Overstock Loses Adware Lawsuit
Utah's highest state court has tossed a lawsuit accusing SmartBargains of engaging in unfair competition by displaying pop-up ads to Overstock.com visitors.
"Overstock failed to show that SmartBargains' pop-ups, labeled with the SmartBargains' logo and appearing in a separate window on the top of Overstock's website, are deceptive, infringe a trademark, pass off SmartBargains' goods as those of overstock's goods, or are likely to cause confusion," according to the Utah Supreme Court in its opinion.
The lawsuit dates back to 2004, when Overstock first filed a complaint against SmartBargains. Overstock alleged that SmartBargains had engaged in unfair competition, interfered with prospective business relations and violated a newly enacted Utah law banning adware companies from displaying any pop-ups that obscure ads or content on other sites. That law, the Utah Spyware Control Act, was found unconstitutional four years ago. Utah subsequently passed a revised law, but that version only bans pop-ups that violate companies' trademarks.
The trial court dismissed Overstock's lawsuit, ruling that the pop-ups were not misleading and did not confuse customers. Utah's Supreme Court agreed in a ruling issued last week.
The Overstock-SmartBargains dispute isn't the first time a court has considered whether pop-ups are legal. Adware company WhenU won a similar lawsuit in a federal appeals court in New York in 2005. There, 1-800 Contacts alleged that WhenU violated trademark law by serving pop-ups for Vision Direct to visitors who navigated to the 1-800 Contacts' site. The Second Circuit Court of Appeals okayed the pop-ups, ruling that they didn't violate 1-800 Contacts' trademark.
Some courts have since extended that rationale to search ads, ruling that using a trademark to trigger a pay-per-click ad isn't the type of use in commerce that's covered by federal trademark law. The Second Circuit Court of Appeals is currently mulling the issue in a lawsuit brought by computer repair company Rescuecom against Google. There, Rescuecom argues that Google infringes on the company's trademark by allowing rivals to appear as sponsored results when users search for Rescuecom.
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