News Blog

An online advertising company accused of luring customers with deceptive offers of "free" iPhones, laptop computers, plasma televisions, and other goods has agreed to pay a record $2.9 million fine as part of a settlement with the Federal Trade Commission.

According to a federal court filing (PDF) released Monday, since at least early 2005, Westlake Village, Calif.-based ValueClick and its subsidiary Hi-Speed Media have been attempting to lure consumers to their Web sites through e-mails and Web-based ads bearing slogans like "Free PS3 for survey" or "let us buy you a 42 inch plasma tv! Just type in your zip code." The purpose of those operations was "lead generation"--that is, connecting consumers with advertisers trying to sell certain goods or services, the FTC complaint said.

Trouble is, the companies didn't disclose "clearly and conspicuously" that, in reality, the offers weren't exactly free, the FTC charged. Instead, consumers were required to fulfill certain obligations or incur various other expenses--for instance, applying for car loans or credit cards--in order to qualify for those goods. In addition to allegedly running afoul of a broader law prohibiting unfair and deceptive practices, the FTC said that misleading subject lines in those e-mails violated the 2003 Can-Spam Act, which regulates distribution of bulk e-mail.

The alleged violations didn't stop there: The companies also gathered sensitive credit card and financial information but did not encrypt that data in a way that's consistent with industry standards or take other steps to protect it from hackers--even though they claimed to do otherwise, the FTC said.

The charges resulted in the largest settlement amount the FTC has reached under Can-Spam, the agency said in a statement. Until Monday's announcement, the FTC's highest settlement under Can-Spam occurred in March 2006, when a company called Jumpstart, which allegedly sent misleading e-mails offering free movie tickets, agreed to pay $900,000 in civil penalties.

It was also the FTC's third case targeting "deceptive promises of free merchandise" by Internet lead generation enterprises. In a case last November, a company called Adteractive, which allegedly lured customers to its Web sites with promises of "free gifts," agreed to pay $650,000 in civil penalties as part of an FTC settlement.

In addition to the monetary payout, ValueClick is required to make clear disclosures about what its customers must do in exchange for the free products. It also must establish and maintain a "comprehensive security program" for protecting personal information, subject to mandatory "independent third-party" reviews, for 20 years.

ValueClick apparently knew the settlement was coming more than a month ago. At that time, it released a statement saying it expected the $2.9 million charge, although, as is the norm in these arrangements, it did not concede it had violated any laws. The company also said the FTC complaint referred only to "past practices" of its Hi-Speed Media subsidiary and not other portions of its company.

Before becoming official, the settlement is subject to approval from a federal district judge in California.

Microprocessor technology supplier Transmeta said it has received the initial payment of $150 million from Intel toward the $250 million settlement that the two companies agreed upon back in October. The payment was received on January 28, according to Sujan Jain, Transmeta's chief financial officer. Mr. Jain also said that Transmeta is evolving its business model to generate a more constant revenue stream.

Transmeta LongRun2

(Credit: Transmeta Corp.)

Transmeta, previously a supplier of low-power x86 processors, now develops and licenses microprocessor technologies and related intellectual property. The company filed a lawsuit against Intel in October 2006 alleging that the latter infringed upon Transmeta's patents. Transmeta later settled with Intel for $250 million.

Last week, the company came under attack from one of its largest stockholders, Riley Investment Management, for what Riley claims is an unconvincing business strategy based on Transmeta's LongRun2 technology--described by Transmeta as a suite of technologies for advanced power management and "leakage control." Riley claims that there is no "credible evidence" that shareholders will benefit from the LongRun2-related operating expenses.

But Transmeta says it is making headway with LongRun2. Using this technology, NEC announced in July 2007 that it is targeting production of approximately one million mobile phone chips a month by 2008. As a result, Transmeta expects approximately $215,000 in LongRun2 royalty revenue that will show up in its first-quarter earnings, said Mr. Jain. That would be an improvement over its third-quarter earnings when Transmeta posted only $44,000 in revenue, including $43,000 of services revenue and $1,000 of license revenue for royalty payments.

Mr. Jain also said that Transmeta has been evolving its business model. Previously, Transmeta only dealt with big companies that had plenty of engineering know-how, due to the complexity of the technology transfer. But now it is focusing on building IP (intellectual property) modules to license to smaller, fabless chip companies too. The new strategy will help expand the LongRun2 business and should result in "more consistent revenues over time," Mr. Jain said.

Transmeta will provide details on how and when it will recognize the entire $250 million settlement from Intel during its 2007 fourth-quarter earnings conference call, said Mr. Jain.

(Credit: TJX)

Editors' note: This blog initially misstated the number of years of credit monitoring that TJX is offering in the proposed settlement. It is offering three years, or two additional years if the customer is already signed up for a credit monitoring service.

The TJX Companies announced on Friday a yet-to-be-finalized settlement for several class action suits resulting from various data breaches over the last few years.

TJX, which operates such discount retail chains as T.J. Maxx and Marshalls in the U.S. and Winners and HomeSense stores in Canada, is offering claimants three years of credit monitoring (or two additional years if the customer already has a credit monitoring service), credit insurance for up to $20,000 in losses, and the cost of replacing driver's licenses. A second group will receive one or two $30 vouchers good at any TJX-owned store.

Additionally, all T.J. Maxx, Marshalls, HomeGoods and A.J. Wright stores in the U.S. and Puerto Rico and all Winners and HomeSense stores in Canada will hold a three-day customer appreciation sale sometime in 2008 in which merchandise will be reduced by 15 percent.

In a press release (PDF) associated with the settlement announcement, Carol Meyrowitz, chief executive of the TJX Companies, said, "We deeply regret any inconvenience our customers may have experienced as a result of the criminal attack on our computer system."

In March, TJX said that up to 45.7 million customers may have had their credit information compromised. It is believed to be the largest data security breach ever.

Recently, Neal Krawetz of Hacker Factor released a report (PDF) citing various vulnerabilities in how large retail chains, including TJX, collect and store customer credit card information. You can read more about Krawetz's findings here or hear a podcast interview with him here.

If you're one of the hundreds of consumers who reportedly complained to the feds about a less-than-pleasant experience with the media search sites MovieLand.com, Moviepass.tv or Popcorn.net, this piece of news may provide a little vindication.

The Web operations, which allegedly bombarded unsuspecting users of its software with a sequence of large, music-accompanied pop-ups that demanded payment of up to $99, have reached a settlement with the Federal Trade Commission, the agency said in a news release Thursday.

Screenshot of Popcorn.net

Last August, the FTC filed a court complaint against the operators of those sites, accusing them of violating federal laws that prohibit unfair and deceptive practices. Each offers a piece of Windows-only software designed to act as a "download manager" for movies, music, sports and other entertainment.

The allegedly illicit scheme worked something like this, according to the FTC: Consumers had the option of signing up for a three-day trial of the service, after which pop-up windows began appearing and demanding payment of a license fee ranging from $19.95 to $99. The FTC complaint (PDF) claimed the pop-ups "significantly disrupt consumers' use of their computers," and "redisplay again and again with ever-increasing frequency."

As part of the settlement, signed September 5 by a federal judge, the Web operations agreed to provide consumers with a way to uninstall their software, to refrain from downloading software onto a user's computer without his or her consent, and to pay a little more than $500,000 for "consumer redress."

Yes, that means some consumers will be eligible for some sort of payout, said FTC spokeswoman Claudia Bourne Farrell. But there's no need for people who think they might be eligible to contact the FTC because "as part of the settlement, the defendants will provide us with a database of consumers who are eligible and a redress administrator will contact them," she added in an e-mail interview. It wasn't immediately clear, however, what the eligibility requirements are in the first place.

If a court finds that the operation "misrepresented financial information" to the FTC, then it may also have to cough up a $1.8 million judgment.

After more than a year of court battles, Sun Microsystems and Java hardware maker Azul Systems said Tuesday they have settled a dispute related to allegations of trade secrets misappropriation and patent infringement.

The financial terms and other settlement details were not disclosed, as is typical, but both sides said they were pleased. Sun chief legal counsel Mike Dillon described the terms as "favorable" to his company in a blog entry reflecting on the news.

"We certainly view that this is fair on both sides," Azul co-founder and chief operating officer Scott Sellers said in a telephone interview. "Both sides kind of gave and took, and we're happy with the results."

The tensions between the companies date back to early 2005. By Dillon's account, Sun suspected a new Azul server product may have been using Sun's technology without authorization--particularly since the Mountain View, Calif.-based start-up had hired about a dozen former Sun employees to work on that project.

Sun began a series of meetings with Azul to discuss its concerns, but attempts at negotiations broke down. In March 2006, Azul asked a federal judge for a finding that it had not infringed on 20 Sun patents.

Shortly afterward, Sun shot back with a countersuit that accused Azul of luring away at least eight technical employees and of selling systems that infringed on six of its patents. Azul sells hardware that's designed to centralize the execution of Java programs that run on servers.

Now that they've smoothed things over, "we certainly want to have a much healthier relationship with Sun in the market," Sellers said. "Customers in the overall Java community just lose when we're spending our time in courtrooms instead of innovating in the market."

Microsoft said on Monday that it has filed suit against Immersion, a company whose technology adds tactile feedback to joysticks and other controllers.

Immersion had originally sued Microsoft, along with Sony, back in 2002., but the two companies reached a settlement in 2003. Under that deal Microsoft agreed to pay Immersion $26 million for licensing rights and for a stake in the company. However, Microsoft said Monday that Immersion has not lived up other terms of that deal, including a provision that requires Immersion to pay Microsoft "based on certain business and IP licensing arrangements."

"We entered into a binding licensing agreement with Immersion and are seeking to have that agreement honored," Microsoft Associate General Counsel Steve Aeschbacher said in a statement. "Microsoft licenses technology both in and out and relies on these agreements to be honored and enforced. Our request to the court is that all companies and industry partners should play by the same rules and that the binding agreement we signed with Immersion be honored."

An Immersion representative could not immediately be reached for comment.

Update 10:00 p.m.: Todd Bishop at the Seattle P-I has done some good digging to get at the heart of the dispute using court and regulatory filings. It appears Microsoft had a clause that it stood to get payments if Immersion and Sony settled. Sony and Immersion reached an arrangement, but Microsoft and Immersion dispute the implications of that. For more, check out Todd's blog on the matter.

News.com's Stephen Shankland contributed to this report

An India-based company that counts itself among the largest recipients of controversial H-1B visas has agreed to pay $2.4 million in back wages to 607 allegedly underpaid computer professionals employed through that avenue.

The U.S. Department of Labor said Thursday it had found that Patni Computer Systems Inc., which is headquartered in Mumbai but centers its North American operations in Cambridge, Mass., did not pay the required wages to those temporary foreign workers between January 2004 and December 2005. Patni specializes in global IT outsourcing services.

In this case, Patni was not fined or barred from participating in the H-1B program--as has been the case with some companies in the past--because federal investigators found no "willful violation" of the law, Labor Department spokesman John Chavez told CNET News.com Monday.

Company representatives did not respond immediately to requests for comment from CNET News.com, but a spokesman interviewed by the Associated Press blamed the wage discrepancies on an "accounting error" that has now been fixed.

Patni was also one of nine Indian companies recently singled out by Sens. Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill.), who said they were troubled by reports that many of the top H-1B users last year were consulting firms that recruit foreign workers, only to outsource them to offshore companies.

In a letter last month, Grassley and Durbin asked Patni to describe how many of the 1,391 H-1Bs it received last year, according to U.S. immigration officials, were used for that purpose.

Grassley and Durbin are sponsoring a bill that would require employers to meet a number of new requirements before they could make H-1B hires. Those obligations would include certifying that they had made a "good faith" effort to hire an American before taking on an H-1B worker and guaranteeing that the foreigner was not displacing a prospective U.S. worker.

Conflicts over wage payments to visa holders are hardly new. Federal auditors reported last year that a few thousand employers that use H-1B visas had not committed to paying wages at the so-called prevailing rate before making their hires.

At the same time, American high-tech companies like Microsoft and Google continue to argue there's a crisis-level shortage in the visas, which allow foreigners with at least a bachelor's degree in professional areas to work in the United States for up to 6 years. A U.S. Senate immigration bill that has died at least for now included a provision to elevate that annual quota.

Other members of Congress say they're worried about the world's share of jobs in science and technology fields increasingly migrating away from the United States. The House of Representatives Committee on Science and Technology plans to explore suggestions for how the federal government should respond to that challenge at a hearing scheduled for Tuesday afternoon.