It seems that a lawsuit was filed in Texas Eastern District Court on January 23, 2007 by Source Inc. alleging patent infringement related to a “Centralized Consumer Cash Value Accumulation System for Multiple Merchants”. Translation: loyalty/rebate system. Source Inc is saying they have the patent of others doing loyalty/rebate systems are infringing on their patent.

Listed as defendants in the suit are:

Access Development Corporation
bCorner.com, Inc.
Belcaro Group, Inc. (ShopAtHome)
Big Co-Op, Inc.
Intefral Technologies, Inc.
77BlueLLC (David Lewis)
Ebates Shopping.com, Inc.
Electronic Scrip Incorporated
The Ezshoppen Company
FatWallet.com, Inc. (Tim Storm)
iGive.com Holdings, LLC,
JellyFish, Inc. (recently purchased by M$)
Jet Set Joe Corporation
Little Grad, Inc.
MBC Direct, LLC
Mall Networks, Inc.
Misermart.com, Inc.
Mezl Media, Inc. (owned by ValueClick)
Mothers Work, Inc.
OC Rebates
Pinnacle Communications International, Inc.
Qdeals, Inc.
QuickRewards Network, Inc.
Shop.com
Simplicity Group, LLC
Spree.com Corporation
Tricordia, LLC
Tuition Fund, LLC
Webloyalty.com, Inc.
Zions First National Bank
Alliance Card, Inc.
Family Network, Inc.
JPMorgan Chase & Co.
Golden Retriver Systems, LLC
Summit State Bank
Nietech Corporation
U.S. Bancorp
U.S. Bank

I’m sure many will recognize several of the thirty-eight defendents on that list. Source Inc may not be done with the list of defendents yet as there is mention of “similar programs whose identities are not yet known”.

Source Inc is also seeking an injunction against each defendent.

Ok, so patent cases are filed, won and lost every day. But “wow” was my initial reaction.

I’m not sure if they are naming any loyalty/rebate program which tracks across multiple merchants or just ones with certain technology or what.

I haven’t read through the patents yet, but this is certainly going to be interesting.

References:
The SouthEast Texas Record (the content on this page may change. Scroll down to Source Inc vs Access Development Corp. et al)
Justia
US Patent Office Search Returns

ExactAdvertisng…remember them? They were behind such lovely adware applications as BargainBuddy (contextual pop-up application like Zango), CashBackBuddy (rebate reminder software), ExactSearch (PPCSE toolbar) and Bullseye Network (BargainBuddy rebranded).

I’ve noticed in the last year or so that several of their adware applications have been dead in the water so to speak. Installation web sites owned by ExactAdvertising were still up and had downloads available, but the adware did not function when installed. I wondered what was going on. Did they decide to pull out of the adware business or was something else happening? (more…)

News of yet another settlement between a government agency related to adware. This time it’s AdultFriendFinder and the FTC. Maybe I need to start tagging these as “chickens coming home to roost.”

AdultFriendFinder and the FTC have reached a settlement over consumers being “pelted” with sexually explicit ads. The short story is the FTC says AdultFriendFinder delivered sexually explicit ads to it’s network of sites to consumers who weren’t looking for such and that’s against the federal law. AFF can’t do that anymore, either themselves or by their affiiates. From the FTC press release:

“Such ads were displayed to consumers who were searching online using terms such as “flowers,” “travel,” and “vacations.” In some cases, defendant’s sexually explicit ads were distributed using spyware and adware.” (more…)

Larry Rulison. over at the TimesUnion.com, has more to report this morning in the continuing indictment of two top WurldMedia executive. It seems to Gregory Kerber, former CEO of Wurld Media, is still employeed by the ROO Group, the publicly traded company who purchased Wurld Media this summer for $4.3 million. Kerber was hired by ROO after the purchase of Wurld Media as a senior vice-president of business development.

I wonder if Kerber had anything to do with all those pop-ups of Roo.com I was getting through adware? Adware inventory buys can be a pretty quick and cheap way to get a site’s traffic figures up when setting those good ole Rate Card prices for advertising on the site. Anyway, back to the Friday fun provided by Larry….

It seems a reporter from TimesUnion went to the offices of Roo, as a good reporter should, and those offices were located in a “nondescript building” with a locked front door. They did have a couch and Christmas tree in the front lobby behind that locked door though. Eh….Merry Christmas.  

Evidently, the Saratoga District Attorney’s office is still being a bit tight lipped on the specifics of charges brought against Kerber and Saxton. According to Times Untion, Assistand Distric Attorney of Saratoga did say

“The grand larceny and money laundering charges center on “certain financial transactions that occurred” related to the distribution of the proceeds from the sale to ROO earlier this year, Wendling said……Wendling would not say where authorities believe the proceeds ended up, although he said it was another entity separate from Wurld.”

My curiosity is piqued. I wonder if it ended up in the Lexy Foundation? No, that’s not news only me being tongue in cheek because it’s Friday. But those who were in affiliate marketing back in the early days of WurldMedia, Morpheus and Buyersport should remember about the Lexy Foundation. Just in case something changes on the site in the future:

Formed by the founders of Wurld Media….to assist the sick, disabled, downhearted, and poor. It was also used to justify the Buyersport software claiming the traffic of other affiliate’s as their own. Even when the software was just getting installed by users of Morpheus who were really just interested is being able to download free music, movies, software, etc. That downhearted part always did make me laugh. All those halos in the logo and with mouse-over of the menu seem pretty funny right now as well.

I do hope that during all this investigating going on that some official probing has happened or will happen into the Lexy Foundation as well. All considered, just to be sure that everything is on the up and up with the nonprofit.

I’ll continue to be watching as all of this progresses and more specific information regarding the charges become public record.

Yet another adware company is facing legal woes. It looks like the stuff has hit the fan for Wurld Media. The CEO, Gregory Kerber, and the CFO, Richard Saxton, were arraigned on Friday on a number of felony and misdemeanor charges. The charges include second-degree grand larceny, third-degree grand larceny, fourth-degree money laundering, first-degree falisifying business records, first-degree offering a false instrument for filing, failure to pay benefits, second degree criminal contempt and failure to withhold income taxes. This follows a seven month investigation by Spa City police and State tax agency. The two face a possible 50 years in jail. (more…)

It looks like a ruling was handed down yesterday on ValueClick’s motions to dismiss. From the web site of the plaintiff’s attorneys:

On August 27, 2007, the Honorable Florence-Marie Cooper issued two orders denying, in part, ValueClick’s Motions to Dismiss the Class Action Complaints. The Court held that Defendants failed to meet their burden of establishing that Plaintiffs could not proceed in the lawsuits.

The pdf’s of the ruling are available as well at:

SRC Motion To Dismiss Order
Carrier Motion To Dismiss Order

Lots of legalese. It looks like the cases will proceed. Additionally, it appears that the plaintiff’s will have te opportunity to amend one claim the judge moved to dismiss if they so chose. So that point may end up back in the claim in some form. At least, that’s what it appears to my non-legal mind towards the end of the Carrier MTD Order.

I’m still wondering if and when ValueClick (VCLK) and/or CJ will have any kind of public comment regarding these lawsuits.

AFP will continue to follow developments in these lawsuits as they progress.

Every Affiliate Manager has probably seen these sites come through their program for approval. It’s the ready-made mall sites that are sold as packages to people so they can make their millions on the Internet while they sleep. I’ve often heard Affiliate Managers ask whether there is any harm in accepting these types of sites into their program, even though they realize the sites are not likely to convert sales. It seems that there may indeed be risk in accepting these types of package deal sites into programs.

On August 21, 2007, the FTC issued a press release outlining the action taken against a company selling these types of mall sites to consumers. The investigation was conducted jointly by the FTC and the Arizona Attorney General’s Office and it appears the AG will be filing a parallel case.

The case was filed against The Results Group, LLC which sold affiliate sites and hosting to consumers as a business system for $99 to $599. They claimed that their system was generating over $50,000/month in commissions for some of their users. Yeah right. Anyone in this industry knows that is far from realistic. The Results Company would then pressure consumers into purchasing more “advertising” for the site they had purchased.

The FTC felt that consumers were provided with false and misleading information regarding The Results Group “turn-key” system. The upshot is that The Results Group will be returning about $435,000 to consumers and will give up thousands in cash which were the proceeds from the sale of luxury sports cars, the value of life insurance policies and a Las Vegas real estate deal. All of that sounds like the FTC hit them with “disgorgement of ill-gotten proceeds” legal whammy, which means they can go after those things purchased with money earned through a scam.

While less than half a million may seem like a bit trifling for the FTC go after, the order was for $19.5 million and $435,000 is the settlement amount. It sounds as if the FTC agreed to take whatever they could get based on current assets.

The FTC mentioned two merchants promoted through these web sites, Amazon and Overstock. While it is doubtful (or at least I would hope so) that the FTC or an AG would go after any of the merchants partnered with these types of mall site scams, there is a potential branding issue for merchants. As a merchant, do you really want your brand connected with such scams? Let alone even being mentioned in an FTC press release.

These types of scams can only exist because they have merchant affiliate relationships. Since anyone with half a brain in this industry knows that these types of sites just aren’t going to bring in any amount of revenue to write home about, it seems to be no reason to be connected with this type of business model at all.

My personal advice would be to hit the decline button and stay clear of such “turn-key” solutions.

The FTC recently received a court ordered temporary injunction against and the freezing of EDebitPay in regards to business practices related to their prepaid debit cards and short-term loans. My write up on the situation is bit lenghy based on the current available information, so I’ve posted it on my forum. You can see the full details here.

The gist of the allegations is that EdebitPay has been charging people a $159.99 fee for the debit cards without adequate disclosure, any disclosure and sometimes when they weren’t even applying for the prepaid card but a short-term loan.

These are very serious allegations and there are some indication it’s also been turned over to the FBI  (not surprising considering the allegations involved). If you have had any business dealings with EdebitPay, you probably want (or need) to stay abreast of this case.

On June 28, 2007 the FTC issued their final consent order with regards to DirectRevenue. Since it is a twelve page government document, I realize many will probably not read through it. Since there are some important points in the decree, I’ll highlight them here.

The Consent Order applies to DirectRevenue LLC, DirectHoldings LLC, the officers (Joshua Abram, Daniel Kaufman, Alan Murray, and Rodney Hook), their agents, representatives, employees or anyone directly or indirectly under the control of any of these. With regards to the officers of DirectRevenue, it applies to them as individuals and as officers of the company. This is significant in light of the historical past of parties involved with DirectRevenue being involved with other adware ventures. I take this to mean that the above entities can not go out and start up shop again, either collectively or individually, under a new company and engage in violate the following orders. (more…)

ZDNet is reporting “legal” spyware which targets Blackberry. The software is FlexiSPY and is marketed as software to catch cheating spouses, etc.

According to ZDNet the software:

Once physically installed on a mobile device, a remote user is given complete monitoring and access control.

This includes bugging voice calls, logging mobile e-mail messages and SMS, tracking the location of the user, or even remotely switching on the phone’s microphone to bug a user regardless of whether they are on a call.

I don’t see how there should be any “legal” to something which does the above…but what do I know?