Overstock.com sues over pop-ups

Armed with Utah's new Spyware Control Act, Overstock.com is suing a Boston company for placing pop-up ads atop the Overstock Web site — an action Overstock says steals its customers away.

Salt Lake-based Overstock, an online closeout retailer, filed the suit Wednesday in 3rd District Court in Salt Lake against Smart Bargains Inc. It seeks to stop the pop-up ads placed without Overstock's permission, plus win unspecified damages.

Overstock claims that the unauthorized use of pop-up ads on Overstock's Web site "interferes with a user's ability to view that site, and solicits and obtains customers from Overstock by the invasion of Overstock's Web site."

Smart Bargains operates its own Web site and "endeavors to compete with Overstock by engaging in aggressive advertising schemes that target customers" visiting the Overstock site, the suit states.

The pop-up ads on the Overstock Web site began last fall. "The actions constitute an unauthorized invasion of Overstock's 'showroom' and create an advertising location for this major competitor in Overstock's own 'house,' " the suit states.

It also claims that Smart Bargain uses the ads to confuse and deceive customers and "to trade upon the goodwill and substantial customer recognition associated with the Overstock marks." Smart

Bargains' activities have damaged Overstock's reputation and customer relationships because of "confusion regarding Smart Bargains' implied affiliation" with Overstock, it says.

"In the long term, if left unchecked, Smart Bargains' actions imperil the economic viability of Overstock's business," the suit states.

The suit is the first filed by a company seeking damages through the act, passed during the 2004 legislative session, although the law has been the subject of a constitutionality lawsuit and lawmakers have since said it may need some tweaking.

The act is designed to cut down on spyware by making it illegal to create or install the software, which monitors Internet activity and sends that information elsewhere, usually without the user being aware of it or consenting to it, and can subject users to unwanted or unauthorized pop-up ads. The law also curbs pop-up advertising on the Internet and calls for penalties of $10,000 per violation.

In April, New York-based WhenU sued Utah, saying the act violates the U.S. and state constitutions. WhenU claims the act violates WhenU's constitutionally protected right to advertise and protects the Web sites of online merchants "from lawful competition from software-based contextually relevant advertisements, regardless of whether the software invades user privacy."

Draper-based 1-800 Contacts Inc. has been involved in lawsuits, including against WhenU, involving unauthorized pop-up ads, but those suits predate the act taking effect.

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