Expert Voice: Pop-Up Lawsuits
The New Reality for Customer Engagement
The flurry of lawsuits pitting outdoor outfitter L.L. Bean Inc. against online marketer Claria Corp. and four of its (alleged) clients over Claria's use of adware to create pop-up ads on L.L. Bean's Web site has not been resolved yet. But the issues giving rise to the suits led CIO Insight to discuss the implications with legal expert and business strategist Larry Downes.
CIO Insight: What is the L.L. BeanClaria dispute about?
Downes: Basically what it's about is trademark law. The trademark system was set up to help consumers simplify their purchasing decisions. If a company invests in a logo, or the design of their stores, or in L.L. Bean's case the design of a Web site, to make them familiar to customers, then trademark law is there to protect the consumer from misuse of those shortcuts. If another company's behavior confuses the customer, we let the company that invested in the design sue the people who are messing it up.
When that happens, the developer of the trademark is essentially suing on behalf of consumers. Unlike copyright or patent law, they aren't actually suing to protect their own property interests. They are more like a private prosecutor protecting consumers being damaged by the misbehavior.
How does that apply in the L.L. Bean case?
First of all, nothing has actually happened to L.L. Bean. Claria hasn't hacked into the L.L. Bean Web site. Its software hasn't been affected, its computers haven't been affected. Everything is happening on the consumer's computer. Claria's software runs on your computer and throws up a pop-up ad when it notices you shopping on certain sites, including L.L. Bean's. So in some sense, who is L.L. Bean to complain?
But fortunately for L.L. Bean, trademark lawand more broadly the law of unfair competitionis flexible enough to handle this kind of interference. All L.L. Bean has to show is that Claria's behavior is likely to confuse consumers about the relationship between L.L. Bean and the products advertised on the pop-ups. L.L. Bean says there is no relationship, for example, between it and Atkins Nutritionals, but the pop-ups imply otherwise. The basis of the complaint is that Claria is making it more difficult for consumers to interact with the L.L. Bean brand.
Is trademark law the most effective way to go after adware companies?
Yes, I think so. But it's really this broader category of unfair competition. If you are stealing customers, confusing customers, or trying to interfere with the customer transaction while it's going on, it doesn't really matter how you do it.
At a Glance
Career Highlights: Larry Downes began his career as a consultant with Accenture Ltd. and then McKinsey & Co. He decided, "as an adult," to attend law school, after which he practiced technology law in Silicon Valley.
His return to business strategy consulting was highlighted by the 1998 publication of Unleashing the Killer App, written with Chunka Mui, followed in 2002 by The Strategy Machine. He is currently working on a book on the nexus between business strategy and law. "In an information economy, information is the most valuable asset, and the only way to regulate it is intellectual property law," says Downes. "Executives who don't know the difference between a copyright and a patent are being irresponsible to their shareholders."
B.A., Northwestern University, 1981
J.D., University of Chicago, 1993
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