Microsoft, Wash. State Sue Over 'Scareware'
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UPDATED: Microsoft (NASDAQ: MSFT) and the Attorney-General of Washington State, Rob McKenna, are teaming up to crack down on scareware. The term refers to pop-up ads that often show up behind some Web pages and offer to scan users' PCs, find some errors and direct the users to a Website where they can download software to fix the problems found, for a price.
At a joint press conference today in Seattle, McKenna announced that his office filed an anti-scareware suit in King County Superior Court today against two businesses, Branch Software and AlphaRed, and their product, Registry Cleaner XP.
"We will not tolerate scams to trick consumers into buying software to solve problems that don't exist," he added.
Richard Boscovich, senior attorney for Microsoft's (NASDAQ: MSFT) Internet Safety Enforcement Team, also said the company has seven lawsuits pending regarding the ads. The first two are against a Delaware and a Michigan company, but the rest are John Doe cases, in which the alleged perpetrators have not yet been identified, Boscovich said.
Microsoft filed the first two suits in February and the complaints were amended September 16, after the identities of some of the people behind the alleged scareware were found through discovery motions. "We had to go through several rounds of discovery," David Bateman, a partner at Microsoft's law firm K&L Gates LLP, which is handling these cases, told InternetNews.com.
One suit names as defendants Barry B. Williams, a Michigan resident, INUX, a Michigan corporation, AW Telecom, a Florida corporation, and John Does 4-20, doing business as Registry Update. A Web search turned up Registry Update's site, but clicking on the end-user license agreement showed it was inactive.
The other suit names SMP Soft LLC, a Delaware corporation, and John Does 2-20, doing business as Scan & Repair Utilities. Their Web site has been closed, but it's listed on wareseeker and Brothersoft, and has a glowing publisher's review on the Free Downloads Center site.
The defendants have 60 days to respond to the complaints and summons, which will take them into mid-November, Bateman said. After that, the parties can engage in the discovery process.
The suit against Registry Update has a trial date of July 27, 2009, and the trial date for the suit against SMP Soft is August 3, 2009, Bateman said.
The lawsuits are "integral to our overall policy of protecting our customers in particular, and consumers in general, from cyber-fraud," Microsoft's Boscovich told InternetNews.com in an e-mailed response to questions, adding that a partnership among industry, government and law enforcement is "the only way to address this problem."
The attorney general's lawsuit against Registry Cleaner XP and its marketers lists five complaints against James Reed McCreary IV, of The Woodlands, Texas, and two businesses: Branch Software, of The Woodlands, Texas, doing business as Registry Cleaner XP, and Alpha Red Inc., of Houston, Texas.
McReary is the CEO of Alpha Red and the sole director of Branch Software, McKenna said. According to McKenna, Microsoft referred the case to the attorney general's consumer protection high-tech unit.
InternetNews.com was not able to reach the companies named in the lawsuit for comment by presstime.
Washington State's complaint said the defendants incessantly sent pop-ups resembling system warnings to consumers' PCs that claimed their registries were damaged and corrupted, and instructed them to download Registry Cleaner XP for $39.95 from a Website.
Consumers who visited the Website were offered a free scan to check their computer, but the program found critical errors every time, Paula Selis, senior counsel with the consumer protection division of the Washington State Attorney General's office, said.
The pop-ups were afoul of amendments passed in June to Washington State's anti-spyware law. These amendments make it illegal to deceive computer users as to the source of a message, and to misrepresent the need for the users to repair their computers. "Both laws were violated in this case," Selis told InternetNews.com.
Hammering the bad guys
Boscovich said the scareware problem mainly affects consumers who have not updated Windows XP, which was shipped with the Windows Messenger functionality on. Windows XP Service Pack 2 turns off that feature, and "it's crucial to have updated antivirus software, updated firewalls and updated spyware software, and to update your operating system," he added.
Washington State and Microsoft are filing their lawsuits under two acts: The Computer Spyware Act and the Consumer Protection Act. Both these acts let the State as well as the private sector file suit for the same violation, Selis said.
They also provide a double whammy for the bad guys. Damages are limited to $2 million under the Computer Spyware Act but are unlimited under the Consumer Protection Act, Selis said. In addition, Washington State law lets the winner of a lawsuit recover attorney costs and collect restitution, and that "could amount to hundreds of thousands, if not millions, of dollars," Selis said.
"We don't want our taxpayers to pay for the cost of prosecution," Selis said. What if the court rules against someone from out of state? The attorney-general's office cannot extradite people, but "we can go into other states and take action, like taking out liens."
Update adds the names of the defendants in the suits.