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Lawmakers Target Internet Spyware as a Consumer Deception and Trademark Infringement Issue.

Article Excerpt
The proliferation of technology that enables monitoring of computer users' actions online and collection of their personal information has given rise to public concerns about protecting individuals' privacy rights. At the center of the debate about such technology is software that is pejoratively referred to as "spyware," though there is vast disagreement on what "spyware" means.

Legislators and government regulators typically use the term "spyware" to refer generally to that broad category of software that often resides on an end user's computer without his or her knowledge and is capable of everything from annoyances such as slowing system performance and delivering unwanted pop-up advertisements to genuine dangers such as collecting credit-card numbers or passwords. During the first half of 2004, Internet service provider EarthLink convincingly demonstrated the pervasiveness of spyware by scanning the PCs of almost 2.1 million Internet users. Among the more startling facts revealed by their surveys was the existence of nearly 54.8 million applications deemed to be spyware on the users' computers, almost all of which had been reportedly installed without their knowledge.

Besides the risks to individuals' privacy rights, spyware can also impose added economic costs on corporations. For example, a lengthy service call from a customer frustrated by excessive spyware-generated pop-up ads on her computer reduces an ISP's profit margin for that account. Computer software and hardware companies may suffer harm to their brands when customers mistakenly blame their equipment for decreases in download and processing speeds that are actually caused by spyware programs on their computers. Finally, corporations can incur increased costs and reductions in productivity arising out of the need to regularly clean hundreds of unwanted spyware programs from their employees' hard drives and the resultant slow-down in their computing speed.

Companies engaged heavily in e-commerce, such as L.L. Bean, have also alleged harm to their brands from software programs which deliver pop-up advertisements based upon an end user's search engine habits by alleging trademark and copyright infringement and unfair competition in lawsuits against competitors and adware distributors.1 Such suits have sought penalties and injunctions for the delivery of a competitor's pop-up advertisement or web site to an end user originally searching for the plaintiff's product or service. Many of these cases have settled out of court before any legal precedent was established. Where courts have ruled, their decisions have been inconsistent which has also fueled the growing interest from policymakers in crafting a legislative solution to the consumer and business objections to spyware. Utah, as discussed below, expressly outlawed software which permits a competitor to display its advertisement or Web site over the Web site of the company whose trademarked brand was searched by the end user.

Motivated by these revelations, privacy advocacy groups, corporations and individuals have begun demanding that actions be taken to protect Internet users and companies from the potential harms of spyware. Whether these actions are ultimately taken through industry self-regulation, private lawsuits, or government regulation, or some combination of these approaches, remains to be seen. Certainly regulators at both the federal and state levels have recently proposed multiple pieces of legislation targeting spyware that could significantly impact a wide range of companies, including those that use or provide software that could be regulated as spyware as well as those who have been adversely impacted by such software. Only one piece of anti-spyware legislation has been signed into law, that being Utah's Spyware Control Act, which is currently on hold pending judicial review. This Client Alert provides an overview of the policy debate surrounding spyware as well as summarizes the current anti-spyware legislative landscape.

Policy Debate: Self Regulation or Government Regulation

An ardent policy debate exists regarding how best to remedy the adverse effects of spyware. Some of the industry participants in this policy debate have advocated for self-regulation, including improved consumer education, private technology solutions...