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Publishers' Pop-Up Protest Could Reshape Online Ads

As an ordinary Internet user, I dislike pop-up advertisements -- small windows that suddenly appear while surfing the Web -- as much as the next guy. As an Internet publisher, however, I can understand their attractiveness, because they offer a more interactive and difficult-to-ignore vehicle for advertisers. And as an attorney, I'm watching with great interest as a debate unfolds about the legality of some of these pop-up ads.

Are pop-up ads illegal? Like so many areas of Internet law, the answer isn't yet clear, and it depends largely on whom you ask.

I don't know of anyone who has said with any authority that all pop-up advertising on the Web is illegal. But an impressive group of news publishers (including Dow Jones & Co., publisher of The Wall Street Journal Online) is using intellectual-property laws to fight some pop-up ads, arguing in a lawsuit that a third party, Gator Corp., doesn't have the right to sell and display these advertisements while users are visiting their news sites.

On July 16, a federal district court judge in Virginia sided with the publishers when he granted their request for a preliminary injunction. His order prohibits Gator from "[c]ausing its pop-up advertisements to be displayed on any website owned by or affiliated with the Plaintiffs without the express consent of the Plaintiffs."

The lawsuit raises some intriguing legal issues about copyright and trademark law and could affect the future of online advertising.

Gator, a closely held company in Redwood City, Calif., offers free software that it says more than 22 million people are using. Promoted to consumers primarily as a tool that automatically fills in forms on Web sites without typing (thanks to data provided once by the user), the software also includes what the company calls the Gator Advertising and Information Network, or GAIN. Simply, GAIN delivers pop-up advertisements to users who have installed the software based on what Web sites the users view. (I asked Gator's chief marketing officer, Scott Eagle, how these delivery decisions are made, but in a written response, he said the answer is "proprietary information." If the lawsuit against Gator continues, he or others may be forced to reveal this information in depositions.)

The advertisements delivered through GAIN are sold by Gator, which doesn't share any of the proceeds with the sites that trigger delivery of the ads.

Gator insists that GAIN is an attractive way for advertisers to reach their audience, because ads are delivered to people whose surfing habits indicate they may be interested in the advertisers' products or services. "[Gator's] ads generate click-through rates 10-40 times more effective than traditional Web advertisements because of the relevancy of the ads," Mr. Eagle told me.

The news publishers in the ongoing lawsuit obviously don't think so highly of GAIN. In their complaint, they called Gator "a parasite on the Web that free rides on the hard work and investments of Plaintiffs and other website owners." By delivering pop-up ads to their customers, Gator is diminishing the news publishers' own ability to sell advertising, they have alleged.

Among other things, the plaintiffs charge that Gator's pop-up ads constitute trademark and copyright infringement because Web surfers mistakenly believe that the advertisements are delivered by the news publishers (not by Gator) and because the ads alter the way the publishers intend their pages to be displayed.

Clearly, these types of legal issues weren't envisioned when most of the current trademark and copyright laws were enacted, so this lawsuit represents yet another challenge in applying traditional law to new technology. As so often happens in these cases, both sides try to draw low-tech analogies. For example, Gator argued in a legal brief that the pop-up advertisements it delivers are "akin to placing one's coffee cup on top of the morning newspaper -- the cup covers a portion of the newspaper page, which may be subject to copyright protection, but it does not alter the newspaper." While this may be true, it ignores the possibly significant difference that pop-up ads, unlike coffee cups, compete with the newspaper publisher for advertising revenue.

And the news publishers argued at a hearing on the preliminary injunction that Gator's delivery of pop-up ads is analogous to Titleist placing its golf balls in front of Nike Inc.'s golf balls in a store next to a full-size figure of Tiger Woods, causing consumers to believe wrongly that Mr. Woods endorses Titleist instead of Nike. However, this argument discounts the fact that all of Gator's pop-up ads contain text and graphics identifying GAIN.

Although Gator's advertising service is unusual, the outcome of this lawsuit could be far reaching. If Gator ultimately is vindicated in the suit, online content providers that already have seen their own advertising-sales revenue plummet could end up having to switch to (or raise their fees for) subscription-based services or search for other ways to pay for their sites.

Certainly, this isn't the first time technology has posed a threat to advertising-supported content providers. In a lawsuit filed last year, the three major broadcast networks sued SonicBlue Inc., maker of the ReplayTV devices, because the devices allow consumers to record TV programs and then watch them without commercials. Turner Broadcasting Systems Chief Executive Officer Jamie Kellner told a cable magazine earlier this year that this type of technology violates the "contract" between broadcasters and viewers, and more recently he was quoted as telling TV writers, "Don't think for a moment there's a free lunch involved in this" -- an apparent reference to changes broadcasters may be forced to make as a result of digital TV recording devices.

In the Gator case, if the news publishers' argument that pop-up windows violate copyright and trademark laws prevail, then what will be the future for other software that behaves similarly, such as instant-messaging applications (especially if their windows contain advertising), or ad-blocking programs? Terence Ross of Gibson, Dunn & Crutcher, the news publishers' attorney, even told me that he thinks Internet users who configure their browsers to disable graphics (a common tactic to boost the speed of Web surfing) are committing copyright infringement because they are interfering with Web publishers' exclusive right to control how their pages are displayed.

Ultimately, the specific issue of whether pop-up advertising is illegal may become moot. Pop-ups were created by the advertising industry's desire to grab Internet users' attention in a way that traditional banner advertising no longer could. However, users have grown to detest and ignore pop-up ads, leading some sites to shun them altogether. CNET Networks Inc.'s News.com recently ran an article, "Taking the air out of pop-ups," which noted that "a handful of sites ... are hoping to reverse mounting ill will stirred by the ads" by eliminating them.

Like so many novel legal issues created by the Internet, the Gator lawsuit may not provide the guidance advertisers, publishers and lawyers desire, particularly if this lawsuit is eventually settled out of court. That wouldn't be an unlikely outcome, considering that Gator already has settled at least one other lawsuit (with the Interactive Advertising Bureau, in November 2001) and that the plaintiffs' Web sites in this case are relatively unimportant to Gator's business (representing only one-third of 1% of Gator's advertising revenue).

Also, don't be surprised if Gator changes its technology as a result of this lawsuit, so that its advertisements appear "underneath" Web sites (as some pop-ups on the Web already do) rather than on top of them. That move could eliminate all of the legal issues in the current litigation -- but it surely won't eliminate the continuing struggle Web publishers face to pay for their sites.


Doug Isenberg, The Wall Street Journal. August 13, 2002

Copyright © 2002 The Dow Jones Company. All rights reserved.