[House Report 109-32]
[From the U.S. Government Publishing Office]



109th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     109-32

======================================================================



 
    SECURELY PROTECT YOURSELF AGAINST CYBER TRESPASS ACT OR SPY ACT

                                _______
                                

 April 12, 2005.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Barton of Texas, from the Committee on Energy and Commerce, 
                        submitted the following

                              R E P O R T

                         [To accompany H.R. 29]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 29) to protect users of the Internet from 
unknowing transmission of their personally identifiable 
information through spyware programs, and for other purposes, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     1
Purpose and Summary..............................................     9
Background and Need for Legislation..............................     9
Hearings.........................................................    11
Committee Consideration..........................................    11
Committee Votes..................................................    11
Committee Oversight Findings.....................................    13
Statement of General Performance Goals and Objectives............    13
New Budget Authority, Entitlement Authority, and Tax Expenditures    13
Committee Cost Estimate..........................................    13
Congressional Budget Office Estimate.............................    13
Federal Mandates Statement.......................................    16
Advisory Committee Statement.....................................    16
Constitutional Authority Statement...............................    16
Applicability to Legislative Branch..............................    16
Section-by-Section Analysis of the Legislation...................    16
Changes in Existing Law Made by the Bill, as Reported............    23

                               AMENDMENT

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Securely Protect Yourself Against 
Cyber Trespass Act'' or the ``Spy Act''.

SEC. 2. PROHIBITION OF DECEPTIVE ACTS OR PRACTICES RELATING TO SPYWARE.

  (a) Prohibition.--It is unlawful for any person, who is not the owner 
or authorized user of a protected computer, to engage in deceptive acts 
or practices that involve any of the following conduct with respect to 
the protected computer:
          (1) Taking control of the computer by--
                  (A) utilizing such computer to send unsolicited 
                information or material from the computer to others;
                  (B) diverting the Internet browser of the computer, 
                or similar program of the computer used to access and 
                navigate the Internet--
                          (i) without authorization of the owner or 
                        authorized user of the computer; and
                          (ii) away from the site the user intended to 
                        view, to one or more other Web pages, such that 
                        the user is prevented from viewing the content 
                        at the intended Web page, unless such diverting 
                        is otherwise authorized;
                  (C) accessing, hijacking, or otherwise using the 
                modem, or Internet connection or service, for the 
                computer and thereby causing damage to the computer or 
                causing the owner or authorized user or a third party 
                defrauded by such conduct to incur charges or other 
                costs for a service that is not authorized by such 
                owner or authorized user;
                  (D) using the computer as part of an activity 
                performed by a group of computers that causes damage to 
                another computer; or
                  (E) delivering advertisements that a user of the 
                computer cannot close without turning off the computer 
                or closing all sessions of the Internet browser for the 
                computer.
          (2) Modifying settings related to use of the computer or to 
        the computer's access to or use of the Internet by altering--
                  (A) the Web page that appears when the owner or 
                authorized user launches an Internet browser or similar 
                program used to access and navigate the Internet;
                  (B) the default provider used to access or search the 
                Internet, or other existing Internet connections 
                settings;
                  (C) a list of bookmarks used by the computer to 
                access Web pages; or
                  (D) security or other settings of the computer that 
                protect information about the owner or authorized user 
                for the purposes of causing damage or harm to the 
                computer or owner or user.
          (3) Collecting personally identifiable information through 
        the use of a keystroke logging function.
          (4) Inducing the owner or authorized user of the computer to 
        disclose personally identifiable information by means of a Web 
        page that--
                  (A) is substantially similar to a Web page 
                established or provided by another person; and
                  (B) misleads the owner or authorized user that such 
                Web page is provided by such other person.
          (5) Inducing the owner or authorized user to install a 
        component of computer software onto the computer, or preventing 
        reasonable efforts to block the installation or execution of, 
        or to disable, a component of computer software by--
                  (A) presenting the owner or authorized user with an 
                option to decline installation of such a component such 
                that, when the option is selected by the owner or 
                authorized user or when the owner or authorized user 
                reasonably attempts to decline the installation, the 
                installation nevertheless proceeds; or
                  (B) causing such a component that the owner or 
                authorized user has properly removed or disabled to 
                automatically reinstall or reactivate on the computer.
          (6) Misrepresenting that installing a separate component of 
        computer software or providing log-in and password information 
        is necessary for security or privacy reasons, or that 
        installing a separate component of computer software is 
        necessary to open, view, or play a particular type of content.
          (7) Inducing the owner or authorized user to install or 
        execute computer software by misrepresenting the identity or 
        authority of the person or entity providing the computer 
        software to the owner or user.
          (8) Inducing the owner or authorized user to provide 
        personally identifiable, password, or account information to 
        another person--
                  (A) by misrepresenting the identity of the person 
                seeking the information; or
                  (B) without the authority of the intended recipient 
                of the information.
          (9) Removing, disabling, or rendering inoperative a security, 
        anti-spyware, or anti-virus technology installed on the 
        computer.
          (10) Installing or executing on the computer one or more 
        additional components of computer software with the intent of 
        causing a person to use such components in a way that violates 
        any other provision of this section.
  (b) Guidance.--The Commission shall issue guidance regarding 
compliance with and violations of this section. This subsection shall 
take effect upon the date of the enactment of this Act.
  (c) Effective Date.--Except as provided in subsection (b), this 
section shall take effect upon the expiration of the 6-month period 
that begins on the date of the enactment of this Act.

SEC. 3. PROHIBITION OF COLLECTION OF CERTAIN INFORMATION WITHOUT NOTICE 
                    AND CONSENT.

  (a) Opt-in Requirement.--Except as provided in subsection (e), it is 
unlawful for any person--
          (1) to transmit to a protected computer, which is not owned 
        by such person and for which such person is not an authorized 
        user, any information collection program, unless--
                  (A) such information collection program provides 
                notice in accordance with subsection (c) before 
                execution of any of the information collection 
                functions of the program; and
                  (B) such information collection program includes the 
                functions required under subsection (d); or
          (2) to execute any information collection program installed 
        on such a protected computer unless--
                  (A) before execution of any of the information 
                collection functions of the program, the owner or an 
                authorized user of the protected computer has consented 
                to such execution pursuant to notice in accordance with 
                subsection (c); and
                  (B) such information collection program includes the 
                functions required under subsection (d).
  (b) Information Collection Program.--
          (1) In general.--For purposes of this section, the term 
        ``information collection program'' means computer software that 
        performs either of the following functions:
                  (A) Collection of personally identifiable 
                information.--The computer software--
                          (i) collects personally identifiable 
                        information; and
                          (ii)(I) sends such information to a person 
                        other than the owner or authorized user of the 
                        computer, or
                          (II) uses such information to deliver 
                        advertising to, or display advertising on, the 
                        computer.
                  (B) Collection of information regarding web pages 
                visited to deliver advertising.--The computer 
                software--
                          (i) collects information regarding the Web 
                        pages accessed using the computer; and
                          (ii) uses such information to deliver 
                        advertising to, or display advertising on, the 
                        computer.
          (2) Exception for software collecting information regarding 
        web pages visited within a particular web site.--Computer 
        software that otherwise would be considered an information 
        collection program by reason of paragraph (1)(B) shall not be 
        considered such a program if--
                  (A) the only information collected by the software 
                regarding Web pages that are accessed using the 
                computer is information regarding Web pages within a 
                particular Web site;
                  (B) such information collected is not sent to a 
                person other than--
                          (i) the provider of the Web site accessed; or
                          (ii) a party authorized to facilitate the 
                        display or functionality of Web pages within 
                        the Web site accessed; and
                  (C) the only advertising delivered to or displayed on 
                the computer using such information is advertising on 
                Web pages within that particular Web site.
  (c) Notice and Consent.--
          (1) In general.--Notice in accordance with this subsection 
        with respect to an information collection program is clear and 
        conspicuous notice in plain language, set forth as the 
        Commission shall provide, that meets all of the following 
        requirements:
                  (A) The notice clearly distinguishes such notice from 
                any other information visually presented 
                contemporaneously on the computer.
                  (B) The notice contains one of the following 
                statements, as applicable, or a substantially similar 
                statement:
                          (i) With respect to an information collection 
                        program described in subsection (b)(1)(A): 
                        ``This program will collect and transmit 
                        information about you. Do you accept?''.
                          (ii) With respect to an information 
                        collection program described in subsection 
                        (b)(1)(B): ``This program will collect 
                        information about Web pages you access and will 
                        use that information to display advertising on 
                        your computer. Do you accept?''.
                          (iii) With respect to an information 
                        collection program that performs the actions 
                        described in both subparagraphs (A) and (B) of 
                        subsection (b)(1): ``This program will collect 
                        and transmit information about you and will 
                        collect information about Web pages you access 
                        and use that information to display advertising 
                        on your computer. Do you accept?''.
                  (C) The notice provides for the user--
                          (i) to grant or deny consent referred to in 
                        subsection (a) by selecting an option to grant 
                        or deny such consent; and
                          (ii) to abandon or cancel the transmission or 
                        execution referred to in subsection (a) without 
                        granting or denying such consent.
                  (D) The notice provides an option for the user to 
                select to display on the computer, before granting or 
                denying consent using the option required under 
                subparagraph (C), a clear description of--
                          (i) the types of information to be collected 
                        and sent (if any) by the information collection 
                        program;
                          (ii) the purpose for which such information 
                        is to be collected and sent; and
                          (iii) in the case of an information 
                        collection program that first executes any of 
                        the information collection functions of the 
                        program together with the first execution of 
                        other computer software, the identity of any 
                        such software that is an information collection 
                        program.
                  (E) The notice provides for concurrent display of the 
                information required under subparagraphs (B) and (C) 
                and the option required under subparagraph (D) until 
                the user--
                          (i) grants or denies consent using the option 
                        required under subparagraph (C)(i);
                          (ii) abandons or cancels the transmission or 
                        execution pursuant to subparagraph (C)(ii); or
                          (iii) selects the option required under 
                        subparagraph (D).
          (2) Single notice.--The Commission shall provide that, in the 
        case in which multiple information collection programs are 
        provided to the protected computer together, or as part of a 
        suite of functionally related software, the notice requirements 
        of paragraphs (1)(A) and (2)(A) of subsection (a) may be met by 
        providing, before execution of any of the information 
        collection functions of the programs, clear and conspicuous 
        notice in plain language in accordance with paragraph (1) of 
        this subsection by means of a single notice that applies to all 
        such information collection programs, except that such notice 
        shall provide the option under subparagraph (D) of paragraph 
        (1) of this subsection with respect to each such information 
        collection program.
          (3) Change in information collection.--If an owner or 
        authorized user has granted consent to execution of an 
        information collection program pursuant to a notice in 
        accordance with this subsection:
                  (A) In general.--No subsequent such notice is 
                required, except as provided in subparagraph (B).
                  (B) Subsequent notice.--The person who transmitted 
                the program shall provide another notice in accordance 
                with this subsection and obtain consent before such 
                program may be used to collect or send information of a 
                type or for a purpose that is materially different 
                from, and outside the scope of, the type or purpose set 
                forth in the initial or any previous notice.
          (4) Regulations.--The Commission shall issue regulations to 
        carry out this subsection.
  (d) Required Functions.--The functions required under this subsection 
to be included in an information collection program that executes any 
information collection functions with respect to a protected computer 
are as follows:
          (1) Disabling function.--With respect to any information 
        collection program, a function of the program that allows a 
        user of the program to remove the program or disable operation 
        of the program with respect to such protected computer by a 
        function that--
                  (A) is easily identifiable to a user of the computer; 
                and
                  (B) can be performed without undue effort or 
                knowledge by the user of the protected computer.
          (2) Identity function.--
                  (A) In general.--With respect only to an information 
                collection program that uses information collected in 
                the manner described in subparagraph (A)(ii)(II) or 
                (B)(ii) of subsection (b)(1) and subject to 
                subparagraph (B) of this paragraph, a function of the 
                program that provides that each display of an 
                advertisement directed or displayed using such 
                information, when the owner or authorized user is 
                accessing a Web page or online location other than of 
                the provider of the computer software, is accompanied 
                by the name of the information collection program, a 
                logogram or trademark used for the exclusive purpose of 
                identifying the program, or a statement or other 
                information sufficient to clearly identify the program.
                  (B) Exemption for embedded advertisements.--The 
                Commission shall, by regulation, exempt from the 
                applicability of subparagraph (A) the embedded display 
                of any advertisement on a Web page that 
                contemporaneously displays other information.
          (3) Rulemaking.--The Commission may issue regulations to 
        carry out this subsection.
  (e) Limitation on Liability.--A telecommunications carrier, a 
provider of information service or interactive computer service, a 
cable operator, or a provider of transmission capability shall not be 
liable under this section to the extent that the carrier, operator, or 
provider--
          (1) transmits, routes, hosts, stores, or provides connections 
        for an information collection program through a system or 
        network controlled or operated by or for the carrier, operator, 
        or provider; or
          (2) provides an information location tool, such as a 
        directory, index, reference, pointer, or hypertext link, 
        through which the owner or user of a protected computer locates 
        an information collection program.

SEC. 4. ENFORCEMENT.

  (a) Unfair or Deceptive Act or Practice.--This Act shall be enforced 
by the Commission under the Federal Trade Commission Act (15 U.S.C. 41 
et seq.). A violation of any provision of this Act or of a regulation 
issued under this Act shall be treated as an unfair or deceptive act or 
practice violating a rule promulgated under section 18 of the Federal 
Trade Commission Act (15 U.S.C. 57a).
  (b) Penalty for Pattern or Practice Violations.--
          (1) In general.--Notwithstanding subsection (a) and the 
        Federal Trade Commission Act, in the case of a person who 
        engages in a pattern or practice that violates section 2 or 3, 
        the Commission may, in its discretion, seek a civil penalty for 
        such pattern or practice of violations in an amount, as 
        determined by the Commission, of not more than--
                  (A) $3,000,000 for each violation of section 2; and
                  (B) $1,000,000 for each violation of section 3.
          (2) Treatment of single action or conduct.--In applying 
        paragraph (1)--
                  (A) any single action or conduct that violates 
                section 2 or 3 with respect to multiple protected 
                computers shall be treated as a single violation; and
                  (B) any single action or conduct that violates more 
                than one paragraph of section 2(a) shall be considered 
                multiple violations, based on the number of such 
                paragraphs violated.
  (c) Required Scienter.--Civil penalties sought under this section for 
any action may not be granted by the Commission or any court unless the 
Commission or court, respectively, establishes that the action was 
committed with actual knowledge or knowledge fairly implied on the 
basis of objective circumstances that such act is unfair or deceptive 
or violates this Act.
  (d) Factors in Amount of Penalty.--In determining the amount of any 
penalty pursuant to subsection (a) or (b), the court shall take into 
account the degree of culpability, any history of prior such conduct, 
ability to pay, effect on ability to continue to do business, and such 
other matters as justice may require.
  (e) Exclusiveness of Remedies.--The remedies in this section 
(including remedies available to the Commission under the Federal Trade 
Commission Act) are the exclusive remedies for violations of this Act.
  (f) Effective Date.--To the extent only that this section applies to 
violations of section 2(a), this section shall take effect upon the 
expiration of the 6-month period that begins on the date of the 
enactment of this Act.

SEC. 5. LIMITATIONS.

  (a) Law Enforcement Authority.--Sections 2 and 3 shall not apply to--
          (1) any act taken by a law enforcement agent in the 
        performance of official duties; or
          (2) the transmission or execution of an information 
        collection program in compliance with a law enforcement, 
        investigatory, national security, or regulatory agency or 
        department of the United States or any State in response to a 
        request or demand made under authority granted to that agency 
        or department, including a warrant issued under the Federal 
        Rules of Criminal Procedure, an equivalent State warrant, a 
        court order, or other lawful process.
  (b) Exception Relating to Security.--Nothing in this Act shall apply 
to--
          (1) any monitoring of, or interaction with, a subscriber's 
        Internet or other network connection or service, or a protected 
        computer, by a telecommunications carrier, cable operator, 
        computer hardware or software provider, or provider of 
        information service or interactive computer service, to the 
        extent that such monitoring or interaction is for network or 
        computer security purposes, diagnostics, technical support, or 
        repair, or for the detection or prevention of fraudulent 
        activities; or
          (2) a discrete interaction with a protected computer by a 
        provider of computer software solely to determine whether the 
        user of the computer is authorized to use such software, that 
        occurs upon--
                  (A) initialization of the software; or
                  (B) an affirmative request by the owner or authorized 
                user for an update of, addition to, or technical 
                service for, the software.
  (c) Good Samaritan Protection.--No provider of computer software or 
of interactive computer service may be held liable under this Act on 
account of any action voluntarily taken, or service provided, in good 
faith to remove or disable a program used to violate section 2 or 3 
that is installed on a computer of a customer of such provider, if such 
provider notifies the customer and obtains the consent of the customer 
before undertaking such action or providing such service.
  (d) Limitation on Liability.--A manufacturer or retailer of computer 
equipment shall not be liable under this Act to the extent that the 
manufacturer or retailer is providing third party branded computer 
software that is installed on the equipment the manufacturer or 
retailer is manufacturing or selling.

SEC. 6. EFFECT ON OTHER LAWS.

  (a) Preemption of State Law.--
          (1) Preemption of spyware laws.--This Act supersedes any 
        provision of a statute, regulation, or rule of a State or 
        political subdivision of a State that expressly regulates--
                  (A) deceptive conduct with respect to computers 
                similar to that described in section 2(a);
                  (B) the transmission or execution of a computer 
                program similar to that described in section 3; or
                  (C) the use of computer software that displays 
                advertising content based on the Web pages accessed 
                using a computer.
          (2) Additional preemption.--
                  (A) In general.--No person other than the Attorney 
                General of a State may bring a civil action under the 
                law of any State if such action is premised in whole or 
                in part upon the defendant violating any provision of 
                this Act.
                  (B) Protection of consumer protection laws.--This 
                paragraph shall not be construed to limit the 
                enforcement of any State consumer protection law by an 
                Attorney General of a State.
          (3) Protection of certain state laws.--This Act shall not be 
        construed to preempt the applicability of--
                  (A) State trespass, contract, or tort law; or
                  (B) other State laws to the extent that those laws 
                relate to acts of fraud.
  (b) Preservation of FTC Authority.--Nothing in this Act may be 
construed in any way to limit or affect the Commission's authority 
under any other provision of law, including the authority to issue 
advisory opinions (under part 1 of volume 16 of the Code of Federal 
Regulations), policy statements, or guidance regarding this Act.

SEC. 7. ANNUAL FTC REPORT.

  For the 12-month period that begins upon the effective date under 
section 11(a) and for each 12-month period thereafter, the Commission 
shall submit a report to the Congress that--
          (1) specifies the number and types of actions taken during 
        such period to enforce sections 2(a) and section 3, the 
        disposition of each such action, any penalties levied in 
        connection with such actions, and any penalties collected in 
        connection with such actions; and
          (2) describes the administrative structure and personnel and 
        other resources committed by the Commission for enforcement of 
        this Act during such period.
Each report under this subsection for a 12-month period shall be 
submitted not later than 90 days after the expiration of such period.

SEC. 8. FTC REPORT ON COOKIES.

  (a) In General.--Not later than the expiration of the 6-month period 
that begins on the date of the enactment of this Act, the Commission 
shall submit a report to the Congress regarding the use of cookies, 
including tracking cookies, in the delivery or display of advertising 
to the owners and users of computers. The report shall examine and 
describe the methods by which cookies and the Web sites that place them 
on computers function separately and together, and shall compare the 
use of cookies with the use of information collection programs (as such 
term is defined in section 3) to determine the extent to which such 
uses are similar or different. The report may include such 
recommendations as the Commission considers necessary and appropriate, 
including treatment of cookies under this Act or other laws.
  (b) Definition.--For purposes of this section, the term ``tracking 
cookie'' means a cookie or similar text or data file used alone or in 
conjunction with one or more Web sites to transmit or convey personally 
identifiable information of a computer owner or user, or information 
regarding Web pages accessed by the owner or user, to a party other 
than the intended recipient, for the purpose of--
          (1) delivering or displaying advertising to the owner or 
        user; or
          (2) assisting the intended recipient to deliver or display 
        advertising to the owner, user, or others.
  (c) Effective Date.--This section shall take effect on the date of 
the enactment of this Act.

SEC. 9. REGULATIONS.

  (a) In General.--The Commission shall issue the regulations required 
by this Act not later than the expiration of the 6-month period 
beginning on the date of the enactment of this Act. In exercising its 
authority to issue any regulation under this Act, the Commission shall 
determine that the regulation is consistent with the public interest 
and the purposes of this Act. Any regulations issued pursuant to this 
Act shall be issued in accordance with section 553 of title 5, United 
States Code.
  (b) Effective Date.--This section shall take effect on the date of 
the enactment of this Act.

SEC. 10. DEFINITIONS.

  For purposes of this Act:
          (1) Cable operator.--The term ``cable operator'' has the 
        meaning given such term in section 602 of the Communications 
        Act of 1934 (47 U.S.C. 522).
          (2) Collect.--The term ``collect'', when used with respect to 
        information and for purposes only of section 3(b)(1)(A), does 
        not include obtaining of the information by a party who is 
        intended by the owner or authorized user of a protected 
        computer to receive the information pursuant to the owner or 
        authorized user--
                  (A) transferring the information to such intended 
                recipient using the protected computer; or
                  (B) storing the information on the protected computer 
                in a manner so that it is accessible by such intended 
                recipient.
          (3) Computer; protected computer.--The terms ``computer'' and 
        ``protected computer'' have the meanings given such terms in 
        section 1030(e) of title 18, United States Code.
          (4) Computer software.--
                  (A) In general.--Except as provided in subparagraph 
                (B), the term ``computer software'' means a set of 
                statements or instructions that can be installed and 
                executed on a computer for the purpose of bringing 
                about a certain result.
                  (B) Exception.--Such term does not include computer 
                software that is placed on the computer system of a 
                user by an Internet service provider, interactive 
                computer service, or Internet Web site solely to enable 
                the user subsequently to use such provider or service 
                or to access such Web site.
                  (C) Rule of construction regarding cookies.--This 
                paragraph may not be construed to include, as computer 
                software--
                          (i) a cookie; or
                          (ii) any other type of text or data file that 
                        solely may be read or transferred by a 
                        computer.
          (5) Commission.--The term ``Commission'' means the Federal 
        Trade Commission.
          (6) Damage.--The term ``damage'' has the meaning given such 
        term in section 1030(e) of title 18, United States Code.
          (7) Deceptive acts or practices.--The term ``deceptive acts 
        or practices'' has the meaning applicable to such term for 
        purposes of section 5 of the Federal Trade Commission Act (15 
        U.S.C. 45).
          (8) Disable.--The term ``disable'' means, with respect to an 
        information collection program, to permanently prevent such 
        program from executing any of the functions described in 
        section 3(b)(1) that such program is otherwise capable of 
        executing (including by removing, deleting, or disabling the 
        program), unless the owner or operator of a protected computer 
        takes a subsequent affirmative action to enable the execution 
        of such functions.
          (9) Information collection functions.--The term ``information 
        collection functions'' means, with respect to an information 
        collection program, the functions of the program described in 
        subsection (b)(1) of section 3.
          (10) Information service.--The term ``information service'' 
        has the meaning given such term in section 3 of the 
        Communications Act of 1934 (47 U.S.C. 153).
          (11) Interactive computer service.--The term ``interactive 
        computer service'' has the meaning given such term in section 
        230(f) of the Communications Act of 1934 (47 U.S.C. 230(f)).
          (12) Internet.--The term ``Internet'' means collectively the 
        myriad of computer and telecommunications facilities, including 
        equipment and operating software, which comprise the 
        interconnected world-wide network of networks that employ the 
        Transmission Control Protocol/Internet Protocol, or any 
        predecessor or successor protocols to such protocol, to 
        communicate information of all kinds by wire or radio.
          (13) Personally identifiable information.--
                  (A) In general.--The term ``personally identifiable 
                information'' means the following information, to the 
                extent only that such information allows a living 
                individual to be identified from that information:
                          (i) First and last name of an individual.
                          (ii) A home or other physical address of an 
                        individual, including street name, name of a 
                        city or town, and zip code.
                          (iii) An electronic mail address.
                          (iv) A telephone number.
                          (v) A social security number, tax 
                        identification number, passport number, 
                        driver's license number, or any other 
                        government-issued identification number.
                          (vi) A credit card number.
                          (vii) Any access code, password, or account 
                        number, other than an access code or password 
                        transmitted by an owner or authorized user of a 
                        protected computer to the intended recipient to 
                        register for, or log onto, a Web page or other 
                        Internet service or a network connection or 
                        service of a subscriber that is protected by an 
                        access code or password.
                          (viii) Date of birth, birth certificate 
                        number, or place of birth of an individual, 
                        except in the case of a date of birth 
                        transmitted or collected for the purpose of 
                        compliance with the law.
                  (B) Rulemaking.--The Commission may, by regulation, 
                add to the types of information described in 
                subparagraph (A) that shall be considered personally 
                identifiable information for purposes of this Act, 
                except that such additional types of information shall 
                be considered personally identifiable information only 
                to the extent that such information allows living 
                individuals, particular computers, particular users of 
                computers, or particular email addresses or other 
                locations of computers to be identified from that 
                information.
          (14) Suite of functionally related software.--The term suite 
        of ``functionally related software'' means a group of computer 
        software programs distributed to an end user by a single 
        provider, which programs are necessary to enable features or 
        functionalities of an integrated service offered by the 
        provider.
          (15) Telecommunications carrier.--The term 
        ``telecommunications carrier'' has the meaning given such term 
        in section 3 of the Communications Act of 1934 (47 U.S.C. 153).
          (16) Transmit.--The term ``transmit'' means, with respect to 
        an information collection program, transmission by any means.
          (17) Web page.--The term ``Web page'' means a location, with 
        respect to the World Wide Web, that has a single Uniform 
        Resource Locator or another single location with respect to the 
        Internet, as the Federal Trade Commission may prescribe.
          (18) Web site.--The term ``web site'' means a collection of 
        Web pages that are presented and made available by means of the 
        World Wide Web as a single Web site (or a single Web page so 
        presented and made available), which Web pages have such 
        characteristics in relation to each other as the Commission may 
        prescribe, which may include--
                  (A) a common domain name;
                  (B) a common theme or topic;
                  (C) common ownership, management, or registration; 
                and
                  (D) relationship to a common intended beginning file 
                or home page or other means of accessing or linking the 
                pages together.

SEC. 11. APPLICABILITY AND SUNSET.

  (a) Effective Date.--Except as specifically provided otherwise in 
this Act, this Act shall take effect upon the expiration of the 12-
month period that begins on the date of the enactment of this Act.
  (b) Applicability.--Section 3 shall not apply to an information 
collection program installed on a protected computer before the 
effective date under subsection (a) of this section.
  (c) Sunset.--This Act shall not apply after December 31, 2010.

                          PURPOSE AND SUMMARY

    H.R. 29, the ``Securely Protect Yourself Against Cyber 
Trespass Act,'' prohibits deceptive practices related to 
spyware programs and requires notice and consent for the 
execution of information collection programs.

                  BACKGROUND AND NEED FOR LEGISLATION

    The release of the Mosaic browser in January 1993, which 
provided the first graphical interface for navigating the 
Internet, is credited with bringing the Internet into the 
mainstream of public usage. In less than one decade, Internet 
usage was transformed from an academic tool into a commercial, 
educational, and communications portal accessed by more than 
70% of Americans. To accommodate the enormous growth in 
Internet use and to meet the needs of online consumers, the 
market has responded with new technologies tailored to consumer 
Internet usage.
    Many of the technologies that have emerged are designed to 
improve the efficiency and speed of data transfer. Websites may 
use browsers to run program-like functions on the user's 
computer, such as scripting and applets, to maximize server 
efficiency and thereby reduce time requirements for a web page 
to load on a user's computer. Technology has also allowed 
websites to use persistent identifiers to recognize a return 
visitor, and thereby enhance the online experience through 
personalization. The unique nature of the Internet has also 
facilitated other beneficial technologies that capitalize on 
the distributed network structure. Peer-to-peer file sharing 
software, instant messaging, and voice-over Internet are but a 
few examples of the developments that benefit millions of 
users.
    Accompanying the growth in available technologies are 
emerging concerns regarding harmful uses of these same 
technologies. The Committee is aware that the same beneficial 
technologies that provide benefits to millions of users can be 
applied in ways that present serious problems for consumers 
when misused by those with unsavory motives. The Committee is 
particularly concerned about the growing use of what is 
commonly referred to as spyware. Computer software known as 
``spyware'' can allow the unscrupulous to prey on unwitting 
consumers by stealing personal and financial information, or 
exposing them to unsolicited offensive material. In many 
instances, spyware software downloads from the Internet are 
occurring without the computer user's knowledge and consent. 
The covert nature of the software installation makes it very 
difficult for a user to detect the presence of the software. In 
fact, when the software begins to degrade the function of the 
computer, consumers often confuse the true source of the 
spyware with the browser they are using or the particular 
application they are running. Some of the same programs prevent 
a user from properly or completely uninstalling or disabling 
the software program.
    Spyware presents privacy, security, and functionality 
concerns for consumers. The Federal Trade Commission (FTC) has 
described ``spyware'' as software ``that aids in gathering 
information about a person or organization without their 
knowledge and which may send such information to another entity 
without the consumer's consent, or asserts control over a 
computer without the consumer's knowledge.'' The Committee 
received testimony that spyware represents a range of software 
programs on a broad continuum from the most pernicious criminal 
activities on one end to the less threatening but still 
intrusive on the opposite end of the spectrum.
    The most serious privacy and security concerns pertain to 
those programs that are intended to capture a user's personal 
information without knowledge and consent. The Committee 
received testimony demonstrating the software technology and 
tactics of some of these programs. They include keystroke 
logging software that captures a user's information (passwords, 
social security numbers, account numbers, etc.) and can lead to 
identity theft, and monitoring software that tracks a user's 
online activity, such as websites visited. Such information 
could be used for profiling. Other monitoring software can 
include audio or video capturing programs that use one's own 
computer video camera or microphone to watch or listen to 
whatever is happening around the Internet-connected computer. 
Furthermore, security experts and law enforcement officers 
report growing cooperation among spammers, virus writers, and 
con artists to steal financial assets from consumers through a 
device called ``phishing'' which captures passwords and other 
private financial data from consumers. Software can also impact 
the functioning of a computer by redirecting the user to 
websites the user does not intend to visit, preventing a user 
from altering settings on the computer, or using the computer 
to send unsolicited commercial electronic mail. The Committee 
is concerned that such attacks could erode the trust that makes 
electronic commerce and online banking possible.
    Techniques for deceiving consumers into downloading spyware 
vary. Deceptive tactics include using pop-under windows that 
disguise the identity of the program distributor, offering 
misleading or deceptive end user licensing agreements, and 
failing to disclose the functionality of a program. More 
nefarious tactics include exploitation of security patches in a 
computer's operating system. Additionally, consumers who leave 
browser security settings on ``low'' open their systems to 
automatic ``drive-by'' downloads in which spyware programs are 
automatically downloaded when visiting certain websites.
    Other software, known as adware, may not have the security 
risks associated with spyware but may raise significant privacy 
concerns. Adware is advertising software that can monitor 
online behavior and websites visited. Adware is often bundled, 
many times as a consideration, with other software a consumer 
voluntarily downloads. The adware usually directs targeted 
advertisements to the user's computer based on information 
gathered about the user's online activity. However, some adware 
has been used to push directed advertisements of material 
unrelated to online activity that a user may find 
objectionable. The Committee does not find adware per se 
objectionable, so long as a consumer has given informed consent 
to the software installation or execution.
    The Committee recognizes that many of the technologies that 
are used for malicious and deceptive practices can also be used 
for beneficial and legitimate purposes. For example, parents 
utilizing software to monitor the online behavior of their 
children may find it to be an appropriate tool to protect their 
children. Similarly, software companies, Internet Service 
Providers, and other intermediaries may have legitimate 
business reasons to monitor and track activity. Examples 
include system performance, network efficiency, and automatic 
updates of anti-virus software. The Committee does not view the 
technology employed by spyware and adware as the source of the 
problem and therefore, does not seek to regulate the software. 
Rather, it is the misuse of this technology that has created 
significant policy concerns the Committee intends to address 
through this legislation and ongoing oversight.

                                HEARINGS

    The Committee on Energy and Commerce held a hearing on 
spyware legislation on January 26, 2005. The Committee received 
testimony from: Mr. David Baker, Vice President for Law and 
Public Policy, EarthLink, Inc.; Mr. Ira Rubinstein, Associate 
General Counsel, Microsoft Corporation; Mr. Howard Schmidt, 
President and Chief Executive Officer, R&H Security Consulting; 
and, Mr. Ari Schwartz, Associate Director, Center for Democracy 
and Technology.

                        COMMITTEE CONSIDERATION

    On Wednesday, February 16, 2005, the Subcommittee on 
Commerce, Trade, and Consumer Protection met in open markup 
session and approved H.R. 29 for Full Committee consideration, 
as amended, by voice vote, a quorum being present. On 
Wednesday, March 9, 2005, the Committee on Energy and Commerce 
met in open markup session and ordered H.R. 29 reported to the 
House, as amended, by a recorded vote of 43 yeas and 0 nays, a 
quorum being present.

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
following is the recorded vote taken on the motion by Mr. 
Barton to order H.R. 29 reported to the House, as amended, 
which was agreed to by a recorded vote of 43 yeas and 0 nays.


                      COMMITTEE OVERSIGHT FINDINGS

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held a legislative 
hearing and made findings that are reflected in this report.

         STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

    The goal of H.R. 29 is to prohibit deceptive practices 
related to spyware programs and requires notice and consent for 
the execution of information collection programs.

   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
29, the Securely Protect Yourself Against Cyber Trespass Act, 
would result in no new or increased budget authority, 
entitlement authority, or tax expenditures or revenues.

                        COMMITTEE COST ESTIMATE

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  CONGRESSIONAL BUDGET OFFICE ESTIMATE

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, March 15, 2005.
Hon. Joe Barton,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 29, the SPY Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Melissa E. 
Zimmerman (for federal costs), Leo Lex (for the impact on state 
and local governments), and Jean Talarico and Philip Webre (for 
the impact on the private sector).
            Sincerely,
                                      Elizabeth M. Robinson
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

H.R. 29--SPY Act

    Summary: H.R. 29 would prohibit the use of computer 
software (known as spyware) to collect personal information and 
to monitor the behavior of computer users without a user's 
consent. The Federal Trade Commission (FTC) would be directed 
to enforce this bill's provisions relating to spyware, 
including assessing and collecting civil penalties for unfair 
or deceptive business practices. (Civil penalties are recorded 
in the federal budget as revenues.) Based on information 
provided by the FTC, CBO estimates that enacting H.R. 29 would 
not have a significant effect on revenues and would not affect 
direct spending. Assuming appropriation of the necessary 
amounts, CBO estimates that implementing the bill would 
increase spending subject to appropriation by about $1 million 
in 2006 and about $7 million over the 2006-2010 period.
    H.R. 29 contains an intergovernmental mandate as defined in 
the Unfunded Mandates Reform Act (UMRA), but CBO estimates that 
the resulting costs would not be significant and would not 
exceed the threshold established in UMRA ($62 million in 2005, 
adjusted annually for inflation).
    H.R. 29 would impose private-sector mandates as defined in 
UMRA on persons who use computer programs to collect certain 
information from another person's computer. Based on 
information provided by industry and government sources, CBO 
expects that the direct costs of complying with those mandates 
would fall below the annual threshold established by UMRA for 
private-sector mandates ($123 million in 2005, adjusted 
annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 29 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              2005     2006     2007     2008     2009     2010
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level.............................        0        1        1        1        2        2
Estimated Outlays.........................................        0        1        1        1        2        2
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted near the end of 2005. We also assume that 
amounts needed to implement H.R. 29 will be appropriated for 
each year and that outlays will follow historical trends for 
similar programs. Enacting H.R. 29 could increase federal 
revenues from civil penalties assessed for committing unfair or 
deceptive acts or practices in commerce, however, based on 
information provided by the FTC, CBO estimates that any new 
collections would be less than $500,000 a year.
    Implementing the bill would increase spending by the FTC 
for law enforcement related to spyware, subject to the 
availability of appropriated funds. Based on information from 
the agency, CBO estimates that such activities would cost about 
$1 million 2006 and about $7 million over the 2006-2010 period.
    Estimated impact on state, local and tribal governments: 
H.R. 29 would preempt state laws in at least one state that 
prohibit the use of spyware and establish penalties for 
violators. This preemption constitutes a mandate as defined in 
UMRA. Although states may incur some costs from enactment of 
this provision, CBO estimates that such costs would fall 
significantly below the threshold established in UMRA ($62 
million in 2005, adjusted annually for inflation). The bill 
also would preserve the rights of states to enforce their own 
consumer protection laws.
    Estimated impact on the private sector: H.R. 29 would 
impose private-sector mandates as defined in UMRA on persons 
who transmit information-collection programs to or execute them 
on another person's computer. Based on information provided by 
industry and government sources, CBO expects that the direct 
costs of complying with those mandates would fall below the 
annual threshold established by UMRA for private-sector 
mandates ($123 million in 2005, adjusted annually for 
inflation).
    Section 3(b) would require persons to provide a notice and 
obtain authorization from the owner or authorized user of a 
computer before installing an information-collection program. 
An information-collection program is defined in the bill as 
computer software that collects personally identifiable 
information and either sends that information to a person other 
than the owner or authorized user of the computer or uses such 
information to deliver advertising to, or display advertising 
on, the computer.
    Under the bill, the notices sent before installation of 
information-collection programs must comply with guidelines set 
forth in the bill and additional requirements to be determined 
by the Federal Trade Commission. Such notices would have to be 
clear and conspicuous and contain language specified in the 
bill. The notices also would have to allow users the 
opportunity to grant or deny consent for installation or to 
abandon or cancel the transaction without granting or denying 
consent.
    Section 3(d) would require providers of information-
collection programs to include certain functions in their 
software. Under the bill, such programs would have to have the 
ability to allow a user of the program to remove the program or 
disable operation of the software easily. The bill would 
require additional functions for certain information-collection 
software that delivers or displays advertising. If the software 
displays an advertisement when the computer user is accessing a 
Web page other than that of the software provider, the software 
would have to identify itself as the source of advertising that 
it delivers.
    The mandates in this bill would represent only marginal 
changes beyond what companies are required to do under current 
law. Most software installations already have notification and 
consent subroutines. An additional notification would thus not 
impose a large cost on most companies, although some companies 
that currently do not include such notifications may incur some 
costs. Similarly, most computer programs already have features 
that allow users to uninstall them. Ensuring that the uninstall 
features are user-friendly would entail no great effort. The 
few companies that have no such features at present would incur 
some costs. Lastly, Web browsers are designed to display 
pictures and notices. Requiring that programs identify 
themselves when displaying an advertisement within a browser 
would impose little additional cost on companies that design 
such software. Consequently, CBO expects that the aggregate 
direct cost of complying with the mandates in this bill would 
not be substantial.
    Estimate prepared by: Federal Costs: Melissa E. Zimmerman; 
Impact on State, Local, and Tribal Governments: Leo Lex; and 
Impact on the Private Sector: Jean Talarico and Philip Webre.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                       FEDERAL MANDATES STATEMENT

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   CONSTITUTIONAL AUTHORITY STATEMENT

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  APPLICABILITY TO LEGISLATIVE BRANCH

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    Section 1 establishes the short title of the Act as the 
``Securely Protect Yourself Against Cyber Trespass Act,'' or 
the ``SPY ACT.''

Section 2. Prohibition of deceptive acts or practices relating to 
        spyware 

    Section 2(a) prohibits any person who is not an owner or 
authorized user of a protected computer to engage in deceptive 
acts or practices in connection with spyware. Specifically it 
prohibits by means of deception: (1) taking control of a 
protected computer; (2) modifying settings related to the use 
of a computer or to the computer's access to or use of the 
Internet by altering certain information; (3) collecting 
personally identifiable information through the use of a 
keystroke logging function; (4) inducing the owner or 
authorized user to disclose personally identifiable information 
using a fraudulent Web page; (5) inducing the owner or 
authorized user to install a component of computer software 
onto the computer or preventing reasonable efforts to block the 
installation or execution of, or to disable, a component of 
computer software; (6) misrepresenting that installing a 
separate component of computer software or providing log-in and 
password information is necessary for security or privacy 
reasons, or that installing a separate component of computer 
software is necessary to open, view, or play a particular type 
of content; (7) inducing the owner or authorized user to 
install or execute computer software by misrepresenting the 
identity or authority of the person or entity providing the 
computer software; (8) inducing the owner or authorized user to 
provide personally identifiable information to another person 
by misrepresenting the identity of the person seeking the 
information, or without the authority of the intended recipient 
of the information; or (9) removing, disabling, or rendering 
inoperative a security, anti-spyware, or anti-virus technology 
installed on the computer, or installing or executing on the 
computer one or more additional components of computer software 
with the intent of causing a person to use such components in a 
way that violates any other provision of section 2.
    This bill addresses software practices that affect end user 
computers, whether those of consumers or of businesses, 
connected to the Internet or similar public networks. Routers 
and other computers on the Internet interact with one another 
and give each other instructions regularly as part of the 
routine operation of the Internet. The Committee does not 
intend that these and other activities that occur in the 
network itself, rather than on the edge of the network, be 
covered by the bill's definitions of ``computer'' or 
``protected computer,'' within the meaning of section 10(3), or 
that they be considered ``taking control'' of a computer within 
the meaning of section 2(a)(1).
    Section 2(a)(4) provides the FTC with enforcement authority 
against ``evil-twin attacks'' and web-based phishing. It is not 
intended to apply in instances of legitimate trademark dispute.
    Many software installations of updated security, anti-
spyware, or anti-virus technologies requested by a computer 
user will disable or render inoperable a prior version of that 
software upon installation of the updated version. Section 
2(a)(8) is not intended to apply to these circumstances.
    Section 2(b) directs the FTC to use its authority to issue 
advisory opinions, policy statements, and guidance to advise 
companies on the parameters of this section. For example, the 
FTC should issue guidance on required disclosures or material 
omissions that would trigger liability under section 2. Section 
2(b) also provides that this subsection will take effect upon 
the date of enactment of the Act.
    Section 2(c) provides that, except as provided in 
subsection (b), section 2 shall take effect upon the expiration 
of the 6-month period that begins on the date of enactment of 
the Act.

Section 3. Prohibition of collection of certain information without 
        notice and consent

    Section 3(a) prohibits the transmission of an information 
collection program to a protected computer unless the program 
provides for notice and consent, as set forth in section 3(c), 
before the first execution of the information collection 
program and contains the functions set forth in section 3(d). 
It also prohibits the execution of any information collection 
program on a protected computer without meeting the 
requirements in 3(c) and 3(d).
    This section contemplates a single notice at the first 
execution of the software. If the same information collection 
program executes more than one time on the same protected 
computer, notice is required only at the initial execution. 
Subsequent notice is only required if the information 
collection program will collect or send information that is 
materially different from, and outside the scope of, the type 
or purpose set forth in the initial or, in the case of prior 
subsequent notice, previous notice.
    Section 3(b)(1) provides a definition for information 
collection program. An information collection program is 
computer software that (a) collects personally identifiable 
information and either (1) sends such information to a person 
other than the owner or authorized user of the computer or (2) 
uses such information to deliver advertising to or display 
advertising on the computer; or (b) collects information 
regarding web pages accessed using the computer and uses the 
information to deliver advertising to or display advertising on 
the computer. The reference to ``a person other than the owner 
or authorized user of the computer'' in section 
3(b)(1)(A)(ii)(I) is intended to include the entity that 
transmitted or executed the information collection program.
    Section 3(b)(2) provides an exception to the definition of 
information collection program. Computer software that 
otherwise would be considered an information collection program 
under section 3(b)(1)(B) shall not be considered such a program 
if: (1) the only information collected regarding Web pages 
accessed using the computer is information about web pages 
within a particular Web site; (2) such information is not sent 
to anyone other than the provider of the Web site accessed, or 
a party authorized to facilitate the display or functionality 
of Web pages within the Web site accessed; and, (3) the only 
advertising delivered to or displayed on the computer using 
such information is advertising on the Web pages within the Web 
site. This section is intended to exempt from the requirements 
of section 3 HTML, Java, Java Script, Web beacons, and other 
similar tools used in the everyday functioning of the Internet 
to the extent that they facilitate the ordinary construction of 
Web pages and do not collect personally identifiable 
information. The Committee does not intend to interfere with 
the benign functioning of the Internet. This exception also 
allows Web site providers, or their agents, to monitor activity 
on their Web site, and to direct advertising on their Web site 
based on that monitoring, without being subject to the 
requirements of section 3. The Committee understands that Web 
site owners often use internal navigation tracking for rights 
management, security, site management, and similar purposes not 
associated with malicious spyware and adware, in order to 
facilitate positive interactions with consumers.
    Section 3(c) sets out the requirements for notice and 
consent with respect to information collection programs. The 
notice must be clear and conspicuous in plain language and 
clearly distinguished from any other information 
contemporaneously displayed. The Committee expects the notice 
to be simple and clear so that consumers can easily understand 
that software collects information about them. Section 
3(c)(1)(A) is not intended to impose specific design mandates 
on hardware manufacturers or software developers. The intent of 
the provision is to require a clearly distinct notice to the 
extent practicable in light of the technical and functional 
limitations of the information collection program or the device 
on which it is installed and executed. The notice must also 
contain a statement identifying whether the information 
collection program collects personally identifiable information 
or web pages accessed, or both. The provider of the information 
collection program may use the provided language or a 
substantially similar statement. The language ``or a 
substantially similar statement'' has been added to section 
3(c)(1)(B) to ensure that vendors of information collection 
programs have adequate flexibility to tailor section 3 notices 
to the user experience and in light of evolving technologies 
and consumer expectations. The notice must provide for the user 
to grant or deny consent, or to simply abandon or cancel the 
transaction without granting or denying consent. The notice 
must also provide for the user to access, before granting or 
denying consent, a clear description of the types of 
information being collected, the purpose for which the 
information is being collected and sent, and in the case of 
bundled software, the identity of the programs that qualify as 
information collection programs under the Act. The software 
provider may provide access to the information required under 
section 3(c)(1)(D) by a link or some other web-based mechanism. 
A single notice is sufficient for bundled software programs so 
long as it meets the requirements under section 
3(c)(1)(D)(iii). Section 3(c)(1)(E) requires concurrent display 
of the specified information in sections 3(c)(1)(B), (C), and 
(D) to the extent reasonably practicable. Section 3(c)(4) 
grants the FTC authority to issue regulations to carry out the 
subsection.
    Section 3(d) provides that an information collection 
program must contain a disable function and, if applicable, an 
identity function. The disable function must allow a user of 
the program to remove or disable operation of the program by a 
mechanism that is easily identifiable to the user and can be 
performed without undue effort or knowledge by the user of the 
protected computer. The Committee has included this provision 
because of evidence that purveyors of spyware have infected 
consumers' computers with software that cannot be removed or 
disabled absent destruction of the computer hard drive. The 
Committee expects that the FTC will take action to educate 
consumers on the dangers of uninstallable software that may 
already be residing on consumers' computers without their 
knowledge. Section 3(d)(1) does not require information 
collection programs to provide users with both a remove and a 
disable option. Developers of information collection programs 
will satisfy the requirements of section 3(d)(1) so long as the 
program includes at least one of these options. The identity 
function must provide that display of an advertisement 
generated by information collected through the program must be 
accompanied by the name of the information collection program, 
a logogram or trademark used for the exclusive purpose of 
identifying the program, or a statement or other information 
sufficient to clearly identify the program. Section 3(d)(2)(B) 
directs the FTC to promulgate rules exempting from this 
required function the embedded display of any advertisement on 
a Web page that contemporaneously displays other information. 
Section 3(d)(3) gives the FTC authority to issue regulations to 
carry out the subsection.
    Section 3(e) provides that a telecommunications carrier, 
provider of information or interactive computer service, cable 
operator, or a provider of transmission capability shall not be 
liable under section 3 to the extent that it transmits, routes, 
hosts, stores, or provides connections for an information 
collection program or provides an information location tool 
through which the owner or authorized user of a protected 
computer locates an information collection program.
    For purposes of commercial computing networks, the 
``authorized user'' of computer software will be the corporate 
licensee of the software. As a practical matter, for purposes 
of sections 2 and 3, the Committee understands in many 
instances that system administrators are the ``authorized 
users'' in the context of commercial computing networks.

Section 4. Enforcement

    Section 4(a) provides that the Act shall be enforced by the 
FTC under the Federal Trade Commission Act and that a violation 
of the Act shall be treated as an unfair or deceptive act or 
practice violating a rule promulgated under section 18 of the 
Federal Trade Commission Act. Section 4 gives the FTC the 
discretion to seek civil penalties for violations of the Act in 
one of two ways: (1) seeking civil penalties of up to $11,000 
per violation under section 5(m)(1)(A) of the FTC Act; or, (2) 
seeking civil penalties under section 4(b) of this Act. Section 
4(b) establishes an alternative enforcement mechanism for 
pattern or practice violations of the Act. It provides for 
significantly higher penalties for those whom the FTC has 
determined engaged in a pattern or practice of violating the 
Act, but also directs the FTC to treat as a single violation a 
single action that violates the Act but affects multiple 
computers. It also directs that any single action or conduct 
that violates more than one section of 2(a) shall be considered 
multiple violations. The higher damages for a pattern or 
practice of violation may be up to $3,000,000 for each 
violation of section 2 and $1,000,000 for each violation of 
section 3.
    Furthermore, section 4(c) provides that civil penalties 
sought under the Act may not be granted by the FTC or any court 
unless the FTC or the court, respectively, establishes that the 
conduct was committed with actual knowledge or knowledge fairly 
implied on the basis of objective circumstances that such 
conduct is unfair and deceptive and is prohibited by this Act. 
This is the existing scienter requirement under the FTC Act. 
Section 4(d) directs the FTC and the court, in determining the 
amount of any such civil penalty, to take into account the 
degree of culpability, any prior history of such conduct, 
ability to pay, effect on ability to continue to do business, 
and such other matters as justice may require. The Committee 
expects the FTC to enforce the law to protect consumers from 
unfair or deceptive acts or practices involving spyware 
vigorously. It also expects the agency to act reasonably to 
avoid seeking damages out of proportion to the harm caused by 
the offending conduct.
    Section 4(e) provides that remedies available under this 
section and remedies available under the Federal Trade 
Commission Act are the exclusive remedies for violation of the 
Act.
    Section 4(f) provides that the section shall take effect 
upon the expiration of the 6-month period that begins on the 
date of enactment of the Act to the extent that the section 
applies to violations of section 2(a).

Section 5. Limitations

    Section 5(a) provides that sections 2 and 3 of the Act 
shall not apply to any act taken by a law enforcement agent in 
performance of official duties or the transmission or execution 
of an information collection program in compliance with a law 
enforcement, investigatory, national security, regulatory, 
agency or department of the United States, or any State in 
response to a request or demand made under authority granted to 
that agency or department. The Committee intends that this 
section shall be interpreted to exclude from sections 2 and 3 
of the Act intelligence agencies and bona fide intelligence 
gathering.
    Section 5(b) provides that nothing in the Act shall apply 
to any monitoring of, or interaction with, a subscriber's 
Internet or other network connection or service, or a protected 
computer, by a telecommunications carrier, cable operator, 
computer hardware or software provider, or provider of 
information service or interactive computer service to the 
extent that such monitoring or interaction is for network or 
computer security purposes, diagnostics, technical support, or 
repair, or for the detection or prevention of fraudulent 
activities. The section also provides that the Act shall not 
apply to a discrete interaction with a protected computer by a 
provider of computer software solely to determine whether the 
user of the computer is authorized to use such software, that 
occurs upon initialization of the software or an affirmative 
request by that user for an update of, addition to, or 
technical service for, the software. The intent of this 
provision is to allow software providers to verify that 
requests for technical support are coming from licensed users 
of software.
    Section 5(c) provides that no provider of an interactive 
computer service may be held liable under the Act on account of 
any action voluntarily taken, or service provided, in good 
faith to remove or disable a program used to violate section 2 
or 3 that is installed on a customer's computer, if the 
provider notifies the customer and obtains consent before 
undertaking such action.
    Section 5(d) provides that a manufacturer or retailer of 
computer equipment shall not be liable under this Act to the 
extent that that manufacturer or retailer is providing third 
party branded computer software that is installed on the 
equipment the manufacturer or retailer is manufacturing or 
selling. This provision does not excuse from liability a 
manufacturer that includes its own software on computers it 
manufactures.

Section 6. Effect on other laws

    Section 6(a) provides that the Act supercedes any provision 
of a statute, regulation, or rule of a state or political 
subdivision that expressly regulates deceptive conduct with 
respect to computers similar to that of section 2(a), the 
transmission or execution of a computer program similar to that 
in section 3, and the use of computer software that displays 
advertising content based on the Web pages accessed using a 
computer. The section also prohibits any person other than the 
Attorney General of a State to bring a civil action under the 
law of any State if such action is premised in whole or in part 
upon the defendant violating any provision of this Act, but 
makes clear that this prohibition shall not be construed to 
limit the enforcement of any State consumer protection law by 
an Attorney General of a State. The section specifically 
preserves state trespass, contract, and tort law, and other 
state laws to the extent those acts relate to acts of general 
consumer fraud. The Committee intends to preserve the ability 
of State Attorneys General to enforce these laws as an 
important backstop to FTC enforcement. However, the Committee 
intends to preempt state legislation that makes illegal an 
information collection program or other computer software that 
displays advertising in a way that complies with this Act by 
simply calling it a trespass, tort, or other statute in an 
effort to avoid preemption. The Committee specifically intends 
to preempt the Utah Spyware Control Act, section 13-39-101, 
Utah Code Annotated 1953.
    Section 6(b) preserves the Federal Trade Commission's 
authority under any other provision of law, including the 
authority to issue advisory opinions, policy statements, or 
guidance regarding the Act.

Section 7. Annual FTC report

    Section 7 requires the Federal Trade Commission to submit 
annual reports to Congress. The report must detail the actions 
taken to enforce sections 2(a) and 3 and describe 
administrative structure and personnel and other resources 
committed to enforcement of the Act. The Committee expects the 
Commission to include in its long range planning an assessment 
of the adequacy of its enforcement resources and its technology 
expertise.

Section 8. FTC report on cookies

    Section 8 requires that, not later than the expiration of 
the 6-month period that beings on the date of the enactment of 
this Act, the FTC submit a report to the Congress regarding the 
use of cookies, including tracking cookies, in the delivery or 
display of advertising to the owners and users of computers. 
The report shall compare the use of cookies with the use of 
information collection programs to determine the extent to 
which such uses are similar or different. Section 8(b) defines 
``tracking cookie'' for the purposes of this section. This Act 
contains a rule of construction in section 10 (4)(C) clarifying 
that cookies are not subject to the requirements of section 3 
because they are not ``computer software.'' The Committee 
understands that traditional cookies are innocuous and a part 
of the basic functioning of most Web sites. On the other hand, 
the Committee has received information about so-called 
``tracking'' or ``persistent'' cookies that collect identifying 
information and increasingly act as spyware and adware. The 
Committee intends for the Commission to look into these and 
other functionally similar information collection programs to 
determine whether and if so how they use and transmit consumer 
information.
    Section 8(c) provides that the section shall take effect on 
the date of enactment of the Act.

Section 9. Regulations

    Section 9(a) provides that any regulations issued under the 
Act shall be issued not later than the expiration of the 6-
month period beginning on the date of enactment of this Act, 
and in accordance with section 553 of title 5, United States 
Code. The subsection also provides a public interest standard 
to guide the FTC rulemaking under the Act.
    Section 9(b) provides that the section shall take effect on 
the date of enactment of the Act.

Section 10. Definitions

    Section 10 provides definitions for terms in the Act 
including ``computer software,'' ``deceptive acts or 
practices,'' ``disable,'' ``personally identifiable 
information,'' ``transmit,'' ``Web page,'' and ``Web site.''
    The definition of ``collect'' makes clear that personally 
identifiable information that is input by the user of a 
protected computer and transferred to the intended recipient, 
or stored on the protected computer in a manner so that it is 
accessible by such intended recipient, is outside the scope of 
section 3 of the Act. This is intended to facilitate ease of 
use for consumers and providers of Internet services or 
websites. The Committee intends the exclusion from ``collect'' 
to be based on active conduct on the part of the computer user. 
The mere acceptance of an end user license agreement by a 
computer user would not be sufficient to meet this test of 
active conduct.
    The definition of ``computer software'' makes clear that 
such term does not include: (1) software placed on the computer 
system of a user by an Internet service provider, interactive 
computer service, or Internet Web site solely to enable the 
user subsequently to use such provider or service or to access 
such Web site; (2) cookies; and, (3) any other type of text or 
data file that solely may be read or transferred by a computer.
    The Committee does not intend to include in the definition 
of ``computer'' and ``protected computer'' consumer devices to 
the extent utilized by a multichannel video programming 
distributor or video programmer to provide multichannel video 
programming services or to collect or disclose subscriber 
information, to the extent covered under 47 U.S.C. Sec. 338(i) 
and 47 U.S.C. Sec. 551.

Section 11. Applicability and sunset

    Section 11 provides that, except as otherwise provided in 
the Act, the Act shall take effect 12 months after the date of 
enactment. Section 10 also provides for a sunset of the bill on 
December 31, 2010.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    This legislation does not amend any existing Federal 
statute.

                                  
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