Utah Regulating Spyware, Adware

Rhett Pardon
SALT LAKE CITY - Utah became the first state in the nation this week to pass a law regulating spyware and other advertising software.

On Wednesday, Utah Gov. Olene Walker signed a law allowing individuals and companies to sue in Utah for unsolicited spyware advertising on their proprietary websites.

HB323, which goes into effect May 3, makes it illegal to create or install spyware, which is software that monitors Internet activity and sends that information elsewhere, usually without the user being aware of it or consenting to it.

The Utah law 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 also bars “context based” tools from triggering unrelated advertisements based on visiting Web sites on a certain topic.

The law does contains loopholes, however. Advertisements served by ordinary HTML or JavaScript are exempted, as are the ordinary “cookies” often used to help personalize Web pages.

The Software & Information Industry Association (SIIA) said Utah’s new law was ratified to hastily. “[The state is] moving too far without looking at what the issues are,” said Mark Bohannon, general counsel and senior vice president of public policy for SIIA.

Most industry groups, he said, only became aware of the piece of legislation in late February.

Bohannon said he is afraid the bill will become a model for other states to follow.

Lawmakers in Iowa and California also have introduced their own spyware control proposals in the past month, and federal lawmakers and regulators already are looking at the issue. A U.S. bill on the issue was drafted in February by the authors of the so-far ineffective Can-Spam Act -- Sen. Conrad Burns (R-Mont.), Ron Wyden (D-Ore.) and Barbara Boxer (D-Calif.).

The legislative trend is raising worried eyebrows among some Internet businesses, which are concerned that state laws may unintentionally hamper some means of doing business on the Internet.

“What’s called spyware is not innately a bad thing,” Emily Hackett, executive director of the Internet Alliance, a trade organization that includes America Online, eBay and Microsoft, told reporters. “What’s called a pop-up is not innately a bad thing.”

Earlier this year, the U.S. District Court for the Southern District of New York issued a preliminary injunction against adware company WhenU, ruling it violated trademark laws. That decision is currently on appeal before the 2nd U.S. Circuit Court of Appeals.

Meanwhile, a court in Germany on Thursday issued a preliminary injunction against Claria Corp. prohibiting pop-up ads, on Hertz Corp.’s website. Claria was previously known as Gator Corp.

The decision in Cologne is the first court ruling in Germany related to adware software.