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WhenU.com Inc. v. Utah

No. 040907578 (Utah Dist. Ct., June 22, 2004)

Utah Court Enjoins Enforcement of Utah Spyware Control Act

Court issues preliminary injunction, enjoining enforcement of Utah's Spyware Control Act, which, inter alia, prohibits the delivery of 'pop-up' ads that obscure any portion of an Internet website, and bars advertisers from downloading programs that deliver ads to a consumer's computer unless the consumer's consent to such download is obtained in the manner specified by the Act.  The Court issued such relief because it found that plaintiff was likely to prevail on its claim that those portions of the Act run afoul of the Commerce Clause of the United States Constitution.

Utah's Spyware Control Act

Utah's Spyware Control Act, Utah Code Ann. §13-40-101, et seq. prohibits the "use [of] a context based triggering mechanism [such as a computer program] to display an advertisement that partially or wholly covers or obscures paid advertising or other content on an Internet website in a way that interferes with a user's ability to view the Internet website"  13-40-201(1)(c).  The statute also prohibits the installation of "spyware" programs on the computer of a user who has not consented thereto, and contains extensive regulations, found in 13-40-102(4), governing the manner in which the consent for such installation must be obtained.  Among other things, the Act requires that the consumer consent before ad delivery "to a clear and representative full size example of each type of advertisement that may be delivered," which ads must be labeled in such a way that "a user may distinguish the advertisement by its appearance from an advertisement generated by other software services."

Plaintiff WhenU.com, Inc. delivers on-line "contextual marketing" on behalf of its clients via software consumers typically download to their own computers in order to obtain, and as "payment" for, another software application.  Before such download takes place, another court has held, (Wells Fargo & Co., et al. v. WhenU.com, Inc., (E.D. Mich. Nov. 2003)) "some user assent is required."  In addition, the Wells Fargo court held that the ads WhenU uses these programs to deliver indicate that their source is WhenU.

Utah Spyware Control Act Likely To Violate Commerce Clause

WhenU moved for a preliminary injunction, enjoining the State of Utah from enforcing the Spyware Control Act.  WhenU argued that the Act ran afoul of the Commerce Clause of the United States Constitution.  Finding plaintiff likely to prevail on this claim, the Court issued the requested relief.  Said the Court:

[T]he statute attempts to do more, and I am persuaded that to the extent there is a prohibition on pop-up advertising, and as I've previously indicated, a protocol for [obtaining] authorization from the recipient of a programming to perfect consent, there is a substantial likelihood plaintiff will prevail on the basis that these provisions violate the Commerce Clause of . . . Article 1, Section 8 . . . of the Constitution of the United States.

This determination was based in part on WhenU's contention that, absent an injunction, WhenU would be subject to different and conflicting regulations on its advertising throughout each of the States of the Union.

The Court further found that WhenU had adequately demonstrated that it would suffer irreparable harm if the requested relief did not issue, because, even if it ultimately prevailed, it would not be able to recover any economic losses it may sustain, such as the loss of revenue from pop-up advertisers, or the costs of compliance with the Act's consent provisions, from the State of Utah.

Finally, the Court found that the potential harm to plaintiff if injunctive relief were not granted, outweighed any harm to the State of Utah and the public if an injunction was granted, given "the public[s] interest that Acts of the Legislature meet Constitutional muster."

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