• by Wendy Davis  @wendyndavis, May 28, 2008

Adware company Zango contends it has been a good corporate citizen since settling a Federal Trade Commission complaint in 2006.

But spyware researcher Ben Edelman will unveil a new report today titled "Debunking Zango's 'Content Economy,'" which questions some of Zango's current practices.

Edelman, an assistant professor at the Harvard Business School and a longtime spyware researcher, alleges in his report that Zango misleads users into thinking that removing its ad-serving software will result in loss of access to video clips. Edelman says that this statement isn't always true because some of Zango's clips are available elsewhere online for free and without adware.

For instance, Zango offers clips that are syndicated by Web video site Revver, but that company allows users to view clips for free without installing Zango. "For files hosted at Revver, installation of Zango is not necessary to watch the videos in the first place, and uninstallation does not interfere with watching the videos later," he writes.

Edelman also points out that while Zango describes itself as "an online media company providing consumers free access to a large catalog of free, sought-after online videos, games, music, tools and utilities," there are no pure music files on the site. While Zango offers some music videos, the tab marked "audio" on Zango's site consists entirely of links to eight recordings of prank phone calls to celebrities like Britney Spears and Bill Gates, made by the Canadian shock jocks known as "Masked Avengers."

Edelman further questions whether the Bellevue, Wash.-based Zango has licensed a trove of copyrighted clips that appear to have originated with major media companies. One 10-second clip Edelman discusses has the Fox logo in every frame, and another apparently came from an HBO movie released on DVD, while another appeared to have first aired on Comedy Central. Scott Grogin, senior vice president for corporate communications at Fox, said the company's logo on a clip indicates that it was copied from a broadcast.

Although the clips Edelman identified appeared to have been broadcast or distributed by TV networks at one time, it wasn't immediately clear on Tuesday who currently owns the copyright to the videos or whether Zango had licensed them.

Zango said it "occasionally" receives copyright-related inquiries, which it investigates and resolves in accordance with federal law. "Zango licenses and aggregates online entertainment content from approximately 100 different content providers," the company said in an e-mail to OnlineMediaDaily. "We strive to abide by the Digital Millennium Copyright Act (DMCA) provisions regarding copyright infringement claims, as presumably do all companies our size and larger in the online entertainment space. We occasionally receive copyright-related inquiries about content available at Zango.com and via our syndication platform. We do our best to investigate those claims quickly and resolve them on a case-by-case basis, in accordance with the DMCA and its safe harbor."

The DMCA has "safe harbor" provisions stating that Web sites are not generally liable for copyright infringement when users upload pirated clips, provided that the sites take down the content when the copyright owner complains.

Zango is now contending it should be able to sue spyware removal company Kaspersky Lab for targeting Zango adware. A federal judge in Seattle dismissed Zango's complaint on the theory that the Communications Decency Act immunizes companies that help users remove "objectionable" content. Zango is appealing that ruling to the 9th Circuit Court of Appeals, arguing that its software isn't objectionable.

In its most recent filing, the company argued that its 2006 settlement with the FTC proves the company isn't "badware." In that case, Zango agreed to pay a $3 million fine and take steps to ensure that people consented to installing its ad-serving software before downloading it. "Zango's adherence to the consent agreement terms must be construed to indicate that its software applications are not 'spyware' or 'malware' or 'badware'; otherwise, the FTC would not have entered into a consent agreement permitting Zango to market that software," the company contended in its brief.