Small e-tailers may have more pop-ups invading their Web pages, thanks to a federal judge's ruling that trademark and copyright laws do not bar pop-ups from appearing in front of the content of other parties' Web sites. The ruling last September came in a lawsuit filed by U-Haul International Inc., a Phoenix-based trucking company, against WhenU.com Inc., a New York City Internet advertising company providing Web surfers free software or downloads, such as video players or screen savers. The freebies come with the SaveNow program that matches users' surfing habits with advertisers. This "spyware" or "adware" shows Web users pop-up ads independent of the sites they visit-so visitors to U-Haul's site could see pop-ups from competitor Ryder System Inc.
U-Haul's lawsuit claimed the ads infringed on its trademarks and copyrights and violated competition laws. U.S. District Judge Gerald Bruce Lee dismissed the suit, noting that U-Haul's pop-up ads open in a WhenU-branded window that's separate and distinct from the window in which the U-Haul Web site appears, and that users willingly subjected themselves to the pop-ups when they downloaded the software. While U-Haul may appeal, the decision is a blow to Web site operators seeking to maintain control of the ads that appear on their sites.
"This is only the beginning," says Shawn Schwegman, CTO and vice president of sales and marketing at Overstock.com, an e-tailer in Salt Lake City. "The next step is for [adware] companies to get smarter about how and when their ads pop up." For example, these ads may soon pop up at checkout, allowing advertisers to steal away customers who are about to buy.
Last year, Overstock.com filed suits against WhenU.com and The Gator Corporation, a Redwood City, California, company that offers similar software. In fact, more than a dozen online publishers and Web site operators have filed suits against The Gator Corporation (which recently changed its name to Claria Corp.) and WhenU.com in the past two years. If other courts reach the same conclusion as Lee's did, it would remove a potential obstacle for adware companies, and, says Schwegman, there could be "a surge of new players."
However, Schwegman predicts that as pop-ups become more prevalent, more pop-up blocking software will be bundled with computers. (Microsoft recently announced it may add pop-up blocking tools to future versions of Internet Explorer.) "If this happens," says Schwegman, "pop-up advertising will be useless."
This story appears in the February 2004 issue of Entrepreneur. Subscribe »
