Washington Attorney General Rob McKenna filed a lawsuit against three California-based Internet affiliate advertisers in February, 2007 under that state’s Computer Spyware Act and Consumer Protection Act. One of the defendants settled in October. HoanVinh V. Nguyenphuoc, owner of FixWinReg, allegedly sent anonymous “Net Send” messages to consumers’ computers that simulated security warnings but were actually ads for registry-cleaner software.
The messages gave the computer users phony warnings regarding registry errors in the computer and informed the users that they needed to take immediate action to avoid data loss and corruption. The warnings encouraged users to proceed to a web site where they could download a free trial version of software that would scan the computer for registry errors. The software consistently identified ‘critical errors,’ and consumers were directed to buy the full version of the software to remove the errors.
The Washington Attorney General brought five lawsuits under the state’s Spyware Act. Under the terms of the settlement agreement Nguyenphoc agreed to pay attorneys’ fees in the amount of $25,000. If he fails to comply with any of the settlement terms, Nguyenphoc will be liable for an additional $75,000.
Texas Attorney General Greg Abbot brought similar claims against Sony BMG and the parties reached a settlement on December 26, 2006. The complaint, the first filed under Texas’ Consumer Protection Against Computer Spyware Act of 2005, alleged that Sony BMG surreptitiously installed spyware on compact music discs (CDs) that consumers inserted into their computers to play. The spyware had the ability to compromise the consumers’ computers.
Sony BMG settled with Texas one year after the suit was filed. Sony was required to publish claim forms on its Web site allowing consumers seeking restitution to receive up to $175 each to compensate them for the costs of repairing computers damaged by Sony BMG products. Even consumers without proof of out-of-pocket expenses were still eligible for $25. The settlement agreement also provided for other incentives for consumers damaged by Sony BMG’s products. Sony BMG also agreed not to manufacture or distribute CDs with DRM or other similar software, and that any existing CDs that contain DRM software must have a conspicuous warning alerting the consumer to the software allowing the user to decline the installation of any software.
If your business uses DRM software, you should seek counsel with the ability to advise you regarding your rights and responsibilities. Failure to comply with state consumer protection laws could lead to unnecessary and costly liability.
View the Texas petition here.
View the Texas settlement agreement here.
View the Washington complaint here.
View the Washington settlement here.