24/7 Media Sues DoubleClick for Patent Infringement

With ad serving technology now an essential component of many e-commerce operations, interactive advertising company 24/7 Media (Nasdaq: TFSM) announced Friday that it has filed a federal patent infringement lawsuit against controversial competitor DoubleClick (Nasdaq: DCLK).

The suit, filed in U.S. federal court in New York, claims that DoubleClick’s DART technology infringes on a patent issued to 24/7 Media in 1996.

24/7 CEO David Moore said the company’s “robust technology infrastructure is supplemented by an early-filed patent relating to Internet ad serving. The patent relates to enabling technology that DoubleClick’s DART ad serving system uses without our authorization, and today’s legal action by us seeks to protect this valuable asset.”

DoubleClick vice president and general counsel Elizabeth Wang responded, “We understand that a complaint was filed. We have not yet seen the complaint. However, based on our initial review of the patent, we believe that any claim of infringement would be baseless. We will defend ourselves vigorously.”

24/7 is asking for both monetary damages and an injunction barring DoubleClick from future infringement of its patent.

Dueling Patents

At the heart of the dispute is 24/7’s U.S. Patent No. 6,026,368, “On-Line Interactive System and Method for Providing Content and Advertising Information to a Targeted Set of Viewers.”

The patent, unlike DoubleClick’s U.S. Patent No. 5,948,061, covers a system with billing and reporting functions, in addition to the targeting and serving of ads.

The two companies have faced off with one another before. In December of 1999, DoubleClick filed suit against Sabela Media — which 24/7 acquired in January 2000 — accusing Sabela of patent infringement. That case is still pending.

The DoubleClick Brouhaha

DoubleClick kicked off what has proven to be a tumultuous year with the announcement last June that it was acquiring Abacus Direct in a $1.7 million (US$) deal.

The acquisition gave DoubleClick access to an extensive database and the means to connect shopping habits with identities and other personal information about individual online consumers.

Privacy advocates were outraged, leading to a lawsuit filed on behalf of Harriet Judnick and the citizens of California claiming that the New York-based DoubleClick was tracking Internet users and obtaining personal and financial information such as names, ages, addresses, and shopping patterns, without their knowledge.

The company’s troubles grew when a complaint by the Electronic Privacy Information Center (EPIC) — accusing DoubleClick of engaging in “unfair and deceptive trade practices” — sparked an FTC investigation into the company’s methods of gathering and using information about online consumers.

Further fueling the controversy, Michigan Attorney General Jennifer Granholm likened DoubleClick’s actions to “spying and wiretapping,” and gave the company 10 days to abandon its practice of tracking Net surfing by sending cookies to its consumers’ computers without their explicit permission.

Taking the Heat

Backed into a corner, DoubleClick tried to patch up its tattered reputation by announcing in March that two high-profile New York consumer advocates would lead its privacy efforts. At the time, DoubleClick president Kevin Ryan said the appointments demonstrated DoubleClick’s “commitment to ensuring online privacy.”

That announcement followed a turgid proclamation by CEO Kevin O’Connor that “We commit today, that until there is agreement between government and industry on privacy standards, we will not link personally identifiable information to anonymous user activity across Web sites.”

O’Connor admitted that DoubleClick had “made a mistake,” but emphasized that the company had never implemented the plan.

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