Zango Spyware Suit Dismissed

  |  September 8, 2006   |  Comments

The lawsuit against the former 180solutions was voluntarily dropped by the plaintiffs; separately, an FTC complaint led to a $2 million settlement against spyware firm Enternet Media.

A lawsuit seeking class action status filed against Zango, formerly 180solutions, has been dismissed by a Chicago court after plaintiffs voluntarily dropped the case. In a separate spyware case, the Federal Trade Commission won a settlement against Enternet Media.

The case, Logan Simios, et al. v. 180solutions Inc., was filed a year ago, alleging that Zango's desktop advertising software was a kind of spyware that damaged the plaintiffs' computers, while Zango profited from it.

The plaintiffs had attempted to convince the judge to define Zango's software as "spyware" and to force it to pay monetary damages to all users in the U.S. that downloaded it since September 2002, but voluntarily withdrew their case before a judgment could be made.

Zango is heralding the dismissal as a win for the company, and a justification of its business model of distributing ad-supported desktop software. According to Ken McGraw, Zango's executive VP, general counsel and chief compliance officer, the dismissal "serves to confirm that Zango's desktop advertising software is not spyware in any shape or form and that our innovative business model is entirely legitimate," he said in a statement.

"We are pleased, but frankly not too surprised, by the voluntary, with-prejudice dismissal of the lawsuit by the plaintiffs. We have maintained from its inception that this case had no merit. The dismissal vindicates that position." McGraw said.

Zango insists that its desktop advertising software, which can be classified as adware, is not and has never been spyware. "We have always sought consumer notice and consent before the installation of our software on a user's computer. In addition, we have never collected personally identifiable information, ever. Spyware does not see notice and consent and does what it says, spies on you," Steve Stratz, a Zango spokesperson, told ClickZ.

However, the plaintiff's attorney, David J. Fish, asserts that the dismissal does not prove a thing. Rather, the case itself, with three individuals as plaintiffs, did not turn out to be the best vehicle to meet the requirements for a class action suit, he said.

"We asked to dismiss the case because we did not believe that this particular case stood a good chance of being approved by the court as a class action. The hope for a class action was why we brought the case in the first place," Fish, an attorney with The Collins Law Firm, told ClickZ. "We would be happy to speak with other people who would like to contact us regarding their experiences with 180solutions/Zango."

Fish said that Zango's claim that this vindicates their business practices is unfounded. "No judge or jury found in their favor. We didn't think we could get a class with this particular case, so we dropped it, rather than prolong it unnecessarily," he said. "The case was dismissed with prejudice because we asked that it be. There was no court decision, or impending decision, that played any role. The judge did not order this dismissal. It was voluntary."

It would be a mistake to make an inference about the case's merits based on the withdrawal, according to Eric Goldman, Santa Clara University School of Law professor and noted Technology and Marketing Law blogger.

"There are a variety of reasons why the case may have been withdrawn, not all of which turn on the merits of the case. No judge opined that this case was weak and no precedent is set by the withdrawal," Goldman told ClickZ. "The voluntary dismissal 'with prejudice' simply means that the plaintiffs are not proceeding with the case, and are not trying to reserve the right to revive the case in the future."

The Collins Law Firm represented the plaintiffs in another recent spyware suit, filed against reformed adware vendor Direct Revenue. That case reached a settlement in June.

Separately, the Federal Trade Commission won a spyware case against Enternet Media, which has been ordered by a federal judge to give up more than $2 million in "ill-gotten gains" for violating FTC regulations, and has been prohibited from engaging in spyware-related activities in the future. Enternet's operations were shut down by a judge last fall.

According to the FTC's complaint, Enternet and its affiliates delivered pop-ups offering free music files, ring tones, and other files, or free browser upgrades or security patches for consumers' supposedly "defective" Internet browsers. Users who downloaded the supposed freeware or security upgrades instead had their computers infected with spyware.

The Enternet case and Zango suit are just two of several spyware-related lawsuits that are active or have been settled recently.

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Kevin Newcomb

Kevin Newcomb joined ClickZ in August 2004, covering search marketing and other online marketing topics. He has been reporting on web-based businesses since 2000.

Before the bubble burst, Kevin was a marketing manager for an online computer reseller, handling copywriting, e-mail marketing, search marketing and running the affiliate program.

With a combination of real-world marketing experience and years of business journalism, Kevin brings to ClickZ a unique ability to deliver news and training materials that help online marketers do their jobs better.

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