Golden opportunities tangle in legal battle

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Golden opportunities tangle in legal battle

It seemed like a great idea: Create a Web site offering to pay consumers for reading and responding to Web ads.

Now, two companies that have been separately promoting the concept, Maritz Inc.'s GoldMail and startup company CyberGold, are embroiled in a legal faceoff over who had the idea first.

Maritz, an incentive marketing company based in St. Louis, last week filed suit against CyberGold in U.S. District Court there, alleging trademark infringement and unfair competition. The suit asks that CyberGold cease using that name and seeks to prevent the company from "engaging in unfair or deceptive acts or practices."

Maritz contends that CyberGold's system copies "every significant feature of GoldMail's unique business concept."

GoldMail was announced June 5. Less than three weeks later, Berkeley, Calif.-based CyberGold, brainchild of entrepreneur Nat Goldhaber, detailed its own service.

LEGAL ISSUES DERAIL PLANS

Both companies say they offer marketers a way to present targeted advertising messages to consumers and pay for an ad only when it is read. Now, the legal wrangling could derail their ambitious marketing plans.

GoldMail sees big business providing incentives for consumers to respond to advertising on the Web.

Consumers entering the company's Web site fill out an extensive survey detailing their interests and demographic information. After receiving a password, they can read ads at the GoldMail site. Each ad carries a credit ranging from a few cents to a few dollars.

PROVIDE E-MAIL, EARN MORE

Consumers must prove they've read the ad by answering a few questions online. If they choose to, they can provide their name and e-mail address to the advertiser, earning even more credits.

Credits can be redeemed for merchandise from an online Spiegel catalog, travel or gift certificates.

GoldMail is recruiting advertisers for a launch next month. Among those interested in participating are Holiday Inn Worldwide, Hammacher-Schlemmer and Chevron, said Bob Johnson, GoldMail general manager.

Advertisers must pay to create special ads for GoldMail but don't pay for media exposure unless an ad is read.

"The appeal is we're paying for something that we know is read," said Michael Tobin, director of database and direct marketing at Holiday Inn. "We could spend $1 or more on a direct mail package we don't know will be read."

CyberGold presents registered consumers with a list of ads they can view and charges advertisers 10% or more for each ad viewed. The 25-employee company counts among its advisers ad legend Jay Chiat, marketing guru Regis McKenna and Peter Sealey, former president of Interactive Network.

CYBERGOLD CURRENCY

Instead of offering merchandise as a reward, CyberGold hopes to convince Internet content providers to accept CyberGold "currency" as a form of payment.

"An individual can take the money offered to them and use it to buy the intellectual property of their choice," Mr. Goldhaber said. The company plans an early fall launch.

Among the companies committed to testing the service are Arthur Andersen & Co. and Portrait Displays, a marketer of computer monitors.

Mr. Goldhaber, who hadn't seen the Gold Mail lawsuit at press time last week, said it was without merit, saying his company applied for its trademark well before Maritz did. A search of U.S. Patent & Trademark Office records shows CyberGold, filed on Oct. 11, 1995, several months before Maritz's March 28, 1996, filing for GoldMail.

The issue is not who filed first, but "who used the mark first," said Wayne Barsky, an attorney for Maritz.

But in the minds of some Internet industry watchers, the question isn't whether GoldMail or CyberGold had the idea first, but if the idea has merit, period.

"The people whom advertisers are going to want to pay to reach aren't going to go to these sites," said Bill Bass, senior analyst with Forrester Research.

ARE CONSUMERS INTERESTED?

Another problem: generating enough consumer interest to get marketers involved. Although both CyberGold and GoldMail predict they will have hundreds of thousands of households registered shortly, there's no guarantee those people will continue to use the service after trying it once.

Others question the motives of consumers using the service. Will they be genuinely interested in the products advertised, or will they merely be entranced by the possibility of earning points?

"The value of the consumer is still a question to me," said Lynn Bolger, associate director of TN Technologies, New York.

Whether one or both companies will be able to prove that value now may be in the hands of the law.

Copyright July 1996 Crain Communications Inc.

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