SmartBargains can pop up on Overstock site -court

LOS ANGELES, Aug 19 (Reuters) - Utah's business codes do not prohibit discount online retailer SmartBargains.com from using pop-up advertisements linked to rival Overstock.com Inc's (OSTK.O) Web site, the state Supreme Court ruled on Tuesday.

Overstock had complained in a 2004 lawsuit that the pop-up ads, which appear in a separate Internet browser window, were unlawful and were intended to confuse, and ultimately to steal, Overstock's customers.

Overstock's lawsuit was based in part on the Utah Spyware Control Act, which bars the use of software that links Web ads to federally registered trademarks, and that partially or fully obscure the Web site the user is trying to access.

A Utah trial judge dismissed the case after finding the Spyware law unconstitutional, and ruling that SmartBargains' use of the pop-up ads did not unfairly compete or illegally interfere with Overstock.com.

The Utah high court agreed with the district court in finding that Overstock failed to show that the SmartBargains ads, labeled with the company's logo and appearing in a separate browser window, were deceptive.

Overstock did not challenge the district court's finding that the Spyware Act was unconstitutional in its appeal.

Overstock President Jonathan Johnson told Reuters that the problems with spyware used by SmartBargains ceased shortly after the case was filed in 2004.

"People have learned this is not a good way to do business and consumers don't like it," Johnson said. "If the problem were to pop up again we definitely would take some action."

A SmartBargains representative could not be reached immediately for comment. SmartBargains Inc is a division of Retail Convergence Inc, a Boston-based holding company for a group of e-commerce sites. (Reporting by Gina Keating; Editing by David Gregorio)