• by Wendy Davis  @wendyndavis, June 29, 2005

In a ruling that validates adware companies' business models, a federal appellate court ruled this week that WhenU's pop-up ads don't violate trademark law.

In the case, 1-800-Contacts, Inc. vs. WhenU.com, the U.S. Court of Appeals for the Second Circuit reversed a federal judge's order barring WhenU from serving ads to consumers who visited 1-800-Contacts' Web site.

The appellate court held that WhenU did not violate 1-800-Contacts' trademark rights by using the site's URL to trigger ads for other contact lens sellers. "A company's internal utilization of a trademark in a way that does not communicate it to the public is analogous to a individual's private thoughts about a trademark," wrote Judge John M. Walker. "Such conduct simply does not violate the Lanham Act, which is concerned with the use of trademarks in connection with the sale of goods or services in a manner likely to lead to consumer confusion as to the source of such goods or services."

This ruling marked the first time a federal appellate court weighed in on whether using a rival's trademark to trigger pop-up ads violates intellectual property laws. Earlier, WhenU prevailed in federal trial courts in Virginia and Michigan, in cases brought by U-Haul International Inc. and Wells Fargo & Co.

The 1-800-Contacts lawsuit had drawn the notice of many Internet companies and observers, including search giant Google, and the online civil liberties group the Electronic Frontier Foundation--both of which filed briefs in WhenU's support.

Fred von Lohmann, an attorney with the Electronic Frontier Foundation, said that the organization got involved because it wanted to make sure that trademark owners can't prevent information or ads from being delivered to consumers' computers.

"It's important to emphasize that trademark owners don't get to control how your computer behaves just because you happen to be visiting that Web site," said von Lohmann.

He added that allowing Web site owners to determine what can be sent to consumers' desktops could stifle consumer-friendly programs. For instance, he said, in the future, consumers might want software that automatically gives them comparison-shopping information when they visit particular Web sites or search for specific products.

Google itself faces trademark infringement lawsuits based on its AdWords program, which allows marketers to serve text ads triggered by consumer queries on rivals' names. Late last year, a federal district court in Virginia dismissed a portion of a lawsuit against Google brought by insurance company Geico, but the search giant still faces other actions.