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Industry Watches as Playboy Continues Fight Against Keyword Sale

Attorneys for Playboy Enterprises Inc. say they will keep fighting despite losing round one of a lawsuit against Excite Inc., leaving the Internet industry holding its breath to find out if search services can legally throw ads for one company in front of Web surfers searching for words associated with another company.

And as one battle looked likely to drag on, a similar disagreement ended for Excite as electronics cataloger Crutchfield Corp. informally settled an out-of-court dispute with the search engine that had roiled relations between the companies since last October.

The root of all the rancor is “banner ad keying” – a controversial practice that accounts for about a quarter of search engines' ad revenue. When a Web user searches for a specific keyword, the rights to that word often have been sold to a specific advertiser whose banner will appear on the search results page.

Visitors to Excite or affiliated service Webcrawler who search for the words “playmate” or “playboy” often see banner ads promoting sex sites unaffiliated with Playboy at the top of their search results page. Playboy contends that the banners divert Net surfers from their site and hurt the company's reputation.

“This is not a case where someone's typing in … 'playmate' and then they're getting a banner ad for pails for the beach,” said Jeffrey Neuburger, law partner at Brown, Raysman, Millstein, Felder and Steiner, the firm representing Playboy. “This is type in 'playmate,' and you're getting an ad for pornography.”

The Federal District Court in Santa Ana, CA, didn't sympathize with the publishing giant. The court ruled against Playboy last month when it asked for a preliminary injunction against Excite and Netscape.com, which licenses Excite's search capability.

But Neuburger pointed out that Playboy has appealed the ruling and, more importantly, the main thrust of the case – the company's contention that Excite violated trademark laws – has yet to go to court. The company still is pursuing the action at the district court level, and hopes to soon take the case into a discovery phase.

A spokeswoman at Excite said the company does not comment on pending litigation.

Excite, a unit of Redwood City, CA-based Net media firm Excite@Home, has at least twice been accused of selling company names – in the form of search keywords – to those companies' business rivals. Estee Lauder Co. filed such a suit against Excite in January, and that case also is pending.

The search engine smoothed over a conflict with another accuser – Crutchfield – with an advertising deal that took effect this month. Crutchfield, Charlottesville, VA, never sued Excite, but the cataloger objected when it discovered last year that Excite sold the keyword “Crutchfield” to competing online electronics store Roxy.com.

Now in exchange for buying a number of other keywords on Excite, Crutchfield has gotten its own name back for free, said Robin Lebo, the company's director of customer acquisition. The informal agreement came about when Excite business development people called Crutchfield asking the merchant to get involved in an online shopping venture.

“We worked out a deal, and to my knowledge, I'm getting every impression of 'Crutchfield,'” Lebo said. “Now that's not written down anywhere, but the inventory numbers are supposed to reflect that I'm getting every Crutchfield impression.”

Should Excite end up going to trial against Playboy or Estee Lauder, the company will in effect be playing a pivotal role in shaping trademark law as it relates to the Net. The rules applying to copyrights and trademarks were murky enough before the digital revolution, and now the Internet has introduced an entirely new realm of legal terra incognita, said analyst Lisa Allen of Forrester Research.

“Any time you're pushing the envelope with technology, and big money is involved, and legally protected properties are involved, you're going to see some fighting … about who owns what under which circumstances,” she said.

Meanwhile, some other search engines seem happy to sit back and let Excite test that new legal ground alone. Yahoo! Inc., operator of the Net's leading search site, said it “does not knowingly sell company or brand names to a company's competitors.”

A spokeswoman at Infoseek, the search service behind Walt Disney's Co.'s Go Network, was unable to outline the company's policies by press time. Lycos Inc. did not return phone calls.

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