously, we would like to have everything validated, but having the trademark claim validated was good," said Joe Zeidner, general counsel for 1-800-Contacts. "We think it's an (important) ruling."

Avi Naider, chief executive of WhenU, downplayed the decision as temporary.

"This judge simply got it wrong," Naider said. Such a decision "would have major ramifications on search engine advertising and comparative advertising, and we're confident it will be overturned on appeal."

A pretrial hearing date is set for Jan. 16. WhenU plans to appeal the decision on the injunction.

 

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