Yahoo! sued over private user data

A breach of contract suit filed against Yahoo! Inc. could have wide-ranging implications for the company's privacy policy.

A Dallas judge Monday granted a temporary restraining order against Yahoo!, ordering it not to publish its privacy policy until the suit is resolved.

Yahoo! officials could not be reached for comment. But in a motion filed with the court, lawyers for the company called the case "an opportunistic lawsuit seeking unprecedented injunctive relief in hope of extracting a King's ransom from Defendants."

The suit seeks $1 billion (£618 million) in damages for breach of contract, as well as $3 billion in punitive damages.

Filed by Dallas-based Universal Image Inc., the suit stems from a contract signed between Universal, which operates online as Chalkboardtalk.com, and Broadcast.com. The deal, signed in November 1998, called for Universal to provide video content to Broadcast in exchange for links on Broadcast's page and registration data from Broadcast subscribers.

Universal alleges that after Broadcast was acquired by Yahoo! in March, the company stopped displaying some of the videos provided by Universal, and, more significantly, cut back the amount and type of consumer data that it gave to Universal.

The data restrictions appear to be related to Yahoo!'s privacy policy, which allows consumers to control who may have access to its data.

Universal claims that its contract with Broadcast.com gives it access to all registration and address information of consumers who access Broadcast's videos.

The Monday ruling also ordered Yahoo! not to sell or use the registration information at issue.

"The data is Internet currency. Most of these Internet companies are not profitable. When Yahoo! bought Broadcast, (Broadcast) wasn't profitable -- they brought it for its data," said Larry Friedman, attorney for Chalkboardtalk.com.

A hearing on the restraining order has been scheduled for Jan. 5.