People v. Network Associates, Inc.

195 Misc. 2d 384, 758 N.Y.S.2d 466, 2003 N.Y. Misc. LEXIS 193
CourtNew York Supreme Court
DecidedJanuary 6, 2003
StatusPublished
Cited by3 cases

This text of 195 Misc. 2d 384 (People v. Network Associates, Inc.) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
People v. Network Associates, Inc., 195 Misc. 2d 384, 758 N.Y.S.2d 466, 2003 N.Y. Misc. LEXIS 193 (N.Y. Super. Ct. 2003).

Opinion

OPINION OF THE COURT

Marilyn Shafer, J.

Petitioner, the People of the State of New York, by Eliot Spitzer, Attorney General of the State of New York, moves, pursuant to Executive Law § 63 (12) and General Business Law § 349, for an order permanently enjoining respondent Network Associates, Inc., doing business as McAfee Software (Network Associates), from engaging in allegedly fraudulent, deceptive and illegal acts and practices, and directing (1) respondent to provide a sworn certified statement indicating the number of instances in which software was sold on discs or through the Internet which contained the alleged misrepresentations; (2) a judgment, pursuant to General Business Law § 350-d, based upon the sum of 500 for each instance of such practice; (3) a judgment in the amount of $2,000 for costs, pursuant to CPLR 8303 (a) (6); and (4) respondent to notify petitioner within 30 days prior to making any representation to customers that relates to the right to review, test or criticize any of the respondent’s software products.

Network Associates is a Delaware limited liability company engaged in the business of developing, selling and marketing a range of software products, including the popular McAfee anti-virus and firewall software named VirusScan and Gauntlet. Network Associates sells its products over the Internet and at various retail locations. Network Associates included on the face of many of its software diskettes and on its download page on the Internet the following restrictive clause:

“Installing this software constitutes acceptance of the terms and conditions of the license agreement in the box. Please read the license agreement before installation. Other rules and regulations of installing the software are:
“a. The product can not be rented, loaned, or leased — you are the sole owner of this product.
“b. The customer shall not disclose the result of any benchmark test to any third party without Network Associates’ prior written approval.
“c. The customer will not publish reviews of this product without prior consent from Network [386]*386Associates, Inc.” (Affirmation of Kenneth M. Dreifach, exhibit 2.)

Network Associates’ form license agreement included with its software did not contain the restrictive clause. Furthermore, the form license agreement contained a merger clause which provides that it constitutes the entire agreement between the parties and supercedes any prior communications with respect to software and documentation. The form agreement also stated that it may be modified only by a written addendum issued by an authorized representative of the company. (Id., exhibit 4, ^ 11.)

In July 1999, Network World Fusion, an online magazine, published a comparative review of six firewall software products, including Network Associates’ Gauntlet. It appears that Network World Fusion sought permission to publish the review of Gauntlet and that Network Associates denied it. Network World Fusion performed the review despite Network Associates’ refusal to allow the review of Gauntlet. In response to the unsatisfactory results of the review, Network Associates communicated its protest, quoting the language of the restrictive clause.

This conduct prompted an investigation by the office of the Attorney General of the State of New York. In the course of investigation, on January 30, 2001, the Attorney General requested the production of documents related to the restrictive clause. (Id., exhibit 7.) Respondent provided certain documents, and on September 18, 2001, counsel for respondent sent a letter to the Attorney General stating that respondent had discontinued the practice of including the restrictive clause. (Id., exhibit 9.) The letter also stated that respondent never withheld any consent to allow review of its software, and that it never enforced the restrictive clause. (Id.) Petitioner , alleges that despite the representations in this letter, an investigation by the office of Attorney General discovered that, as of January 2, 2002, respondent continued to utilize language similar to the restrictive clause. (Id., exhibit 10.)

Respondent states that in response to the inquiry by the Attorney General, on July 2001, it adopted the following new language replacing the restrictive clause in all of its new products:

“Network Associates, Inc. updates its products frequently and performance data for its products change. Before conducting benchmark tests regarding this product, contact Network Associates to [387]*387verify that you possess the correct product for the test and the then current version and edition of the product. Benchmark test[s] of former, outdated or inappropriate versions or editions of the product may yield results that are not reflective of the performance of the current version or edition of the product.” (Affirmation of Kent H. Roberts, exhibit F.)

Respondent states that because distributors and retailers still have some of the old software packages left over, respondent anticipates that it will take approximately six months to phase out the products containing the old restrictive clause. Respondent also states that because certain old software available for download from its Web site may contain the restrictive clause in embedded files, and because the removal of that clause would be very costly and complicated, it provides every consumer purchasing any of respondent’s products directly from its Web site with the notice that the restrictive clause has been replaced and superceded by the new language. (Id., exhibit G.) However, it appears that certain new products made by respondent contain restrictive language prohibiting publication of benchmark test results similar to that in the restrictive clause. Petitioner submits a copy of a license agreement printed in September 2001, which contains a clause which restricts publication of benchmark test results. (Reply affirmation of Kenneth Dreifach, exhibits B, C, 5.) Finally, respondent maintains that the prohibition of publication of any benchmark test results is accepted in the industry, and submits copies of license agreements by other software companies containing similar language.

Petitioner commenced this proceeding alleging deceptive acts and practices in violation of General Business Law § 349, and seeking a permanent injunction based on fraud and illegality of respondent’s acts, pursuant to Executive Law § 63 (12).

According to Executive Law § 63 (12),

“[W]henever any person shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in carrying on, conducting or transaction of business, the attorney general may apply, in the name of the people of the state of New York, to the supreme court of the state of New York, on notice of five days, for an order enjoining the continuance of such business activity or of any fraudulent or illegal acts, directing [388]*388restitution and damages * * *. The word ‘fraud’ or ‘fraudulent’ as used herein shall include any device, * * * misrepresentation, concealment, suppression, false pretense, false promise or unconscionable contractual provisions.”

Petitioner argues that respondent’s acts of including the reference to “rules and regulations” in the restrictive clause are deceptive.

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Bluebook (online)
195 Misc. 2d 384, 758 N.Y.S.2d 466, 2003 N.Y. Misc. LEXIS 193, Counsel Stack Legal Research, https://law.counselstack.com/opinion/people-v-network-associates-inc-nysupct-2003.