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Terry Goddard Announces Settlement Over Hidden Software On CDs

(Phoenix, Ariz. – Dec. 22, 2006) Attorney General Terry Goddard today announced a $4.25million settlement with SONY BMG, resolving allegations that the record company placed anticopyingsoftware on music compact discs without notifying consumers. Goddard joined 39 otherstates in this settlement. Arizona’s share is about $310,000.

During 2005, SONY BMG distributed more than 12 million CDs with two kinds of anti-copyingsoftware. SONY BMG did not notify consumers who purchased these CDs about the anticopyingsoftware (also known as Digital Rights Management software) or that the software woulddownload itself onto computers without their knowledge.

The settlement provides restitution to consumers affected by this anti-copying software. Inaddition to the restitution, the settlement, an Assurance of Discontinuance, will prevent SONYBMG from using anti-copying software on its music CDs in the future without first complying withthe reforms required by the settlement.

The states alleged in their complaint that SONY BMG included two types of anti-copying softwareon their music CDs during 2005. One version of the software, XCP, was designed to hide anumber of the program’s files and operations. When consumers played XCP CDs in theirWindows-based computers, they did not know the anti-copying software was downloaded ontotheir computers. XCP created vulnerabilities on Windows-based computers by exposing them tosecurity risks, including viruses and other problems.

When some consumers discovered XCP on their computers, they experienced problems whenthey tried to remove the software. In some cases, their CD-ROM drives crashed.

Another type of software, MediaMax, downloaded on a consumer’s computer even if theconsumer declined to accept it. One version created a security issue on consumers’ computersby allowing subsequent users to modify the contents on the computer and run dangerousprograms they would not otherwise have been able to run.

“Consumers expect music on their music CDs, not software that could expose their computers toviruses or other security risks,” Goddard said. “If companies want to use technology to protecttheir interests, they need to be up-front with consumers and give them an opportunity to makeinformed choices about buying and using these products.”

According to the settlement:

  • SONY BMG will refund up to $175 to all consumers who experienced harm to their computerswhen they sought to remove the anti-copying software. Refund claims must be submitted toSONY BMG through a claims process that has not yet been formalized.
  • SONY BMG is specifically prohibited from using XCP and Media Max software. The companymust continue to pull XCP CDs from retailers and destroy Media Max 5.0 CDs in wholesalestock.
  • SONY BMG cannot use software that permanently resides on a computer’s hard drive unlessthe user is notified and has an option to decline installation.

A copy of the settlement is attached. Assistant Attorney General Vincent Rabago handled this

case.

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