• by Wendy Davis  @wendyndavis, September 9, 2011

Last month, Web user Betsy Feist alleged in a lawsuit that the company Paxfire and Internet service provider RCN "intercepted, monitored, marketed, and divulged" her search history to a third party.

The claims largely stemmed from a report that RCN and other ISPs were working with Paxfire to divert search traffic by sending some users who queried on brand names directly to marketers' pages, rather than returning search results for those queries.

Paxfire has now fired back with a $80 million countersuit against Feist. The company says in its legal papers, filed in federal district court in New York, that it didn't break any laws or violate users' privacy. However, Paxfire also acknowledges that it offered what it calls "direct navigation" when users typed brand names into the search boxes in their browsers.

The company explains "direct navigation" as follows: "Beginning in 2010, Paxfire also provided direct navigation to the websites of certain trademark holders for end users who entered trademarks into address bars and search boxes embedded in their web browsers, where such end users were customers of Internet Service Providers that had contracted with Paxfire to provide such services ("Direct Navigation services") for their customers."

Users could opt out of "direct navigation" through their ISPs, contends Paxfire, adding that it did not collect any information about people's searches that could be used for profiling purposes.

In its counterclaim against Feist, the company says she defamed Paxfire with her allegations and also interfered with its business relationships. Paxfire says that it lost several contracts as a result of Feist's allegations, including deals with LinkShare and the ISP XO Communications.

People typically can't be sued for defamation based on claims they make in court papers. Paxfire alleges that Feist (or her attorneys and agents) defamed it by making statements about the company to the publication New Scientist and advocacy group Electronic Frontier Foundation.