• by Wendy Davis , November 22, 2010

A court has handed a defeat to Internet service provider Bresnan Communications in privacy litigation stemming from its partnership with defunct behavioral targeting company NebuAd.

In a ruling issued last week, U.S. District Court Judge Richard Cebull rejected Bresnan's attempt to send the potential class-action lawsuit to arbitration. Bresnan had argued that consumers had agreed in a clause in their subscriber agreement and acceptable use policy to resolve all disputes in arbitration, but Cebull ruled that the term wasn't valid.

"The agreement was presented by defendant to plaintiffs on a take-it-or-leave-it basis," he wrote. "The arbitration provision in the agreement was not conspicuous nor was the consequence of accepting it explained to plaintiffs. Plaintiffs were not sophisticated business persons that could have been presumed to know and understand the effect of an arbitration provision."

A spokesperson from Bresnan said the company didn't comment on pending litigation.

The decision is just the latest in a string of court rulings stemming from NebuAd's ill-fated behavioral-advertising partnership with Internet service providers. In late 2007 and early 2008, six ISPs, including Bresnan, allowed NebuAd to use deep-packet inspection technology to monitor subscribers' Web activity and serve targeted ads based on the data collected. Other ISPs to partner with NebuAd included Cable One, CenturyTel, Embarq and Wide Open West.

Privacy advocates and lawmakers criticized the company, saying that its technology was more intrusive than older forms of behavioral targeting because ISPs could provide data about everything consumers did online -- including their search activity and visits to non-commercial sites. Older forms of behavioral targeting only collected information from a network of commercial sites.

NebuAd maintained that its data collection was anonymous and that consumers could opt out of the program. However, most of the ISPs that participated only provided notice of the program by quietly revising their online privacy policies -- a method that critics called inadequate, given that consumers had no reason to suspect the change in terms.

NebuAd's technology emergence spurred congressional hearings, following which the company suspended plans for further tests. Shortly afterward, the company shuttered. After the details of the tests came to light, a group of consumers sued all six ISPs and NebuAd for allegedly violating federal and state laws with the platform. Last year, a federal judge in the Northern District of California dismissed the lawsuit against the ISPs, ruling that they shouldn't have to face trial in California when they had no contact with the state other than their contract with the Redwood City-based NebuAd. Lawyers for the consumers then brought cases against ISPs individually, in various courts throughout the country.

One other defendant, Knology, also argued that the case should be sent to arbitration because subscribers had agreed to arbitrate any disputes. The judge presiding over that case sided with Knology, and earlier this year, granted its motion to compel arbitration.