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December 7th, 2004, 12:46 PM #1
Downloading Spyware, Adware And Exploit Code Without Consumers' Knowledge Or Consent Likely Violates Federal Trade Commission Act, Federal Trade Commission v. Seismic Entertainment Productions, Inc., et al., 2004 U.S. Dist. Lexis 227788 (D.N.H., October 21, 2004).
Court holds that the FTC is likely to prevail on its claims that defendants violated the Federal Trade Commission Act (“FTCA”), 15 U.S.C. § 45(a)(1). Defendants were charged with downloading to consumers’ computers, without their knowledge or consent, both spyware and adware that delivered pop-up advertisements for anti-spyware software, as well as “exploit code” which altered consumers’ home pages, and redirected their browsers to websites selected by defendants. Apparently, this occurred when consumers visited defendants’ websites. The Court found that this conduct likely ran afoul of the FTCA’s prohibition against the use of “unfair or deceptive acts or practices” in commerce. The Court accordingly issued ‘temporary injunctive relief’ requiring defendants to remove from their websites the software script that allowed defendants to download this software to consumers’ computers without their knowledge.
Court holds that the FTC is likely to prevail on claims defendants violated Federal Trade Commission Acts 15 U.S.C. § 45(a)(1) prohibitions against the use of “unfair or deceptive acts or practices” in commerce by downloading to consumers’ computers without their knowledge or consent spyware, adware and “exploit code” which redirected consumers’ browsers to websites defendants selected, and altered their preselected homepages. The Court accordingly issued ‘temporary injunctive relief’ requiring defendants to remove from their websites the software script that allowed defendants to download this software to consumers’ computers.
Defendants Download Without Consumers' Knowledge
Exploiting certain security vulnerabilities in Microsoft’s Internet Explorer browser, defendants downloaded spyware, adware and “exploit code” to the computers of consumers who visited websites defendants operated. Defendants’ “exploit code” changed a consumer’s designated home page (the website displayed when the consumer first opens his/her browser) and redirected their browsers to websites selected by defendants. Defendants used the downloaded adware to deliver pop-up ads for spyware removal programs, which could allegedly be used to combat the very spyware defendants downloaded in the first place. These activities were all undertaken without the knowledge or consent of the affected consumers.
Numerous consumers and others complained that they were damaged by these activities, which caused their computers to work slowly, freeze, lose data and/or crash. Consumers also complained of the extensive efforts they had to undertake to remove the offending software downloaded by defendants, and return their computers to their preexisting condition.
Unfair Or Deceptive Acts
As a result, the FTC commenced this suit, charging that defendants’ conduct ran afoul of 15 U.S.C. § 45(a)(1) of the FTCA, which makes unlawful the use of “unfair methods of competition” and “unfair or deceptive acts or practices” “in affecting commerce.” According to the Court, an “unfair or deceptive act” within the meaning of the Act, includes the dissemination of “any false advertisement . . . for the purpose of inducing . . . the purchase of . . . devices [or] services.” 15 U.S.C. § 52(a). To establish a violation of the FTCA, the FTC must show both the use of an unfair or deceptive act or practice, and that “the act or practice must be likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or competition.” 15 U.S.C. § 45(n).
To be entitled to temporary injunctive relief, the FTC must show both a likelihood that it will succeed on these claims and that the balance of the equities favors issuance of injunctive relief.
The Court held that “the FTC is likely to succeed in showing that the defendants’ activities are unfair and deceptive practices within the meaning of the FCTA.” Said the Court:
The defendants’ activities in the new arena of internet advertising do not necessarily fit easily into the traditional concepts of unfair and deceptive acts and practices under the FTCA. Nevertheless, the declarations of the computer users who have been affected by the defendants’ activities amply support the likelihood that the FTC will be able to prove violations of the FTCA and that consumers have experienced substantial injury without countervailing benefits. The declarants’ experiences include unauthorized changes of their home pages, difficulty using their computers, and infusions of pop-up ads, including pornographic ads and ads for anti-spyware software. The affected users were not notified of the defendants’ activities and did not know what had caused the problems with their computers, making the defendants’ activities both deceptive and unfair.
The Court reached this result notwithstanding the fact that consumers were unaware of defendants’ activities and therefore unlikely to be deceived by them.
Court Issues Temporary Injunctive Relief
The Court held that the balance of the equities favored the issuance of injunctive relief, as the public’s interest in avoiding the harm caused by defendants’ activities outweighed defendants’ interest in preserving the revenue they derived therefrom.
As a result, the Court issued temporary injunctive relief, requiring defendants to remove the code from their websites which allowed them to download spyware, adware and “exploit code” to the computers of unsuspecting consumers.
December 7th, 2004, 02:08 PM #2
- Join Date
- January 18th, 2005
- West Coast USA
WHO TF are "The defendants"
December 7th, 2004, 02:24 PM #3
Don't shoot the messanger!
Defendant Seismic Entertainment Productions, Inc. (“Seismic”) is a New Hampshire corporation
with its principal place of business located at 11 Farmington Road, Rochester, New Hampshire 03867.
Since at least December 2003, and continuing thereafter, Seismic has marketed various products,
including purported “anti-spyware” software called “Spy Wiper” and “Spy Deleter,” on behalf of others.
Seismic advertises these products through “pop-up” advertisements displayed to consumers using
various Internet web sites that it controls, including the web sites at www.default-homepagenetwork.
com and downloads.default-homepage-network.com. Seismic also downloads to and installs
on consumers’ computers various advertising and other software programs, including Favoriteman,
TrojanDownloader and Clearsearch. Seismic transacts or has transacted business in the District of New
Defendant SmartBot.Net, Inc. (“SmartBot”) is a Pennsylvania corporation with its corporate 3 address at 3 Cobblestone Court, Richboro, Pennsylvania 18954, and its principal place of business at
495 Route 9, Barrington, New Hampshire 03825. Since at least December 2003, and continuing
thereafter, SmartBot has marketed various products, including purported “anti-spyware” software called
“Spy Wiper” and “Spy Deleter,” on behalf of others. SmartBot advertises these products through popup
advertisements displayed to consumers using various Internet web sites that it controls, including the
web sites at www.passthison.com, object.passthison.com, and www.smartbotpro.net. In addition, the
pop-up advertisements served by SmartBot also are displayed when a computer user visits various
Internet web sites controlled by Seismic, including, but not limited to, www.default-homepagenetwork.
com. SmartBot transacts or has transacted business in the District of New Hampshire.
Defendant Sanford Wallace (“Wallace”) is or has been President and owner of Defendants
Seismic and SmartBot at all times material to this Complaint. Acting individually or in concert with
others, Wallace has formulated, directed, controlled, or participated in the acts and practices of Seismic
and SmartBot, including the acts and practices complained of below. Wallace resides and/or transacts or
has transacted business in the District of New Hampshire.
December 7th, 2004, 04:49 PM #4
- Join Date
- January 18th, 2005
- West Coast USA
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