Computer Law 484 Professor Richard H. Stern Supplemental Material

. . . Recently, Internet marketers have turned to a further step in associating one person's advertising with another's content. This expedient does not simply place the material near or next to the underlying content. Instead, it effectively superimposes it on (layers it over) the other person's content. The next Mousetrapping page turns to this extreme form of hyperlinking, which its more incensed detractors have termed scumware and thiefware.

Its friends and users call it contextual advertising. That term picks up on contextual advertising being designed to get viewers to transfer from a first site page containing a word or phrase describing a given subject (the "context") to a second site page, which addresses the same subject from a second advertiser's standpoint. Thus, a viewer might be reading a Pepsi Web page extolling the merits of Diet Pepsi. The word "cola" would be hyperlinked in orange on the screen display, the hyperlink would be to Coca-Cola's Web page about Diet Coke, and if the viewer passed the cursor over the word "cola" it would appear highlighted in yellow. On the other hand, if Pepsi had outbid Coke for the word "cola," the firm operating the contextual advertising program (eZula, Inc.), the tables would be turned and Diet Coke Web page readers would be seeing orange hyperlinks to Pepsi's page. The main thing is that If a viewer of such a page clicks on the orange link, the viewer's browser is redirected to the Web page of eZula's client. The claimed advantage of contextual advertising is that the viewer being shuffled around from site to site is a more likely customer for the advertiser than a random viewer is. This viewer is already self-selected as a person interested in the common subject matter of the two sites and in the linked word or phrase. (That is the context of the contextual advertising.) The word or phrase is known as a keyword. A partial list of these keywords is posted at the thiefware.com Web site.

Here are screenshot examples, showing the operation of eZula's ContextPro program when a computer system on which that program is installed browses Web pages. First, consider the Web page of Premier Equity, a company offering debt consolidation service. Then, consider this screenshot of an FTC Web page, as browsed with a ContextPro-equipped computer system:

Clicking on the keyword "loan" transfers the user from the FTC page to the Premier Equity page. The same thing would occur on the Web page of another lending institution, such as any bank whose Web page mentions loans. (This has led to a demand to FDIC from a banking trade association for an investigation and possible regulatory action.) The next two images show an Amazon.com page and a Yahoo.com page, in greater detail. When the cursor is passed over the orange-underlined keyword "Financing" (i.e., onmouseOver), the word is surrounded by yellow highlighting as shown, and a tooltip (small popup window) appears, stating, "Apply today for a PremierEquity loan!" The contextual advertising program provides this function by searching the current page in the browser for those keywords that eZula or other relevant marketing company has "sold" to one of its advertiser-customers. When the program finds such a keyword in the HTML code for the current page, it provides code to place an overlay over the word, so that the appearance on the user's screen of that part of the page is changed as shown here, as one might place a moustache overlay on an electronic image of the Mona Lisa. At the same time, a hyperlink to the page of eZula's client is established.

Clicking on the link (in these two examples) transfers the user to the same Premier Equity site that was previously shown as linked to the FTC page. The next image is eZula's concise explanation of its service to potential advertiser-customers.

How did those yellow links on the FTC's, Amazon's, and Yahoo's pages get there? Think about Odysseus and the Trojan Horse. Ezula entered into a bundling agreement with Kazaa, a company that gives away a popular Napster-Gnutella substitute. (Kazaa gave away about 7 million copies to lovers of free music.) Kazaa includes eZula's program (now called ContextPro, formerly called TopText) with its own program in the download package. When a user installs Kazaa, more often than not the user will install eZula's program at the same time without even realizing it. The installation process for Kazaa is designed to get the user to let opText/ContextPro slide into the user's system along with Kazaa.

Once installed, eZula's program operates non-discriminatorily on any browsed Web page. For example, eZula gives Premier Equity's page the same equal opportunity treatment that it provided (per above) to the pages of the FTC, Amazon, and Yahoo.

Another reviled contextual advertising program is Gator. Instead of just plastering links on Web pages that its users visit, Gator delivers link-containing popup windows. For example, a PC user may decide to research digital cameras with a search engine such as Google or Yahoo, or by looking up product reviews by Consumer Reports. Or the user may be viewing Hitachi's digital camera Web page. Gator has "sold" the phrase "digital camera" to a notional client, Digicam Co. The PC user's installed Gator program recognizes the phrase "digital camera" on the user's currently browsed page. A window therefore pops up in the middle of the user's screen, carrying a message such as:

Get the best prices and selection on digital cameras at Digicam! Click here to get a $10 discount on any purchase over $50. Link to Digicam.

Link to screenshot of Gator popup Instant Offer for its book seller client half.com, superimposed on Amazon.com Web page. Similar link to screenshot of Gator popup for its book seller client Overstock.com, superimposed on Barnes & Noble Web page.

Gator is distributed in much the same way as eZula. The engine for the popups is bundled as part of a multi-function package that performs such tasks for users as remembering passwords and storing information for filling out purchase order forms. Downloading and installing the package quietly installs the popup engine along with the other programs. Gator claims to have distributed 8 million copies of its program to consumers.

Gator Promotional Material

Gator helps advertisers market directly to highly targeted and receptive consumers. Since offers are presented to consumers at the perfect time and place, online promotions are extremely effective. Gator gives you the chance to deliver offers or banners to consumers while they are visiting any competitor's website-anytime, anywhere! Gator reacts to consumer behavior in real time, rather than trying to predict it.

Why are the proprietors of Web pages so enraged about these programs? (See, for example, the statements on the scumware.com page.) Detractors of eZula and Gator say that these programs steal (i.e., divert) customers from their pages to the pages of their competitors, or to pages of the competitors of those firms whose advertising they carry, and thus steal the detractors' income. The business model of the proprietors of these pages is to provide some sort of content that is freely available to viewers. In addition, the proprietors of these pages place on them advertising material (typically, banner advertisements) with links to the advertisers. If a viewer clicks on a link in an advertisement, the viewer is redirected to the advertiser's site and the advertiser pays the proprietor of page a fee for the click. The payment supports the proprietor of the Web page, which results in continued provision of free content on the page. This is the usual business model for Internet sites operated by small businesses; many large businesses, such as Google, Lycos, Yahoo, and Netscape use this model, too.

When a contextual advertising program causes viewers to click on the contextual advertiser's superimposed link, the contextual advertiser's customer pays it for the click. But nobody pays anything to the proprietor of the underlying page. As the late Jim Wilson, the Webmaster of the scumware.com page and for many years a leading detractor of contextual advertising, put it:

When someone comes to [my Web site] Jimworld and the banner is replaced by one sold by Gator, then I have just been cheated out of the revenue that comes from that advertising. Why pay to advertise on my Web site when you can pay these bozos to hack into my content and send you some cheap, stolen traffic. To add insult to injury, they deface my sites with their ugly yellow background colors.

The following before and after tabulation shows how a notional Web page ("Jimmy World") about digital cameras appears on a user's monitor, before and after the user installs Gator on the user's PC. The tabulation illustrates what is bothering Wilson and other detractors of contextual advertising.

Without Gator Installed on User's PC			After Gator Is Installed on User's PC
Jimmy World Tells You About Digital Cameras			Jimmy World Tells You About Digital Cameras
Banner Advertisement that Jimmy runs for Hitachi, which pays Jimmy 10 cents per click if viewer clicks on link to Hitachi Web site. (Text goes here saying ''Get great deals on digital cameras at Hitachi ... etc.'')	Here is Jimmy's content, telling users all about the fine points of how digital cameras work, what features to look for when buying one, and whatever else Jimmy can think of to make his site attractive to Internet users who are interested in digital cameras. Jimmy imagines that he will become rich by collecting vast sums from his banner advertising because his wonderful content will draw users who will happily click on his ads.		Banner Advertisement for Gator's client, which pays Jimmy nada per click if viewer clicks on link to Gator-Client Web site. (Text goes here saying ''Get great deals on digital cameras at Gator Client ... etc.'') In a worst case scenario, this banner ad completely covers up Jimmy's Hitachi banner ad.	Here is Jimmy's content, telling users all about the fine points of how digital cameras work, what features to look for when buying one, and whatever else Jimmy can think of to make his site attractive to Internet users who are interested in digital cameras. Jimmy imagines that he will become rich by collecting vast sums from his banner advertising because his wonderful content will draw users who will happily click on his ads. No way at nada for Jimmy per click.

The implication of this, according to those in Jimmy's position, is that their revenues will decrease so much that they will be driven out of business and become unable to continue to support their Web sites. As a result, the public will be deprived of the benefit of their sites' free content. (This is the same as the free-goods argument made in support of intellectual property rights.) It might be argued that they should charge a fee for the public's use of their content, but that is unrealistic. Generally (some exceptions exist), the fee-for-use business model has not been successful on the Internet. Probably, therefore, at least some free-content sites will become so unprofitable, as a result of gatoring or similar expedients, that they will exit the marketplace. Those that do not exit the market will operate at somewhat reduced income levels. This fact incenses the affected businesses and has caused creation of the scumware and theftware sites to protest the development and to urge some sort of counter-attack against contextual advertising firms. Thus far, Gator Inc. has not devised any special response to Jim Wilson's scumware page or similar pages, but one might imagine some creative responses that Gator might dream up if antagonized enough.

That's Jim Wilson's side of the story and that of other "gatored" or "eZula-ed" Webmasters. But they are not the only stakeholders and theirs are not the only interests. Other interested stakeholders include the client-advertisers (including both Wilson's and eZula/Gator's, which are overlapping sets), the scumware/contextual advertising firms (eZula, Gator), and consumers who are viewers of these Web sites and ads. While eZula and Gator clearly sabotage the business models of the adversely affected Webmasters, they do not appear to cause the kind of substantial, unavoidable injury to consumers that is required for a finding of unfairness under section 5 of the FTC Act.

Moreover, it is at least conceivable that offsetting competitive benefits or improvements in allocative efficiency result from gatoring and eZula-ing. Contextual advertising delivers product availability and price information to consumers more efficiently than other advertising, which results in gains for advertisers and information-seeking consumers. At the very least, contextual advertising is not bad per se. Thus, the court rebuffed Playboy Enterprises when it complained (essentially on trademark grounds) about the Excite and Netscape search engines firing up sexually oriented banner ads when users utilized "playboy" as a keyword in a search. The court likened this contextual advertising practice (known as "keying") to standing across the street from a McDonald's outlet and asserting (say, by billboard advertising) that cheaper and better burgers are available down the block at Burger King. That case is distinguishable from this situation on multiple grounds. Nonetheless, it indicates that other values may be relevant here besides protecting the business models of Webmasters. It is at least conceivable that the public interest favors court abstention from resolving the merits of this controversy and leaving it to ordeal by battle in the marketplace.

What about copyright? A good argument can be developed that eZula and Gator engage in unauthorized preparation of derivative works based on the original Web pages. That is, the above-displayed right-hand version of the Jimmy World page with the yellow Gator banner advertisement is seemingly a derivative work based on the original, left-hand version of the page, and Jimmy did not authorize preparation of the derivative work. Even if FTC Act § 5's public interest calculus does not condemn gatoring, how about copyright law's property rights calculus? Does it call for a different result? That calls for a more general and elaborate analysis of derivative work liability, which is beyond the scope of this portion of the materials. See the L.H.O.O.Q. pages for an attempt to address that. For present purposes, it is enough to say that whether gatoring or eZula-ing create copyright infringement liability, because they violate § 106(2)'s prohibition against unauthorized preparation of derivative works, is a difficult question that requires considerable analysis, and that some parts of a copyright analysis (for example, fair-use nature-of-use factor and "transformativeness") may involve weighing public interest factors comparable to those whose consideration is required under FTC Act § 5.

It appeared in late 2000 that a judicial resolution of the legality of gatoring might occur. The Interactive Advertising Bureau, an Internet advertising trade association, began making public statements that gatoring was unethical and illegal and that it planned to ask the FTC to investigate the practice under § 5. In response, Gator filed a declaratory judgment action seeking a ruling that gatoring was not illegal; Gator also complained that the IAB was defaming it and tortiously interfering with its business expectations. In late November, however, the parties "agreed to extend various deadlines relating to the lawsuit; thereby enabling ongoing discussions to focus on the positive ways Gator, the IAB and publishers can work together." Further, "as a gesture of good faith in our ongoing discussions," IAB agreed to stop bad-mouthing Gator, and Gator agreed not to accept further contracts for its present form for advertising. Apparently, the goal of the discussions is "to co-develop a new version [of the Gator popups] that is more publisher [Web site] friendly, designed to create a revenue stream for them by monetizing unused banner inventory." It is unclear what that means, but it seems to suggest a sharing of revenue or license fee for gatoring a site.

In mid-2002, The Washington Post and a group of other news and information providers sued Gator Corp. in the Eastern District of Virginia. Numerous IP theories feature in the complaint, including violations of the public display and derivative work rights. One of the allegations (par. 78) is that Gator charges a fee not to prey on a given Web site. The fee is said to be up to $50,000. The district court granted a preliminary injunction, based mainly on trademark infringement grounds. But the order was uninformative and the parties settled the case in early 2003.

While the Washington Post's case against Gator was pending, U-Haul brought a similar suit in the same district against WhenU, a company using techniques similar to Gator's. The case fell to another judge of the court and he dismissed the complaint on summary judgment cross-motions. The rationale is not clearly stated, but the court concluded that there was no derivative work primarily on the ground that to rule otherwise would require him to hold that Internet users infringe copyright when they cause (or allow) a pop-up window, such as one saying "You have mail," to appear over a Web page currently being viewed. (The court also ignored the legislative history of the 1976 Act, in finding that the transitory nature of a pop-up window prevented creation of a derivative work.) The opinion does not mention fair use or attempt to balance the respective interests of the public and Web site proprietors.

Mousetrapping, gatoring, and similar conduct reflect early ideas of marketers about how to exploit for commercial gain the ability of HTML code for Internet pages to refract the content of other people's Internet pages regardless of the others' lack of express consent (or even their explicit statements of no consent). We must expect the imaginativeness of Internet marketers to lead to further, as yet unimagined expedients of this kind, which of course will lead to interesting litigation. Litigation in this area has as yet been too inconclusive to tell us how courts will respond to claims of theft of property rights and other interferences with asserted interests of proprietors of the Internet pages whose content has been exploited this way against the proprietors' wishes. In part that has been the happenstance of defendants being underfunded startups and therefore unable to sustain the cost of litigation. That is likely to change, however, if the stakes become greater.

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