The Supreme Court decided today that it won't hear an appeal of a decision clearing Embarq of liability for working with the defunct behavioral-targeting company NebuAd.
The ruling brings an end to a five-year-old legal saga about whether the Internet service provider violated consumers' privacy by testing NebuAd's technology.
Embarq (now owned by CenturyTel) was one of six ISPs to test NebuAd's behavioral advertising platform in late 2007 and 2008. The ISPs allowed NebuAd to install a device on the networks that captured data about subscribers' Web-surfing history. The company then served ads to people based on their Web activity. NebuAd paid Embarq around $30,000 for three months' worth of data from 26,000 customers, according to the court records.
Subscribers sued NebuAd and all of the ISPs. The consumers said the companies had violated various laws, including the federal wiretap law. That law prohibits companies from intercepting or disclosing subscribers' electronic communications without their consent.
NebuAd settled for $2.4 million. More significantly, the controversy over the company's technology helped put it out of business. NebuAd was shuttered in 2008.
During its brief existence, the platform drew criticism from privacy advocates as well as lawmakers, and sparked hearings on Capitol Hill. One of the biggest concerns was that ISPs could offer data about everything consumers did online -- including their activity at sensitive sites, like pages operated by hospitals or religious organizations. NebuAd said its data collection was “anonymous,” and that consumers could opt out of the program, but it's safe to say that almost no consumers knew about the program while tests were conducted.
The ISPs all fought the cases and several, including Embarq, have won dismissals for various reasons In Embarq's case, the 10th Circuit Court of Appeals ruled that the ISP itself didn't violate the wiretap law by allowing NebuAd to gather data. The court ruled that the federal wiretap law only imposes liability on companies that wrongly intercept traffic, and that NebuAd alone was responsible for any potentially unlawful interceptions. That 10th Circuit noted in its decision that NebuAd didn't share the raw data, or user profiles it created, with Embarq.
The consumers who sued recently asked the Supreme Court to hear the case, arguing that the wiretap law should prohibit ISPs from “redirecting” communications, as well as intercepting them.
Now that the Supreme Court has turned down the consumers' appeal, Embarq doesn't have to worry any longer about its former partnership with NebuAd. Still, after five years of litigation, whoever okayed the $30,000 deal with NebuAd has to be wondering whether that was a good business decision.