Radiate Settles Spyware Class Action

Radiate, a CMGI-backed company that develops technology for placing ad-banners in third-party shareware software, has agreed to settle a class action lawsuit that accused it of creating spyware.

Under the proposed settlement, Radiate has avoided making any financial payments to the class members, who include millions of computer users who downloaded between March of 1996 and March of 2001 any of the more than 600 software utilities that include Radiate’s adware technology. Those products include CuteFTP, BuddyPhone, and My Getright, among others.

Mountain View, California-based Radiate has agreed to pay the plaintiff’s attorneys $75,000, and will post a disclosure notice at its home page that explains how its ad-serving technology works. Radiate will also provide members of the class a coupon to purchase the company’s Go!Zilla download utility for 50 percent off the retail price.

The lawsuit followed media reports last year that Radiate was not fully disclosing its privacy practices. Counsel for the class argued that Radiate’s ad-serving technology installed itself on user’s computers without their permission, and silently collected demographic data and monitored their viewing of ads.

According to Radiate’s director of communications, Peter Fuller, the settlement does not include an admission of wrongdoing by the company, but instead was an efficient way to dispatch the litigation.

“They had nothing. It was one of those cases where you can either prove yourself innocent and spend $500,000 doing it, or settle for $75,000,” said Fuller.

The firm, formerly named Aureate, has agreed to allow the plaintiffs to attempt to collect $2-million from its insurance company. According to Jeffrey Wilens, the attorney representing the class, Radiate’s financial condition makes it impossible to collect any reparations for victims directly from the firm.

“There’s nothing more that we can get from this company for consumers. We’re beating a dead horse. We can continue with this lawsuit for a year or two and try to get something more, but I’m not convinced Radiate will be around in a year. We’re gambling that we’re going to get the insurance money, and the consumers are gambling with us,” said Wilens.

Richard Smith, chief technology officer of the Privacy Foundation, said that the settlement is unlikely to prevent other companies from making the same mistakes as Radiate.

“It’s not so much about consumers getting money, it’s to have a disincentive for companies to do questionable things. [Class actions] serve a purpose in the privacy area by making people more wary on the front end. But if the settlements aren’t that great, like this one apparently isn’t, then it doesn’t send that great a message,” said Smith.

Joel Reidenberg, a professor of law at Fordham University and co-author of a book on data privacy law, said he was disappointed in the outcome of the case, which he said had legitimate claims under current laws governing fair information practices.

“I do not see this as a successful conclusion to a lawsuit that would send a message to software developers. If these companies are developing products willfully ignoring fairness to the users, there’s something wrong with that, and these spyware programs fit into that category,” said Reidenberg. He believes that plaintiff’s attorneys should have pressed Radiate to force its partners to clearly disclose the nature of its technology before users install the third-party software.

But Radiate’s Fuller said the company’s contracts already require such disclosure by partners, although he admits it’s difficult to police compliance.

“We’re dealing with 650 different companies, and sometimes when we license our technology our agreement doesn’t get in there. There are some issues that we have definitely tried to resolve with making sure partners are abiding by our strict standards,” said Fuller.

Wilens, who is also a plaintiff in a similar class action pending against RealNetworks, said that even without big damage awards, such lawsuits are causing the industry to change its behavior.

“I don’t think any companies go into business expressly for the purpose of violating privacy rights. That’s just a tool to try to accomplish the goal of profitability. And if it’s too expensive a tool, they won’t even try to pursue it,” said Wilens.

Objections to the proposed Radiate settlement must be filed with the Los Angeles County Superior Court by March 5. A final hearing on the case is scheduled for March 19.

Since the outcry over Radiate’s technology last year, several free utilities have been created to identify and remove alleged spyware. The most popular, OptOut, has been downloaded 2.6 million times, according to its developer Steve Gibson. The program however will expire March 1 and will be replaced by a commercial version, called NetFilter, which will ship by summer.

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