FTC Files First U.S. 'Spyware' Lawsuit

The Federal Trade Commission on Thursday filed the first case in the country against software companies accused of infecting computers with intrusive "spyware" and then trying to sell people the solution.

The commission accused the companies of infecting computers with unsolicited software, showering computer screens with pop-up ads and then trying to get consumers to pay $30 to fix it. It is seeking an injunction to get the companies, owned by the same person, to stop, and to offer restitution to consumers.

The FTC requested a temporary restraining order from the U.S. District Court for the District of New Hampshire against Seismic Entertainment Productions Inc., Smartbot.Net, Inc., and Sanford Wallace.

The FTC said the companies secretly installed the software on computers, causing systems to be overwhelmed by pop-up advertisements, and then sending them alarming messages saying they needed to buy "Spy Wiper" or "Spy Deleter" for $30.

The FTC alleges the defendants have unfairly: changed consumers' Web browsers, installed advertising and other software programs, and compelled purchase of anti-spyware software.

Seismic is based in Rochester, N.H.; SmartBot in Richboro, Pa., with its principal place of business in Barrington, N.H. Wallace is officer and director of both Seismic and SmartBot.

The FTC is asking the court, among other things, to temporarily:

_Restrain defendants from publishing, disseminating or distributing software code, script or any other content on or through the Internet, Web and other places.

_Require defendants to remove the software script that exploits Web browser vulnerabilities from any Web site, Web page, and other places.

_Require defendants to produce documents relating to their Internet marketing.

The FTC lawsuit demonstrates that the commission believes it has adequate power under consumer protection laws to prosecute such cases and doesn't need new laws to broaden its authority in this area.

This week, the House passed two bills that would outlaw spyware. The Internet Spyware Prevention Act would give the Justice Department $10 million to crack down on companies and others that secretly install spyware and those who attempt to dupe victims into releasing personal details and financial information in e-mail scams.

Anyone caught installing spyware to change a computer's security settings or steal a victim's personal information could be sentenced up to two years in prison.

The other bill would add hefty civil penalties over the use of spyware.