Adware vendor Zango profits from pirated movies, says researcher

August 18, 2008 (Computerworld) Adware company Zango Inc. profits from copyright infringement, a Harvard University researcher charged today, after the company claimed that sites serving up links to pirated movies were operating within its rules when the sites pressed users to install Zango's software.

The sites, Movietvonline.com and Bestcinemaonline.com, list dozens of recent movies and popular TV shows, including the recent blockbuster The Dark Knight. That was the film that caught the eye of Chris Boyd, the director of malware research for FaceTime Communications Inc., who last week said he had spotted Zango installation prompts on both sites.

"They want you to agree to install Zango in order to view whole movies, some streamed on the movietvonline site from other sources, others in the form of broken up downloads hosted on file-downloading sites," said Boyd in a post to the FaceTime security blog last week.

"Here's a shot of what appears to be a badly made camcorder (complete with people talking and scrunching up paper in the background) streamed on the site," said Boyd, referring to a screenshot from a portion of The Dark Knight viewed via Movietvonline.com.

In a follow-up posting, Boyd reported finding identical Zango installation prompts on Bestcinemaonline.com, which also touts full-length movies. "I'm starting to wonder how many of these are actually out there," he said.

Zango has long been criticized by security and privacy advocates, who have charged that the company distributes adware — software that pops up advertisements while a person is browsing — using illegal methods. In 2006, Zango paid a $3 million fine to settle Federal Trade Commission charges that it used unfair and deceptive practices to download software to users' PCs.

When asked last week whether it approved of Movietvonline.com using pirated content to get users to install its software, the company said the site was breaking none of its rules. "We do not sponsor, [or] partner [with], any site hosting copyrighted streaming content," said company spokesman Steve Stratz in an e-mail. "In this case, [Movietvonline.com is] not actually hosting the content. We view services that don't actually host content as if they were a search engine. In this instance, this Web publisher is not violating our terms today."

According to Boyd, Movietvonline.com and other sites linking to pirated movies and TV programs that require Zango to be installed steer users to secondary sites such as Megavideo, or to offshore BitTorrent- and YouTube-esque sites hosted in China.

Stratz also acknowledged that Movietvonline.com currently receives revenue from Zango, which pays sites for each installation they obtain.

But noted antispyware researcher Ben Edelman, a lawyer and assistant professor at Harvard Business School, said Zango is also making money from the practice. "Zango is profiting directly from copyright infringement," said Edelman, who has tracked the company's moves for years, most recently in research he published in May that took Zango to task for, among other things, offering up copyrighted content on its own site.

Zango's revenues come from serving up the pop-up ads its software displays on users' computers.

That means Zango is not eligible for the "safe harbor" provisions of the Digital Millennium Copyright Act (DMCA), said Edelman. "To claim safe harbor, a site cannot 'receive a financial benefit directly attributable to the infringing activity,' " Edelman said, reading from the statute.

"Google, for example, knows it would become ineligible for the DMCA Safe Harbor if it ran ads alongside copyrighted content on YouTube, because then Google would be profiting directly from the copyright infringement," Edelman continued. "That's why most have no ads."

Nor does Zango's explanation that Movietvonline.com acts as a search site hold water. "It doesn't look like a search site to users," Edelman argued. "The site puts itself out as offering the videos directly, not by linking."

Movie and television copyright holders would have a strong case against Zango if they wanted to pursue the matter, Edelman added. "It's just a question of how many they want to file," he said. "I think this would be a pretty good one to pursue, because Zango is profiting directly from the infringement."

This is the second time in the past three months that Zango has made the news. In June, the Bellevue, Wash.-based company, formerly known as 180solutions Inc., laid off nearly 70 employees, a third of its workforce.

Zango also remains locked in a legal battle with security company Kaspersky Lab, whose software blocks the adware company's programs from installing. Although Kaspersky won the first round of a Zango-filed lawsuit, Zango appealed the verdict to federal court last year. A decision on the appeal has not yet been handed down by the Ninth Circuit Court.