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Already bedeviled by legislators and consumer advocates about their privacy policies, Internet companies now have a new foe to contend with: the class action bar. Milberg Weiss Bershad Hynes & Lerach is among several plaintiffs firms pursuing litigation against four online companies — DoubleClick Inc., Amazon.com Inc., RealNetworks Inc. and Buy.com Inc. The suits claim that the businesses are secretly collecting personal data on Internet users, such as their e-mail and home addresses, phone numbers and the Web sites they frequent. However, the companies contend that visitors to their sites remain anonymous. And they are adamant that litigation is an inappropriate way to revise online privacy policies. For plaintiffs’ attorneys, however, the lawsuits are an entr� into the dynamic, and potentially lucrative, debate over consumer privacy on the Internet. Little case law exists on the subject, and the suits could give the courts their first crack at the issue. The class actions also coincide with efforts by the federal government, Congress and privacy advocates to hold companies accountable for how they collect and use personal data. Last month, the Federal Trade Commission issued a report to Congress calling for legislation to require companies to meet specific privacy standards. Several privacy bills are pending in Congress and state legislatures that, if passed, would fill — along with the lawsuits — a legal void in the privacy arena. Not surprisingly, plaintiffs’ attorneys prefer litigation to legislation. “The evolution of this is going so fast that companies are doing things they had not done six months ago,” said Alan Mansfield, a partner at Milberg Weiss’s San Diego office and one of the plaintiffs’ attorneys in class actions against the four companies. “The rules may be obsolete by the time legislation is adopted.” TRACKING ONLINE FOOTSTEPS The first privacy class actions were filed late last year in both federal and state courts. In most instances, companies face more than one class action. For example, 15 suits have been filed against online advertiser DoubleClick. The federal cases have been consolidated into In re DoubleClick Inc. Privacy Litigation, 00-641, which is pending in the federal court for the Southern District of New York. The complaints could turn into a pot of money for plaintiffs’ firms. Mansfield said statutory damages “could be in the hundreds of million of dollars for each of the cases.” In the DoubleClick litigation, Milberg Weiss shares lead counsel status with New York’s Bernstein Litowitz Berger & Grossmann and Chicago-based Miller Faucher and Cafferty. Plaintiffs claim that DoubleClick uses cookies, electronic files with unique identification numbers, to secretly track users’ activities on the Internet and collect their personal information. When an individual visits a Web site that displays a DoubleClick ad, a cookie is implanted on the user’s computer system. But DoubleClick contends that the visitors retain their anonymity. “There is no personally identifiable information available from placement of a cookie,” said DoubleClick’s attorney, Morrison & Foerster partner Lori Schechter. Rather, she said, a cookie is used to enable DoubleClick to determine how many unique anonymous visitors see a given ad. DoubleClick had planned to combine names with anonymous user activity on the Internet following its merger last year with Abacus Direct. Abacus has a database of information about direct-mail shoppers that it shares with catalog companies. But in response to an outcry from consumer advocates and the initiation of an FTC investigation, DoubleClick announced in March that it would not link offline and online data until the government and industry agreed on privacy standards. As to the company’s current practices, Milberg’s Mansfield said DoubleClick is playing a game of semantics, that although DoubleClick doesn’t obtain personal information every time someone visits a Web site with its banner ad, specific information is obtained over time that enables DoubleClick to compose a Web surfer’s profile. For example, Richard Smith, an Internet consultant in Brookline, Mass., said he recently found that visitors to Red Herring’s Web site typed in their e-mail addresses in order to subscribe to a Red Herring newsletter. The e-mail address was then automatically sent to DoubleClick. While Smith said DoubleClick probably doesn’t use such personally identifiable information, he said the issue is that the company doesn’t inform consumers what it saves and what it throws away. “Companies can change the rules at a drop of a hat,” Smith said. “What they throw away today, six months later they can keep.” It’s the potential for companies to do harm in the future that has gotten many consumer advocates riled up. “There is heightened concern not about what you are doing or collecting now, but about what you might do in the future as a result of industry mergers and consolidation,” said James Brelsford, the managing partner of Perkins Coie’s Menlo Park and San Francisco offices. Brelsford represents Amazon.com Inc. and its affiliate Alexa Internet in a privacy class action. The suit alleges that Alexa’s software interfaces with a user’s Internet browser to obtain information about the Web sites the individual visits. In the other class actions Milberg Weiss is pursuing, RealNetworks is alleged to collect personal data via software that enables computers to play audio and video files. The complaint against Buy.com claims the online superstore collects personal information and transmits it to advertising companies. GAGGLE OF PLAYERS Concern over online privacy is at an all time high. Last month the Federal Trade Commission issued a report to Congress calling for privacy legislation. The agency, which has been monitoring commercial Web sites for several years, said companies have not been successful in regulating themselves and that most do not adequately disclose the information they collect. Several bills are pending in Congress. The most closely watched is the Consumer Privacy Protection Act, S. 2606, introduced by Sen. Ernest Hollings, D-S.C., the day after the FTC issued its report. As mandated by the FTC, the bill would require commercial Web sites to notify consumers what information is collected about them and how it is used; permit consumers to choose whether this data can be used; give consumers access to the data; and make sure the information is secure. As an alternative to a legislative fix, the World Wide Web Consortium, or W3C, is developing a protocol to enhance online privacy. The standard, called Platform for Privacy Preferences, or P3P, would enable Internet users to select the type of privacy policy they wish to use. A web server would automatically communicate how it collects and shares data and a user’s browser would only go to sites that meet its privacy specifications. While many companies believe that a technology fix is preferable to legislation, some privacy advocates say the P3P falls short of protecting consumers’ privacy. Last week the Electronic Privacy Information Center, Junkbusters Corp. and other privacy proponents released a report critical of the protocol, which is still in draft form. Jason Catlett, president of Junkbusters, an online privacy advocate, believes legislation is the only way to assure consumer privacy. He said privacy problems exist “because the United States doesn’t have legislation that requires information to be treated in a fair and transparent way.” Brelsford concurs. “Having some clarity as to the dos and don’ts is preferable to the situation industry is facing now,” he said. But litigation, he says, isn’t the way to bring about new policy. The plaintiffs, he says, are attempting to exploit consumer worries about online privacy. Milberg Weiss’ Mansfield believes it’s the Internet companies who are exploiting the situation. “Rather than trying to fix the problem, companies are trying to make [their activities] more surreptitious.”

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