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'Spamford' Accepts Injunction in FTC Spyware Case

The Federal Trade Commission and Sanford Wallace reached an agreement that will prevent Wallace from putting so-called spyware programs on users' computers while an FTC lawsuit against him proceeds.

Under the preliminary injunction, Wallace and his companies, SmartBot.net and Seismic Entertainment Products, can advertise only on their Web sites. The order also prohibits Wallace from helping others exploit security vulnerabilities in Microsoft's Internet Explorer browser.

The FTC accused Wallace in an October 2004 lawsuit of deceptively installing advertising and Web monitoring software on consumers' computers. A judge placed a temporary restraining order against Wallace at the time. The preliminary injunction contains no admission of wrongdoing by Wallace.

“We're hopeful this case will be resolved by a favorable ruling of the court or an agreement with the parties that gives consumers the relief necessary,” said Laura Sullivan, an FTC attorney on the case.

The FTC filed the suit against Wallace — its first involving spyware — in U.S. District Court in New Hampshire. No trial date has been set. Hanson said she hoped the court would schedule one this month.

Wallace gained the moniker “Spamford” in the late 1990s for sending millions of unsolicited e-mails through his company, Cyber Promotions. EarthLink won a $2 million judgment against him in March 1998, and Wallace subsequently left the e-mail marketing business, according to reports.

The FTC charges that Wallace moved from spam to spyware, a new form of intrusive marketing online that relies on software downloaded without consumer consent to track Internet behavior and serve advertising.

According to the suit, Seismic infected computers with spyware that would display pop-up ads for $30 anti-spyware software, called Spy Wiper and Spy Deleter, made by an Atlanta company.

Sullivan declined to say whether the FTC would pursue companies that profited from Wallace's activities, either through acting as distribution channels or letting Wallace act as an affiliate. She said the FTC would continue to investigate spyware cases.

“It sends a strong message to people … who in some way benefit from these types of illegal activities that they're on notice,” she said.

Brian Morrissey covers online marketing and advertising, including e-mail marketing and paid search, for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters

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