<nettime> fwd from CSL : New York Sues a Marketer on Use of Internet Spyware

[Patrice Riemens <patrice {AT} xs4all.nl>]

>From the Cyber Society Live list.
Apps 4 X-post


April 29, 2005

New York Sues a Marketer on Use of Internet Spyware

By AL BAKER



http://www.nytimes.com/2005/04/29/nyregion/29internet.html?th
<http://www.nytimes.com/2005/04/29/nyregion/29internet.html?th&emc=th>
&emc=th



The New York Times

ALBANY, April 28 - A broad investigation into Internet abuses led the New 
York attorney general to file a lawsuit on Thursday accusing a California 
company of clogging computers across the nation with secretly installed 
spyware and adware, which can vex users and impede the flow of commerce on 
the Web.

The attorney general, Eliot Spitzer, sued Intermix Media, a large Internet 
marketing firm, accusing it of embedding "several types of invasive and 
annoying" programs on its Web domains that can pop up, route users to 
unwanted sites or link them to Intermix's services and clients. The 
accusations were in a complaint that was filed on Thursday in State 
Supreme Court in Manhattan.

"This is the type of thing that makes users feel not in control of their 
own Internet browsing habits and less likely to use e-commerce," said Ken 
Dreifach, the chief of Mr. Spitzer's Internet Bureau. "We are trying to 
get rid of this nuisance."

Mr. Spitzer's civil complaint comes amid a crush of protests from Internet 
users about invasive programs. To battle the problem, state and national 
lawmakers have written legislation to establish or strengthen sanctions 
for wrongly distributing software. In Albany, several bills to address the 
issue are working their way through the State Senate and Assembly.

In recent years, companies have tried to sneak what consumer advocates 
call parasitic software into computers that tracks users' browsing habits, 
but government inquiries into such practices have been rare, said Ben 
Edelman, a Harvard University researcher who studies spyware. Last year 
the Federal Trade Commission brought suit against two companies that made 
false claims to induce users to install their programs, he said.

The spyware technology erodes the trust of customers, slows their computer 
functions and wastes time deleting it, all things that hurt e-commerce, 
said Ari Schwartz, associate director at the Center for Democracy and 
Technology, a nonprofit group that advocates for Internet privacy.

State officials said that in the Intermix case, the simple downloading of 
a game, screen saver, cursor or other file-sharing program could download 
programs to a user's hard drive that summon unwanted pop-up ads or display 
unwanted toolbars.

"Tens of millions" of downloads have occurred, they said, including more 
than 3.7 million in New York.

An official with Intermix, in a statement posted on Thursday on the 
company's Web site, said that the company neither promoted nor condoned 
spyware, and that many of the practices being challenged by Mr. Spitzer 
began under the company's previous leadership. The official, Christopher 
Lipp, said the company wanted to put "this legacy behind it," and hoped to 
reach "an appropriate and amicable resolution" in talks with the attorney 
general's office.

"We voluntarily ceased distribution of the applications at issue earlier 
this month," said Mr. Lipp, who said the company, begun in 1999, was 
committed to consumer privacy. "Neither the company's toolbar nor redirect 
application has been used to collect personal information or spy on the 
Internet or other activities of the user."

On Wall Street, the inquiry has had a profound effect on Intermix, a 
publicly traded company. "The stock price has halved since it became 
public two weeks ago that Spitzer was investigating," said John Tinker, an 
equity research analyst who writes investment reports on Intermix for 
ThinkEquity, a Wall Street investment bank.

Shares of the company fell 83 cents, or 17 percent, to $3.97, after 
trading on Thursday on the American Stock Exchange, said Mr. Tinker. He 
said the company changed its name a year ago from eUniverse, restructured 
and was concentrating on areas "not being investigated."

On its Web site, Intermix labels one of its two divisions as "one of the 
world's leading Web destinations for shareable interactive entertainment." 
It also reports generating $250,000, since its inception, on downloads by 
New Yorkers.

The company is accused of violating the state's General Business Law, 
which prohibits false advertising and deceptive business practices, as 
well as New York's common law, which has prohibitions against trespass, 
according to state officials. The suit seeks to prevent the company from 
installing spyware or adware; an accounting of all revenues made on those 
products, which investigators said was "in the millions" of dollars; and 
penalties of $500 for each act of illegally attaching such software onto a 
computer's hard drive.

Facing such stiff fines, Mr. Tinker said, "The real question here is what 
is the settlement going to be? Historically, that is normally what happens 
in these cases."





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