Smartphone Spying Case|on Road to Settlement

SAN FRANCISCO (CN) - Carrier IQ has agreed in principle to settle class action claims that its software - installed on millions of smartphones - collects user keystrokes and other data, and then sends the information to telecom providers.

Carrier IQ and various telecoms were hit in 2011 with a raft of class actions alleging that it used a device called IQRD to access smartphones while hiding its presence and subverting standard operating system functions or other applications.

A consolidated amended class action in San Francisco federal court alleges violations of the Federal Wiretap Act, the Computer Fraud and Abuse Act, and the Stored Communications Act, as well as multiple federal and state-law warranty and consumer-protection claims.

While Carrier markets the device as capable of measuring performance and user experience while not affecting the devices, consumers say the so-called rootkit software actually decreases battery life and overall performance while increasing data use and recording all keystrokes, messages, media, and location statistics and other information.

Carrier and the telecoms - including Sprint, AT&T and others - failed to persuade U.S. District Judge Edward Chen earlier this year to force arbitration based on users' agreements with their wireless providers. Chen said that users had no idea what Carrier was at the time they signed their contracts, and that the software developer was not a party to the agreements in any event.

On Monday, Carrier told Chen that it had "reached an agreement in principle that will resolve plaintiffs' claims against Carrier IQ on a class-wide basis."

Prior to that, however, the company said the parties will go through another round of mediation on Nov. 12 to hammer out the best course of action.

Carrier has consistently maintained that while its software sometimes records the content of users' messages, the data is not readable. The company says the software is supposed to be used by wireless providers to uncover their own network problems, like dropped calls.

Last year, cellphone manufacturer HTC settled Federal Trade Commission charges that Carrier software on its Android phones left users vulnerable to malware and other malicious applications by third parties.

HTC agreed to issue software patches to button up the devices and has implemented a security program as part of the FTC settlement.

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