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Software Firms Accused of Sneaky Spying

BOSTON (CN) - A federal class action claims that 3-D software developer Transmagic secretly planted surveillance technology in its software that "commandeered the computers of its customers, spied on them, and used the ill-gotten intelligence to build a recurring revenue stream exacted from an involuntary customer base."

The complaint states: "Defendants, waving the banner of software anti-piracy, secretly planted 'phone home' code in Transmagic software and used it to conduct surveillance on all Transmagic users in an attempt to detect a few supposedly unauthorized users. Defendants' purpose was not to deter unlicensed use but to profit by treating suspected unlicensed users as 'leads' whom they would 'convert' into customers by shaking them down for steep license premiums and ongoing maintenance fees."

Transmagic is based in Westminster, Colo.; co-defendant ITCA Integrity Services and other ITCA entities are based in the Netherlands and Curaçao; co-defendant Licensing Technologies Limited is based in England.

Transmagic develops and sells three-dimensional, computer-assisted design software (3D CAD) "designed to enable users of different vendors' 3D CAD systems to share design files with each other," the complaint states. It distributes the software, including free trial versions, through its website, which requires users to agree to an end-user license agreement (EULA).

Three-dimensional software is particularly popular with engineers and designers, and can be expensive.

"Transmagic has incorporated a 'Phone-Home Function' as part of its product to trap those who download and attempt to use copies of Transmagic software without agreeing to Transmagic's EULA and to track the activities of all persons using Transmagic software," says lead plaintiff Miguel Pimentel.

The "phone-home" function is called Sheriff, and was designed, sold and licensed by LTL. Pimentel says the phone-home function transmits' users' personally identifiable information to Transmagic, including the users' Internet protocol address, the media-access address of their computers, email addresses, and Transmagic software activity.

If the data indicates unlicensed use of Transmagic software, the defendants "catch the few supposedly unlicensed users and demand fees from those persons," the complaint states.

Pimentel says he downloaded a free, 7-day trial copy of Transmagic software from a website, didn't like it, and uninstalled it the same day.

Three months later, he says, he got a phone call from ITCA: "ITCA, while claiming to serve as a 'mediator,' used various coercive techniques to induce plaintiff to agree to a large penalty for 'illegally downloading' software. For example, ITCA told the plaintiff that if he did not agree to purchase the product license and service plan for $10,000 plus annually recurring maintenance fees, Transmagic and ITCA would take legal action against him for $150,000, an amount ITCA claimed it had successfully obtained in prior actions. Further, ITCA made clear it knew where plaintiff worked and, as long as payment was made, ITCA would not disclose the 'piracy' to his employer.

"Research conducted into such actions has not revealed the existence of any such instances of recovery by Transmagic.

"ITCA waited three months to contact plaintiff to benefit from the likelihood that he would not recall the details of his software download and would not have retained relevant records on his computer, and would thus be more likely to accept."

The class adds: "Plaintiffs do not contest Transmagic's right, in principle, to implement technology to protect its intellectual property. In this case, however, defendants exceeded the boundaries of permissible self-protection and violated consumers' privacy and property rights by surreptitiously and indiscriminately engaging in surveillance and information-harvesting.

"Defendants invaded the privacy of all users of their software for the sake of promoting their revenue-generating opportunity. Without notice and without users' consent, defendants commandeered the computers of its customers, spied on them, and used the ill-gotten intelligence to build a recurring revenue stream exacted from an involuntary customer base. For their own enrichment, defendants exploited users in violation of Massachusetts' Consumer Protection Act and Privacy Act, the federal Computer Fraud and Abuse Act, and common-law prohibitions against trespass to chattels and conversion."

The class seeks damages, including statutory damages, restitution, costs, and an injunction. Their lead counsel is Adam Elman of Newton, Mass., and Scott Kamber with KamberLaw of New York, N.Y.

UPDATE: On June 13, the clerk's office entered an order closing the case without entry of judgment.

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