New York Attorney General sues vendor for spyware

The state of New York has sued Direct Revenue LLC, of New York City, for selling spyware software that matches pop-up ads to people's Web surfing habits.

The U.S. state of New York has asked a court to stop a software firm from installing spyware on users' computers.

New York Attorney General Eliot Spitzer alleges that Direct Revenue, of New York City, sold software that surreptitiously installed millions of pop-up ad programs on users' computers.

His lawsuit asks the court to bar the firm from installing any more spyware or sending further ads through existing spyware, and to assign monetary damages.

"These applications are deceptive and unfair to consumers, bad for businesses that rely on efficient networks to do their jobs, and bad for online retailers that need consumers to trust and enjoy their online experience," Spitzer said in a statement.

In return, Direct Revenue issued a statement claiming it had stopped those practices six months ago, and that the affected computer users were in fact getting a good deal, since they were able to use free software in return for viewing a few advertisements.

This is not the first suit by Spitzer's office to allege software malfeasance. In 2005, Intermix Media settled a lawsuit that accused it of distributing adware.

"The government has been getting quite a bit more active, primarily because this stuff is having such a drag on networks and productivity," said Rob Enderle, principal analyst with The Enderle Group, California.

"It is reaching a point where there is no reasonable tool that can defend against this stuff; the volume is too overwhelming. Soon we will need a way to reinstall the OS more frequently to get rid of all the malware. So I do expect to see much more of these lawsuits going forward."

Tuesday's suit alleges that Direct Revenue advertised "free" applications such as games or browser enhancements, but omitted any reference to spyware that accompanied the download.

Once the secret software was installed, it would track the user's Web browsing habits, and deliver pop-up ads for related products. Even if a user detected and deleted the software, it would reinstall itself.

The strategy could have affected anyone who visited one of 21 Web sites to download programs with names such as VX2, Aurora or OfferOptimizer.

The lawsuit specifically demands penalties from the company's four founders and majority stock-holders: Joshua Abram, Rodney Hook, Daniel Kaufman and Alan Murray.

Direct Revenue defended its business practices, saying they benefited both advertisers and consumers, and insisted that its products should be called adware, not spyware.

Founded in 2002, Direct Revenue calls itself a provider of "desktop advertising and behavioral marketing services." It describes its business as the sale of software products to advertisers as a way to deliver highly targeted marketing messages to millions of Internet users worldwide.

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