• by Wendy Davis  @wendyndavis, September 30, 2013

The Internet service provider WOW has defeated a long-running privacy lawsuit stemming from its partnership with defunct behavioral targeting company NebuAd.

On Friday, U.S. District Court Judge Edmond Chang in the Northern District of Illinois dismissed claims that WOW (formerly called Wide Open West) violated federal wiretap laws by intercepting and transmitting information about consumers' Web activity to NebuAd. The dismissal was with prejudice, meaning that the consumers can't refile the case. Scott Kamber, a lawyer for the consumers who sued NebuAd, says they are evaluating their options.

Chang ruled that WOW did not violate the wiretap law because the company didn't itself intercept any transmissions by customers, but merely allowed NebuAd to do so. NebuAd used the data to send targeted ads to people.

Chang added that the case might have turned out differently if NebuAd had shared the data it gathered with WOW. “If plaintiffs made factual allegations that WOW had directly intercepted their communications, their disclosure and use claims would remain viable,” Chang wrote in a 20-page ruling. “So, too, would these claims remain viable if plaintiffs had amended their complaint to include factual allegations that WOW somehow received the contents of plaintiffs’ intercepted communications from NebuAd.”

WOW was one of six Internet service providers to test NebuAd's ad-serving platform in 2007 and 2008. The behavioral advertising company, which shuttered soon after news of the tests came to light, used “deep packet inspection” technology to gather data about Web users' activity directly from their ISPs. The controversial technology drew objections from privacy advocates as well as lawmakers. One criticism was that ISPs could provide data about everything consumers did online -- including their sensitive searches and browsing activity at noncommercial sites.

NebuAd said its data collection was anonymous, and that consumers could opt out of the program.

In 2008, after news of the tests came to light, consumers sued NebuAd and the six ISPs, arguing that the companies violated federal privacy laws. NebuAd agreed to a $2.4 million settlement, but the ISPs fought the cases.

The ISP Embarq, which also worked with NebuAd, defeated a similar lawsuit last year when the 10th Circuit Court of Appeals ruled that NebuAd alone was responsible for any interceptions of subscribers' data. This May, the Supreme Court refused to consider an appeal by consumers.

Other ISPs who partnered with NebuAd were CenturyTel, Knology, Bresnan and Cable One. A lawsuit against CenturyTel was dismissed in 2011, while a case against Knology was sent to arbitration. Litigation against Bresnan is still pending.

Attorney Tom Counts, who represented WOW in the case, says he doesn't see any legal obstacles preventing Internet service providers from getting involved in behavioral advertising in the future -- provided the companies notify consumers and obtain their permission. “I don't see any structural impediment to an ISP doing it,” says Counts, a partner at Paul Hastings. “It all boils down to the issue of consent.”