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NetZero sues Juno, alleges patent infringement

The free Internet service provider files a lawsuit alleging that its free ISP rival infringed on its advertising-related patent.

Free Internet service provider NetZero has filed a lawsuit against Juno Online Services, alleging that the rival free ISP infringed on its advertising-related patent.

The lawsuit, filed Tuesday in U.S. District Court in Los Angeles, alleges that Juno infringed on a patent recently awarded to NetZero's zCast technology that allows an ISP to display an advertising pop-up window. Both companies offer free Internet access but require people to accept a persistent window that displays advertisements.

The practice of serving persistent advertisements is the cornerstone of free ISPs. The services often subsist on revenues from advertising sales, and patents on the ad technologies can hinder rival services attempting to become leaders in the market.

NetZero's lawsuit seeks an end to the alleged infringing practices by Juno and compensation for what it considers resulting damages.

"We intend to judiciously protect our rights granted by this patent," Mark R. Goldston, chief executive of NetZero, said in a statement.

This is not the first time the two companies have battled in court over alleged infringements. In June, Juno filed a lawsuit alleging that NetZero and Qualcomm infringed on a patent that enables advertisements and other content to be displayed when a consumer is offline. This lawsuit has not yet been resolved.

Juno CEO Charles Ardai denied infringement by his company's services in either case.

"We do not believe we are infringing on any valid claim of any NetZero patent," Ardai said. "I hope to see both of these complaints to be resolved appropriately through legal channels."

Given the recent downturn in online advertising dollars, skeptics question whether the free ISP business model, with its reliance on ad sales, is sustainable enough to offset connection costs.

Because of this skepticism, free ISPs have been hammered this year. Juno's stock has plummeted 99 percent from its 52-week high of $87; it now trades below $1 after a 30 percent dip Wednesday. NetZero shares have nose-dived 97 percent from their year high of $40 and now trade below $1.

Other free ISPs have folded or been acquired by larger entities. Internet holding company CMGI plans to shut down its free Net access provider 1stUp.com while it seeks a buyer. In December, Kmart's online division, BlueLight.com, said it would acquire the assets of free ISP Spinway.com.