NebuAd, a former online advertising company, was sued in 2008 for alleged violations of federal and state privacy laws. Although the company no longer exists, the case is still ongoing. At issue was NebuAd's practice of tracking consumers' online activities, selling that data, and using the data to deliver targeted advertisements. NebuAd contracted with various ISPs to install devices on their networks that monitored the ISP subscribers' Internet activity. That data was then transmitted to NebuAd, which analyzed it and used it to sell advertising tailored to subscribers' interests. The advertising profits were split by NebuAd and its ISP partners. Plaintiffs are ISP customers who allege their online activities were monitored during trials of this technology by NebuAd and the six ISPs to which they subscribed. NebuAd sought to dismiss the case, asserting that the plaintiffs cannot pursue an action under the California Invasion of Privacy Act and the California Computer Crime Law because they are not residents of California, and therefore lack standing under the statutes. Additionally, NebuAd asserts that both of these laws are preempted by the Federal Electronic Communications Privacy Act of 1986. The court held that the California Legislature did not intend to limit the right of action in the two California state laws only to in-state plaintiffs. Additionally, the court concluded that there was no intent by Congress to occupy the entire field involving the interception of communications, and, as such, there is no basis for concluding that application of California law is preempted by federal law. Therefore, NebuAd's motion to dismiss was denied.

TIP: We will continue to monitor this case, which may result in a decision regarding whether or not (in California) tracking consumer behavior to serve targeted advertisements constitutes a violation of the Electronic Communications Privacy Act. In the meantime, clients who engage in this activity – or who hire others to do so on their behalf – should understand and follow the FTC recommendations in this area, as well as industry initiatives like the Ad Choices program (www.aboutads.info).