NebuAd Defense Does Way More Than Rest

by Wendy Davis, May 21, 2009, 6:27 PM

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Defunct behavioral targeting company NebuAd did not just spur complaints by lawmakers and privacy advocates. This week, NebuAd's defense lawyers filed papers with the federal district court in San Francisco asking to withdraw as counsel in a privacy lawsuit.

In a motion dated Monday, attorney Thomas Gilbertsen alleges that NebuAd is behind on its legal bills -- in some cases by more than 45 days. He also argues that because NebuAd is out of business, no officers or employees are available to help with the defense.

"Because NebuAd has essentially ceased to exist, it can no longer participate in this case," states the motion. Gilbertsen also asked that the case be delayed pending NebuAd's liquidation and the resolution of creditors' claims.

Gilbertsen also says in court papers that counsel and NebuAd have "irreconcilable differences." He did not elaborate in the motion or return messages seeking comment.

Last week, NebuAd executed an "assignment for the benefit of creditors," which is a mechanism for companies to liquidate and pay off creditors without declaring bankruptcy. At its height, the Redwood City company employed 60 people. But with the papers filed last week, NebuAd essentially shut down.

But NebuAd still faces a putative class-action lawsuit by more than a dozen Web users. They allege the company violated their privacy by purchasing information about their Web activity from Internet service providers and using that data to send them targeted ads.

NebuAd's platform sparked Congressional hearings last summer, after it came to light that the company was going to start testing its system with Charter Communications. At that point, six smaller broadband providers had already quietly tested the technology.

Privacy advocates and some lawmakers argued that gleaning information directly from broadband service providers violated wiretap laws. Faced with congressional pressure, Charter suspended plans to work with NebuAd. Shortly afterwards, CEO Bob Dykes resigned and NebuAd laid off staff.

Consumer advocates said that NebuAd's Internet service provider-based platform presented a far more significant privacy threat than older forms of targeting because broadband companies have access to users' entire Web histories -- including search queries and activity at non-commercial sites. Older behavioral targeting companies only track users at a limited number of sites within a network.

At this point, it's not clear what effect the liquidation will have on the pending lawsuit. To further complicate matters, two former executives of the U.K. branch of NebuAd have ties to a new U.K.-based behavioral targeting company called "Insight Ready."

NebuAd appears to have registered Insight Ready's domain name last year, raising questions about how closely connected the new company is to NebuAd. Insight Ready is not expected to engage in Internet service provider-based targeting, according to media reports.

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