LOS ANGELES, Dec. 29 -- Responding to customer protests, the online toy retailer eToys has decided to put its law suit against the internationally-accclaimed art group etoy on hold, it said Wednesday.

"People are telling us they want the art of etoy and the e-commerce of eToys to continue to co-exist," eToys spokesman Jonathan Cutler told Wired.com. "We've agreed. We're not pressing the lawsuit."

Protests and technological assaults mounted by protesting Internet groups such as RTMark.com and the Electronic Disturbance Theatre have combined to do substantial damage to the online retail giant's stock price in the past month. [see accompanying story below.]

Although the eToys statement does not definitively state it is dropping the lawsuit, it does suggest that the company is trying to recover from a major public relations defeat. EToys may also be reacting to the pain of a 50 percent drop in the value of its stock [ETYS], which is listed in the Nasdaq exchange.

The stock has plummeted in value ever since the lawsuit was filed. Etoys attributes the drop to a Christmas plagued by customer complaints and slow deliveries on gift orders, but another artists' group, RTMark.com, claims its efforts against the retailer have cause the plunge.

On Monday, a scheduled lawsuit hearing at the L.A. County Courthouse actually became nothing more than a brief "status conference" by telephone between presiding Judge John P. Shook and eToys' attorney, Bruce A. Wessel of Irell & Manella.

The attorney for etoy, Robert S. Freimuth, did not participate in that conference call, after which Judge Shook granted a continuation of the hearing to Jan. 10, 2000. Now the status of that hearing is uncertain. Some are speculating that it may be just another pro forma "status conference." Freimuth told Slashdot.com, an Internet news site, that the call "took all of 45 seconds."

EToys suit complains that etoy (http://146.228.204.72:8080/), a seven-member art-performance cooperative that uses the Internet as its medium, had used its trademark to subvert eToys' web site and business. EToys had won an injunction to shut down the etoy site on November 29.

The etoy site sells shares (http://146.228.204.72:8080/SHARE/) to "high risk art collectors" who want to support its projects, and was started in 1992 by four artists from Italy, the U.S., Switzerland and the Czech Republic. The seven artists who currently run the collective are Michel Zai, Fabio Gramazio, Luzius Bernhard, Marky Goldstein, Martin Kubli, Gino Esposto, and Daniel Udatny.

In its original complaint, eToys cited etoy for everything from peddling pornography to supporting terrorism. Although not ordered to do so, InterNIC domain name provider Network Solutions Inc. also stopped email going to the etoy site.

Those complaints, however, drew quick and nasty responses from many sides, most of them claiming that eToys' suit actually amounted to an overt attempt to silence free expression on the Internet in order to preserve commercial interests.

"[Network Solutions Inc.] has taken a highly unusual action [in disabling email to etoy] based solely on the bullying of a legal firm and a single clueless judge. If that matters more than the time-tested rules of the internet, we're all in trouble," one poster wrote on Slashdot.com.

The judges' decisions in the case also appeared to support the idea that commercial interests should outweigh creativity. Judge Shook as well as Federal Judge Edward Rafeedie both quickly agreed to eToys' requests without comment or alteration.

"Given the information on the public record, it is very hard to see why [Judge Shook] ruled as he did," Internet law expert Michael Froomkin, a professor of law at the University of Miami School of Law, told the American Reporter. "One can't help but wonder if the decision wasn't overly influenced by the suggestion that the defendants were somehow involved in terrorism or securities fraud," Froomkin said.

"It seems to me that eToys really didn't have a legal leg to stand on -- the judge's original order was just plain wrong," he said.

In response, two Internet protest groups initiated tactics designed to truly subvert eToys' business. In a press release obtained by the American Reporter on December 26, RTMark outlined how it, acting independently of etoy, placed false toy orders on eToys, calling into question eToys' claim that it had attracted 900,000 new customers since the start of the Christmas shopping season.

The press release also described how a second protest group, the Electronic Disturbance Theater, had joined RTMark on December 16 to wage a cyber "sit-in" during which the two groups succeeded at overloading the eToys website with false customer information and keeping actual customers out. Dozens of other groups joined in with "prtojects" aimed at eTioys commercial interests.

One of those, Project EFLD, was organized for the Dec. 15-25 Christmas rush. The organizers set up a site that urged, "eToys are nothing without their website. Bring down that website (and those of eToys' subsidiaries) periodically by using the Virtual Sit-In tool. eToys shares will fall tremendously. A good time to start might be during the ten days before Christmas."

On Dec. 19, one Project EFLD wrote, "I'm shorting a few thousand dollars of eToy stock tomorrow morning, in anticipation of the press conference here in NYC at 6:30pm. Will purchase the shorts the following day with what I hope to be a return of a couple of hundred dollars. Any ideas on the best way to spend the proceeds? One idea: mail the check to etoy.com to help them with their legal bills, and try to get some press on it. Any thoughts?"

The effect was so severe, the RTMark release continued, that eToys had to extend its deadline for Christmas delivery. Throughout the "sit-in," eToys CEO Toby Lenk maintained in eToy press releases that the inability to fill orders on time merely "underscore[d] the rapid growth of online shopping and the success of eToys' holiday marketing effort."

Froomkin said he thought it unlikely that there would be any criminal prosecution of RTMark for its actions against eToys.

"If everything one reads is true, it sounds like there's a tort in there somewhere -- interference with prospective business advantage? A new tort of "denial of service attack"?

"Unless there were some sort of conspiracy charge -- hard to prove it's concerted action -- and assuming there are no federal computers harmed, it's hard to see what federal law would be violated. Not knowing what state etoy's machine is in, I have no idea about the state statutes that might be violated," Froomkin noted.

"I'd be fairly suprised if there were any criminal actions," he said. "Similarly, tort would be hard to prove: How do you prove who it was who was hammering your machine? And probably more trouble than it's worth. How do you monetize the damages? It's very speculative, especially since I gather etoys wasn't actually brought down.

In a recent article on regulatory issues and the Internet, he suggested that the practical inability of nations to respond to individuals who violate their regulations via the Internet "will tend to promote liberal democratic values of openness and freedom."

"But I think those actions were in very bad taste," Froomkin said.

Meanwhile, reaction Wednesday to the announcement that eToys has, at least for now, suspended the suit were mixed.

RTMark spokesperson Rita Margolis, echoing an earlier RTMark press release, said that her organization still does not consider the lawsuit "dropped," only put on hold for a while.

Margolis said that members of RTMark had been trying to contact etoy in Switzerland for a reaction, but still had not succeeded.

"It's good that eToys is now being shamed into lying to the press that its 'intent was never to silence free artistic expression,'" an RTMark press release stated. RTMark also called for an apology and compensation for etoy from eToys.

One of the speakers at a courthouse protest in Los Angeles on Monday was Peter Lunenfeld, a professor at the Pasadena Art Center, where two members of etoy were once resident instructors. Lunenfeld told the American Reporter Wednersday that although the news was good, the eToys lawsuit would still have a lasting impact on free expression for a long time to come. The injunction raised many legal issues, he said.

"Imagine a judge taking away your telephone, or shutting down your newspaper, when you haven't even been found guilty of anything," he said. "[Etoys] lost contact with the world" because of the injunction, he said, saying that "injunctions can do more damage than judication."

Lunenfeld also felt that "Corporate types will study this decision [to drop the suit] as a case of beneficence on the part of eToys."