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Spyware Out of the News and Into the Congress

Most of you know “spyware” as pesky programs that install themselves on your computer – often tacked on to programs you intend to install – that do everything from tracking online browsing habits to stealing passwords and getting at sensitive data on your computer. But what about those programs that automatically download and patch your software or update your anti-virus definitions, or cookies that enable sites you visit to recognize you and customize your experience? Of course, you have also heard of “adware” -programs that trigger the delivery of online advertising (did I say pop-ups?) that target consumer preferences and activities.

Confused by the distinctions and attempts to sort out the definitions? There is clearly a legislative drive to prohibit programs from being installed on consumers’ computers without consent or knowledge and at least three spyware bills are winding their way through the U.S. Congress. Although it is unlikely a bill could reconcile the differences and reach the President for signature this session, there is clearly impetus to “do something,” and interests on all sides are lining up to shape the contours of legislation so as not to do away with all those “good” programs!

Confused about the definitions or worried Congress might get it wrong—or just wondering who cares? Pay attention. Much of the utility and appeal of the Internet is interactivity. Browsers and websites interact. Navigational tools and features which make browsing more efficient, reduce time, and provide a more customized – thus more useful—experience, are based on useful programs working in the background and which are helpful and desirable, if properly used—”properly” being the operative issue. If worded too broadly, legislation could prohibit tools that make sense. Imagine every advertiser, website owner, merchant and search engine being required go to every user with a new consent (“opt-in”) form! How will legislation be enforced if the website owner is in another jurisdiction? Need to follow this issue? Want to know more? Want to your voice heard? Call Rimon—we can help.

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Pop Goes the Lawsuit

This past June, we reported L.L. Bean filed suit against Nordstrom, J.C. Penney, Atkins and Gevalia alleging copyright and trademark infringement in connection with pop-up advertising. Bean has now settled with Gevalia and Atkins, who have agreed to damage payments (i.e., for trademark infringement), as well as agreeing not to authorize pop-up advertisements of their products on Bean’s website. Spyware has been the subject of significant controversy, and anti-spyware legislation has passed in Utah and is pending in Congress and in California, although the Utah statute is being challenged by spyware maker WhenU. It is likely lawsuits such as Bean’s will continue to be filed based on theories that not only are consumers annoyed by pop-up ads, but that they become confused by the advertisements as well.

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Spyware

A Utah statute, the first in the nation, entitled “The Spyware Control Act,” was originally scheduled to take effect on May 3, but has been delayed by a legal challenge brought by a New York-based company, WhenU.com. WhenU.com filed suit in Salt Lake City on April 12, seeking a declaration that Utah’s new law violates the U.S. and Utah Constitutions. WhenU.com claims the act—which targets software downloaded onto a consumer’s computer that triggers pop-up advertisements—unfairly targets online contextual advertising services that aren’t linked to websites, but instead sells ads based on consumer browsing preferences. The Utah Attorney General agreed to delay the effective date of the Act until the hearing to allow WhenU.com to seek a preliminary injunction delaying implementation of the law. WhenU.com hopes it can persuade the court to delay enforcement until a trial can be held to test WhenU.com’s claims that the law is unconstitutional. At the hearing, WhenU.com’s lawyers argued that regulation of advertising on the Internet is a matter of interstate commerce subject to federal, not state, jurisdiction. Arguing the State’s case, lawyers noted that disrupting a consumer’s browsing and highlighting competitors goods and services is the kind of consumer protection the Utah Legislature has a right to prohibit. In protecting consumers, lawyers for the State also argued that computer users are often tricked into installing such software without adequate disclosures and then find it difficult to remove when unintended or unwanted consequences arise.

WhenU.com noted its software is only installed with consumer consent and that pop-up ads offer consumers useful free features (e.g., weather, screen savers, tool bars) in exchange for allowing software that tracks browsing habits and generates related ads on the screen. With such context-based advertising software, a consumer browsing mortgage lending websites might be offered home loan information from one or more lending institutions. Stay tuned.