• by Wendy Davis  @wendyndavis, July 11, 2014

A long-running fight about whether software developer Carrier IQ and a group of phone manufacturers violated consumers' privacy could be heading toward a settlement.

U.S. District Court Judge Edward Chen in the Northern District of California recently signed an order directing the consumers and companies to take their 3-year-old dispute to private mediation -- which often is the first step toward a resolution. Chen's move comes several months after he rejected the companies' argument to send the case to an arbitrator.

Chen's refusal to send the case to arbitration marked a significant defeat for Carrier IQ and the manufacturers, which had argued they shouldn't have to face the possibility of a jury trial. The companies said that the software at the center of the lawsuit was installed at the request of three wireless carriers -- all required consumers to agree to take disputes to an arbitrator.

But Chen ruled that those agreements only apply between the carriers and subscribers and not outside companies, like Carrier IQ and device manufacturers.

The lawsuit stems from allegations that Carrier IQ's software -- which was installed on millions of mobile devices -- could log users' keystrokes. The software's capabilities came to light in November of 2011, when a researcher posted a video that appeared to show the company logging keystrokes.

Carrier IQ later acknowledged that its software sometimes logs the contents of messages, but said the data isn't readable. The company also said that its software was intended to help mobile carriers to discover the source of network problems, like dropped calls.

The news resulted in lawsuits against Carrier IQ and six device manufacturers, including HTC, Samsung and LG Electronics.

News about the software also spurred a Federal Trade Commission action against manufacturer HTC, which allegedly shipped smartphones with Carrier IQ's diagnostic software. The FTC accused the manufacturer of failing to disable a code used in testing. HTC also allegedly installed Carrier IQ in such a way that many third-party apps could access users' keystrokes and gain access to the phone numbers users' called, browsing histories and other data.