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Judge: Adware Confuses Consumers in WhenU Case

A federal judge dealt a setback to adware maker WhenU.com's fight to legitimize its contextual-advertising system.

Judge Deborah Batts of the U.S. District Court in Manhattan this month enjoined WhenU.com from serving ads for a competing service on the 1-800 Contacts Web site, ruling that the ads violated 1-800 Contacts' trademark and potentially confused consumers.

“The fact that defendants' pop-up advertisement for competing Internet contact lenses retailers appears shortly after a consumer types into the browser bar plaintiff's trademarked name and accesses plaintiff's homepage increases the likelihood that a consumer might assume defendants' pop-up advertisements are endorsed or licensed by plaintiff,” the judge wrote in her 88-page opinion delivered Dec. 22.

1-800 Contacts sued WhenU and Vision Direct Inc. in October 2002, claiming that WhenU's pop-ups advertising Vision Direct's services are deceptive and lead consumer to believe they come from the Web site they are visiting, despite labeling that the ads are served by WhenU. Batts granted 1-800 Contacts' request for a preliminary injunction.

WhenU's SaveNow software pops up ads tied to words the user types into the browser or search engines. SaveNow is bundled with popular software such as file-sharing service BearShare. Users agree to the display of SaveNow ads on their desktop in exchange for the free software. The company says response rates average 5 percent for the ads and can run as high as 20 percent for instant coupon offers.

Batts said WhenU violated 1-800 Contacts' trademarks by including its trademarked name in its directory of terms used to trigger ads and by displaying ads on the 1-800 Contacts Web site. The injunction requires WhenU to stop serving ads on the 1-800 Contacts Web site and remove its trademarked terms from its database used to trigger ads. Vision Direct was also ordered to cancel its registration of the www.www.1-800Contacts.com domain.

“We're confident it will be overturned on appeal,” WhenU chief executive Avi Naider said. “If targeting advertising in this way were deemed a trademark violation, it would cause problems for the entire Internet advertising industry, including all the major search engines.”

After being hit with suits alleging trademark infringement for its keyword-advertising program, Google in November asked a federal judge in California for a declarative judgment that serving ads triggered by trademarked terms is legal.

The injunction comes after legal victories for WhenU and similar adware maker Claria, formerly known as Gator. In November, a federal judge in Michigan rejected an injunction request from Wells Fargo in a similar case. Four months earlier, another federal judge found that WhenU's advertising system is legal and dismissed a case brought by U-Haul. Overstock.com recently dropped suits it brought against WhenU and Claria.

The judge ruled against 1-800 Contacts' claims that WhenU's pop-up ads infringed on its copyrights by blocking its Web site.

“This judge had a much more practical approach, which is, are they making money off your trademark?” said Terence Ross, an attorney for 1-800 Contacts. “They wouldn't be targeting 1-800 Contacts if there wasn't value in that trademarked name.”

Batts dismissed WhenU's contention that labeling on the ads makes clear their source.

“Consumer confusion caused by the pop-up advertisements can hardly be alleviated by WhenU's use of disclaimers with terms that are buried in other Web pages,” Batts wrote.

The judge ruled against 1-800 Contacts' claims that WhenU's pop-up ads infringed on its copyrights by blocking its Web site.

In 2002, a group of major news publishers settled an infringement case against Gator. Terms were not revealed, though sources close to the case say Gator agreed to not serve ads to users visiting those publishers' Web sites.

Despite the protests of Web site publishers, adware makers claim continued progress in widening their distribution, piggybacking on popular file-sharing programs and screensavers. Claria reports 38 million consumers have its software, and WhenU says its software is on 25 million to 30 million desktops.

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