May 14, 2003 4:59 PM PDT

Intuit to remove antipiracy mechanism

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Intuit plans to strike antipiracy technology from future versions of TurboTax that had sparked a rash of consumer complaints and a lawsuit earlier this year.

The Mountain View, Calif.-based software maker will discard its so-called product activation feature, the company announced Wednesday when it reported third-quarter earnings.

"Intuit has a long heritage of doing right by customers, and some of our customers didn't have the great experience they expect from Intuit," Steve Bennett, chief executive of the company, said in a statement. "Therefore we've decided to discontinue product activation next season."

The introduction of product activation technology in TurboTax for the 2002 tax year also failed to deliver the additional revenue and profit growth the company had anticipated, Bennett added. Even so, Intuit reported revenue rose by 29 percent and net income more than doubled in the quarter ended April 30, compared with the same period a year ago. The company said growth was driven by gains in its TurboTax business, which brought in $313.1 million in revenue for the quarter.

Product activation is a controversial antipiracy approach that locks a piece of software to a specific PC. Intuit's version, developed by Macrovision, runs in the background on the PC and checks for a unique activation number generated when TurboTax is installed and stored on the PC's hard drive. The technology is intended to prevent customers from printing or filing returns from any PC other than the original machine that was used to activate the software.

Customers complained, however, that the technology could make it difficult to continue using TurboTax if they were to acquire a new PC or hard drive. Many customers said they were annoyed that the product activation mechanism continually ran in the background, even when TurboTax wasn't being used, monopolizing a small chunk of their PC's memory.

Intuit pledged earlier this year to modify the technology in the next version of TurboTax to address the complaints. Later, a Los Angeles lawyer filed a suit against Intuit, seeking class-action status. The suit, which is still pending, charges the company with unfair and deceptive business practices by failing to fully disclose the mechanisms and consequences of its product activation technology. It seeks unspecified financial compensation for people the suit claims were defrauded by Intuit.

H. Scott Leviant, the attorney who brought the suit, said he's pressing forward with it despite the turn of events.

"We are gratified that our efforts have resulted in a substantial positive benefit for consumers nationwide," said Leviant, a senior associate at Stanbury Fishelman. "However, undisclosed computer modifications, undisclosed use restrictions, and undisclosed Internet communication of personal data remain significant threats to consumer rights and privacy. Enjoining such action is an accomplishment, but we also intend to obtain full and fair compensation and relief for purchasers and users of the 2002 TurboTax products."

An Intuit representative declined to comment on the lawsuit.

News.com's David Becker contributed to this report.

 

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