Trademark isn't infringed when computer users install programs that show them a competitor's as well as a search subject's advertising, the 2nd U.S. Circuit Court of Appeals ruled June 28. The ruling was a blow for contact lens seller 1-800 Contacts, which had sued to stop adware maker WhenU from showing their own and competitor ads when users searched for 1-800 Contacts.
The 2nd Circuit Court overturned a lower court ruling from December 2003 in holding for WhenU. "The fact is that WhenU does not need 1-800's authorization to display a separate window containing an ad any more than Corel would need authorization from Microsoft to display its WordPerfect word processor in a window contemporaneously with a Word word processing window," wrote 2nd Circuit Court chief judge John Walker.
"We could not have asked for a better decision," said WhenU chief executive Bill Day about the ruling in a formal statement. "This ruling closes the book on any lingering doubts that advertisers may have had about this technology.
"It's clear that the consumer owns the desktop," Day continued, "and our sole focus is to lead the way in best practices and enhance the consumer experience so that more and more consumers want to take advantage of our competitive advertising and comparison shopping technology."
1-800 Contacts has yet to comment on the ruling or announce whether or when they would appeal. But WhenU attorney Celia Barenholtz called the ruling the most important yet on target Internet advertising, carrying "broad ramifications for search engines such as Yahoo and Google that allow advertisers to buy targeted advertising based on brand names of competitors."
The 2nd Circuit Court said WhenU brands ads prominently, doesn't disclose the proprietary contents of its directory, and doesn't let advertisers pay for their ads to turn up on specific websites. The court also noted that WhenU products are now installed only with a user's direct permission and can be branded and uninstalled clearly.
The Electronic Frontier Foundation, which filed an amicus brief in the case on WhenU's behalf, applauded the 2nd Circuit Court ruling. "A trademark owner is not entitled to control your desktop just because you happen to be visiting its website," said EFF senior attorney Fred von Lohmann. "This decision is good news for consumers who want the freedom to install tools that help them customize their web surfing."
WhenU is not without its critics, of course. Last year, another alleged WhenU practice – "cloaking," or trying to raise search rankings artificially by setting up a ring of sites full of "gibberish designed to be read only by search engines," as one report put it – got it dropped completely out of Google and Yahoo search results. WhenU blamed an outside search-optimization company for those problems.
Most recently, a federal judge blocked a tough Utah anti-spyware law earlier this month, after WhenU sued to challenge the recently enacted law. WhenU charged that the Utah law impaired legitimate Internet advertising as well as going after spyware.
