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FTC v. Seismic Entertainment

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Citation Edit

Federal Trade Comm'n v. Seismic Entertainment Productions, Inc., 441 F.Supp.2d 349, 2006-1 Trade Cases ¶75,333 (D.N.H. 2006) (full-text).

Factual Background Edit

In April, 2005, the Federal Trade Commission (FTC) charged that John Robert Martinson, the principal of Mailwiper, Inc. and its successor, Spy Deleter, Inc., unfairly compelled the purchase of two purported "anti-spyware" products marketed under the names Spy Wiper and Spy Deleter. According to the FTC, Martinson and his companies paid spyware distributor Sanford Wallace and his companies, Seismic Entertainment, Inc. and SmartBot.Net, Inc., to promote, advertise, and sell the Spy Wiper and Spy Deleter programs. Wallace and his companies exploited security vulnerabilities in Microsoft's Internet Explorer Web browser and downloaded spyware onto consumers' computers. It then sent advertisements for the Mailwiper and Spy Deleter programs.

One advertisement, for example, caused the CD-ROM tray on computers to open and then displayed a "FINAL WARNING!!" to computer screens with a message that said, "If your cd-rom drive's open . . .You DESPERATELY NEED to rid your system of spyware pop-ups IMMEDIATELY! Spyware programmers can control your computer hardware if you failed to protect your computer right at this moment! Download Spy Wiper NOW!" The complaint charged that the defendants forced consumers either to spend $30 to purchase the Spy Wiper and Spy Deleter software, or spend substantial time and money to fix the computer problems they caused.

Settlement and Consent Agreement Edit

The defendants settled with the FTC. The settlement bars Martinson from exploiting any security vulnerability to download or install software. It also prohibited him from downloading spyware onto consumers’ computers without their express consent; from redirecting consumers' computers to sites or servers other than those consumers selected to visit; from changing any Web browser’s default home page; and from modifying or replacing the search features or functions of any search engine. In addition, it requires him to monitor affiliates he hires to promote or distribute software programs, products, or services to assure that they are complying with the terms of the settlement.

The settlement also imposed a $1.86 million judgment which was suspended, except for $40,000, based on Martinson's inability to pay. If the court finds he misrepresented his financial condition, the entire $1.86 million will become due. The settlement with Martinson resolves charges against the final remaining defendant in this action. Default judgments or settlements were previously entered against all other defendants.

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