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Adware maker challenges Utah anti-spyware law

Online advertising software maker WhenU says the first U.S. anti-spyware statute set to take effect next month could harm its business.

Online advertising software maker WhenU is challenging the nation's first anti-spyware statute, charging that the Utah law set to take effect next month is unconstitutional.

WhenU filed a motion for a temporary restraining order and preliminary injunction this week in the Third Judicial District Court in Salt Lake County, Utah. It charges that Utah's recently enacted Spyware Control Act violates free-speech guarantees and could unfairly harm its business. WhenU's software lets advertisers deliver pop-up and pop-under advertising to computers connected to the Internet.

"In addition to seeking a declaration, WhenU has asked the court for an injunction prohibiting the implementation and enforcement of the act prior to its effective date" on May 3, the company said in a statement. "Alternatively, WhenU has sought damages from Utah on the grounds that the act constitutes an unconstitutional taking of WhenU's property in violation of the Utah Constitution."

Utah is the first state to pass a law regulating spyware and other advertising software. "Spyware" and "adware" are rarely clearly defined, but typically refer to software that tracks computer users' actions online or uses a computer's resources to pop up advertisements or other messages. Many of these programs are bundled quietly with other pieces of software and are sometimes difficult or impossible to find and uninstall. WhenU said its software can only be installed after people agree to accept terms of service that explicitly describe all of its practices.

Regardless of consent, the Utah bill bars companies from installing software that reports its users' online actions, sends any personal data to other companies, or pops up advertisements without permission. It contains some loopholes: Advertisements served by ordinary HTML or JavaScript are exempted, as are the ordinary "cookies" often used to help personalize Web pages.

The bill also bars "context based" tools from triggering unrelated advertisements based on visiting Web sites on a certain topic, a concern that arose from a problem reported by a local contact lens direct marketer.

That has caused worry among some Internet businesses, which are concerned that state laws may unintentionally hamper some means of doing legitimate business on the Net. The Internet Alliance, a trade organization that includes America Online, eBay and Microsoft, has opposed anti-spyware legislation.

Last month, 1-800-Contacts filed the first lawsuit under the Utah law, charging that its competitor Coastal Contacts had used WhenU and other adware to deliver ads that infringe on its copyrights and trademarks.

The law has drawn the attention of other Internet advertisers. WhenU rival Claria, formerly known as Gator, referred to potential threats to its business posed by Utah's anti-spyware law in a recent securities filing announcing plans for an initial public offering.

"A recently enacted statute in Utah will, upon coming into effect on May 3, 2004, prohibit us from providing our products and services in that state," according to Claria's S-1 document.

CNET's John Borland contributed to this report.