Company Defends Internet Pop-Ups
Those flashy pop-up ads that annoy millions of Internet users each day are getting a legal test, thanks to a pair of 20-year-old college students who are challenging the government’s effort to regulate the advertisements.
The Federal Trade Commission accuses the students’ small San Diego company of committing “high-tech extortion” by using a feature inside popular Windows software to generate pop-up ads as frequently as every 10 minutes. Ironically -- and a key factor in the government’s case -- the students’ pop-ups tout software designed to block such ads.
The company, D-Squared Solutions, countered that the government’s allegations went too far and that its ads were “no more harmful than roadway speed bumps or television commercials.”
Federal regulators brought the enforcement lawsuit in hopes it would quickly dampen one of the most irritating practices of Internet advertisers. Instead, the company’s founders have mounted a spirited defense over whether such pop-ups are protected free speech.
“It’s very unusual for a company to aggressively fight an FTC enforcement action,” said Mark Rasch, an expert on technology law. Most companies in high-profile FTC lawsuits quickly settle, typically paying a fine and pledging to stop the disputed business practice.
Rasch said the FTC’s legal arguments and the company’s business practices were “right on the margins,” ripe for challenge in an important dispute that could have broad effects on the future of Internet advertising.
The FTC last month accused D-Squared of unlawfully exploiting Messenger network technology built into most new versions of Microsoft’s Windows operating system to display the unwanted advertisements. Unlike Web-based pop-up ads, such messages can appear even when a computer user isn’t surfing the Web.
The company contended that it wasn’t illegal to transmit its ads, that the ads weren’t damaging and that its software genuinely blocked pop-up ads. It noted that the Messenger technology was widely considered a serious security threat for home computer users and said its ads helped warn consumers their computers were at risk.
“While it may be annoying, if you get a pop-up on your screen it may cause you to address this problem,” said Anthony J. Dain, one of D-Squared’s lawyers.
The FTC, however, compared D-Squared to vandals throwing bricks through windows to sell home-security systems.
It said the company’s founders “desperately try to recast themselves as innocent public servants who merely hope to warn consumers about a security flaw.”
D-Squared’s owners, Anish Dhingra and Jeffrey Davis, are students at UC San Diego. Both were expected to testify in federal court next week and urge a judge to lift an order barring D-Squared from delivering more pop-up ads.
Their lawyer said the students were unlikely players in a court drama.
“They’ve never been in any kind of trouble before. They’re good kids, nice individuals,” Dain said. “Obviously they’re scared, anxious, nervous, but they’re also angry. They don’t think they’ve done anything wrong.”
Citing complaints from consumers, the FTC said the ads disrupted some home computers and that most people didn’t know how to turn off the ads. FTC consumer protection chief Howard Beales called the company’s practices “high-tech extortion.”
D-Squared’s lawyers complained to the judge that such talk was “inappropriate and prejudicial.”
The company’s lawyers said consumers could find detailed turn-off instructions so easily on the Internet that it was “inexcusable for the FTC to plant these shills before the court and instruct them to feign helplessness.”
The affected Messenger service -- unrelated to Microsoft’s own instant-messaging software that uses the same name -- permits network administrators to display messages on a user’s computer screen, such as a warning that a company’s Internet connection is having problems.
