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[House Report 110-169]
[From the U.S. Government Publishing Office]

110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    110-169

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

 
     SECURELY PROTECT YOURSELF AGAINST CYBER TRESPASS ACT (SPY ACT)

                                _______
                                

  May 24, 2007.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Dingell, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 964]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 964) 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
Purpose and Summary..............................................    10
Background and Need for Legislation..............................    10
Hearings.........................................................    12
Committee Consideration..........................................    12
Committee Votes..................................................    13
Committee Oversight Findings.....................................    13
Statement of General Performance Goals and Objectives............    13
New Budget Authority, Entitlement Authority, and Tax Expenditures    13
Earmarks and Tax and Tariff Benefits.............................    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............    26

  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 UNFAIR OR 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 unfair or 
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 or a series of 
                advertisements that a user of the computer cannot close 
                or terminate without undue effort or knowledge by the 
                user or 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 
                downloading or installing any of the information 
                collection 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 internet 
                activity to deliver advertising.--The computer 
                software--
                          (i) collects information regarding the user's 
                        Internet activity 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 
        internet activity 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 the user's internet activity, and used to 
                deliver advertising to, or display advertising on, the 
                protected computer, is--
                          (i) information regarding Web pages within a 
                        particular Web site; or
                          (ii) in the case of any Internet-based search 
                        function, user-supplied search terms necessary 
                        to complete the search and return results to 
                        the user;
                  (B) such information collected is not sent to a 
                person other than--
                          (i) the provider of the Web site accessed or 
                        Internet-based search function; 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 a statement 
                required under subparagraph (B) 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.
  (f) Study and Additional Exemption.--
          (1) Study and report.--The Commission shall conduct a study 
        to determine the applicability of the information collection 
        prohibitions of this section to information that is input 
        directly by users in a field provided on a website. The study 
        shall examine--
                  (A) the nature of such fields for user input;
                  (B) the use of a user's information once input and 
                whether such information is sent to a person other than 
                the provider of the Web site;
                  (C) whether such information is used to deliver 
                advertisements to the user's computer; and
                  (D) the extent of any notice provided to the user 
                prior to such input.
          (2) Report.--The Commission shall transmit a report on such 
        study to the Committee on Energy and Commerce of the House of 
        Representatives and the Committee on Commerce, Science, and 
        Transportation of the Senate not later than the expiration of 
        the 6-month period that begins on the date on which final 
        regulations are issued under section 9. The requirements of 
        subchapter I of chapter 35 of title 44, United States Code, 
        shall not apply to the report required under this subsection.
          (3) Regulation.--If the Commission finds that users have 
        adequate notice regarding the uses of any information input 
        directly by the user in a field provided on a website, such 
        that an exemption from the requirements of this section, or a 
        modification of the notice required by this section is 
        appropriate for such information, and that such an exemption or 
        modification is consistent with the public interest, the 
        protection of consumers, and the purposes of this Act, the 
        Commission may prescribe such an exemption or modification by 
        regulation.

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 (and 
other remedies available to the Commission in an enforcement action 
against unfair and deceptive acts and practices) 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 protected 
        computer--
                  (A) in connection with the provision of a network 
                access service or other service or product with respect 
                to which the user of the protected computer is an 
                actual or prospective customer, subscriber, registered 
                user, or account holder;
                  (B) by the provider of that service or product or 
                with such provider's authorization; and
                  (C) that involves or enables the collection of 
                information about the user's activities only with 
                respect to the user's relationship with or use of such 
                service or product,
        to the extent that such monitoring or interaction is for the 
        purpose of network security, computer security, diagnostics, 
        technical support or repair, network management, authorized 
        updates of software, 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.--
          (1) In general.--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.
          (2) Construction.--Nothing in this subsection shall be 
        construed to limit the liability of a provider of computer 
        software or of an interactive computer service for any anti-
        competitive act otherwise prohibited by law.
  (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.
  (e) Services Provided by Cable Operators and Satellite Carriers.--It 
shall not be a violation of section 3 for a satellite carrier (as such 
term is defined in section 338(k) of the Communications Act of 1934 (47 
U.S.C. 338(k)) or cable operator (as such term is defined in section 
631(a)(2) of such Act (47 U.S.C. 551(a)(2))) to--
          (1) utilize a navigation device (as such term is defined in 
        the rules of the Federal Communications Commission);
          (2) interact with such a navigation device; or
          (3) transmit software to or execute software installed on 
        such a navigation device to provide service or collect or 
        disclose subscriber information,
if the provision of such service, the utilization of or the interaction 
with such device, or the collection of or disclosure of such 
information, is subject to section 338(i) or section 631 of the 
Communications Act of 1934.

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) unfair or 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.
          (4) Effective date.--The preemption provided for under this 
        subsection shall take effect, with respect to specific 
        provisions of this Act, on the effective date for such 
        provisions.
  (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. FTC REPORT ON COOKIES.

  (a) In General.--Not later than the expiration of the 6-month period 
that begins on the date on which final regulations are issued under 
section 9, the Commission shall submit a report to the Congress 
regarding the use of cookies in the delivery or display of advertising 
to the owners and users of computers. The report shall examine the 
extent to which cookies are or may be used to transmit to a third party 
personally identifiable information of a computer owner or user, 
information regarding Web pages accessed by the owner or user, or 
information regarding advertisements previously delivered to a 
computer, 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.
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) Effective Date.--This section shall take effect on the date of 
the enactment of this Act.
  (c) Paperwork Reduction Requirements.--The requirements of subchapter 
I of chapter 35 of title 44, United States Code, shall not apply to the 
report required under this section.

SEC. 8. FTC REPORT ON INFORMATION COLLECTION PROGRAMS INSTALLED BEFORE 
                    EFFECTIVE DATE.

  Not later than the expiration of the 6-month period that begins on 
the date on which final regulations are issued under section 9, the 
Commission shall submit a report to the Congress on the extent to which 
there are installed on protected computers information collection 
programs that, but for installation prior to the effective date under 
section 11(a), would be subject to the requirements of section 3. The 
report shall include recommendations regarding the means of affording 
computer users affected by such information collection programs the 
protections of section 3, including recommendations regarding requiring 
a one-time notice and consent by the owner or authorized user of a 
computer to the continued collection of information by such a program 
so installed on the computer. The requirements of subchapter I of 
chapter 35 of title 44, United States Code, shall not apply to the 
report required under this section.

SEC. 9. REGULATIONS.

  (a) In General.--The Commission shall issue the regulations required 
by this Act not later than the expiration of the 9-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 or by a third party 
        authorized by such intended recipient 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) Exceptions.--Such term does not include--
                          (i) 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; or
                          (ii) a text or data file known as a cookie, 
                        to the extent that the text or data file--
                                  (I) is used, written to, or placed on 
                                the computer of a user by an Internet 
                                service provider, interactive computer 
                                service, or Internet website, or any 
                                entity acting with the authorization of 
                                and on behalf of such Internet service 
                                provider, interactive computer service, 
                                or Internet website; and
                                  (II) can be read or recognized solely 
                                to return information to such Internet 
                                service provider, interactive computer 
                                service, or Internet website, or any 
                                entity acting with the authorization of 
                                and on behalf of such Internet service 
                                provider, interactive computer service, 
                                or Internet website.
          (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) Unfair or deceptive acts or practices.--The term ``unfair 
        or 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 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 any of the 
        following characteristics:
                  (A) A common domain name.
                  (B) Common ownership, management, or registration.

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, 2013.

                          PURPOSE AND SUMMARY

    H.R. 964, the Securely Protect Yourself Against Cyber 
Trespass Act, prohibits unfair or deceptive acts or practices 
related to spyware or adware 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 the intervening time, Internet 
usage has been transformed from an academic tool into a 
commercial, educational, and communications portal accessed by 
more than 70 percent of Americans.
    It comes as no surprise that the market has responded with 
new technologies tailored to consumer Internet usage. Many of 
these technologies are designed to improve the efficiency and 
speed of data transfer. For example, some maximize server 
efficiency and thereby reduce time requirements for a Web page 
to load on a user's computer. Other technologies allow Web 
sites 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, such as peer-to-peer 
file sharing software, instant messaging, and voice-over 
Internet, that capitalize on the distributed network structure.
    At the same time, the Committee is aware that these 
technologies are capable of visiting great harm on consumers 
and commerce when misapplied by scam artists, criminals, and 
others with unsavory motives. The Committee is particularly 
concerned about the growing use of what is commonly referred to 
as ``spyware.'' 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.
    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 Web sites visited. This 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 in schemes to steal financial assets from consumers 
through a practice known as ``phishing'' by which bad actors 
fraudulently convince users to disclose passwords and other 
private financial data. Software can also affect the 
functioning of a computer by redirecting the user to Web sites 
that 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 financial transactions possible.
    Techniques for deceiving consumers into downloading spyware 
vary. Deceptive tactics include using pop-under windows that 
disguise the identity of the program distributer, offering 
misleading or deceptive end user licensing agreements, and 
failing to disclose the functionality of a program. Some 
spyware programs masquerade as anti-spyware technology. 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 sites.
    The Committee also is concerned with the growth of abusive 
``adware.'' Adware is advertising software that can monitor 
online behavior and Web sites visited. Adware is often bundled, 
many times as a consideration, with other software that a 
consumer voluntarily downloads. Adware usually directs targeted 
advertisements to the user based on his or her online activity. 
The Committee does not find adware per se objectionable, so 
long as a consumer has given informed consent to the software 
installation or execution.
    On the other hand, the Committee has received testimony and 
other information indicating that some adware has been used to 
push directed advertisements of material unrelated to a user's 
online activity and that the user finds objectionable. Adware 
also has been used to barrage consumers with pop-up ads that 
disrupt Internet usage. Many consumers have lost important data 
because this malware crashed their computers, or were forced to 
junk perfectly good computers that were so burdened with 
unwanted adware that they were useless. Increasingly, adware is 
being coupled with spyware or other deceptive or malicious 
software programs. See, for example, the FTC case In Re Direct 
Revenue LLC, et al., File No. 052 313 (February 2007). 
DirectRevenue LLC, a large distributer of adware, installs its 
adware on consumer's computers directly and through a large 
network of affiliates and sub-affiliates. According to the FTC 
complaint detailing charges that DirectRevenue settled, the 
company and its affiliates frequently offered consumers free 
content and software, such as screen savers, games, and 
utilities without disclosing adequately that downloading them 
would result in installation of the adware. In other instances, 
according to the FTC's complaint, some of DirectRevenue's 
affiliates exploited security vulnerabilities in Web browsers 
to install the adware. In addition, the FTC charged that 
DirectRevenue deliberately made it difficult to identify, 
locate, and remove the adware once it was installed. For 
example, DirectRevenue allegedly failed to label its pop-up ads 
to identify their source, stored the adware files in rarely 
accessed locations on consumers' hard drives, failed to list 
the adware in the Windows Add/Remove utility or named the 
adware files to resemble core systems software or applications, 
and installed technology on consumers' computers to secretly 
reinstall the adware when consumers attempted to remove it or 
when the adware was deleted by consumers' anti-spyware 
programs. In addition, when DirectRevenue provided an uninstall 
tool at separate Web sites, it allegedly required consumers to 
follow a 10-step procedure involving the download of additional 
software and deactivation of all third-party firewalls, thus 
exposing consumers' computers to security risks. The Committee 
supports honest online advertising but intends for the FTC to 
use its existing authorities and the tools in this Act to take 
vigorous enforcement action against unfair or deceptive acts or 
practices. See also, ``The Plot To Hijack Your Computer,'' 
Business Week cover story (July 17, 2006).
    The increasing popularity and convenience of e-commerce and 
the benefits that it brings to our national economy make it 
critical for the Committee and the Congress to act 
expeditiously to preserve the integrity of the system and thus 
consumer confidence. The Committee's bipartisan legislation 
accomplishes that goal by striking a careful balance between 
cracking down on abuse while preserving beneficial uses of 
software applications. Similar legislation passed the House by 
overwhelming votes in the 108th and 109th Congresses.

                                HEARINGS

    The Committee on Energy and Commerce held a hearing on the 
legislation on March 15, 2007. The Committee received testimony 
from the following: Mr. Jerry Cerasale, Senior Vice President, 
Direct Marketing Association, Inc.; Ms. Fran Maier, Executive 
Director, TRUSTe; Mr. Dave Morgan, Founder and Chairman, 
TACODA, Inc.; Mr. Ari Schwartz, Deputy Director, Center for 
Democracy and Technology; and Ms. Christine A. Varney, Esquire, 
Hogan & Hartson LLP, on behalf of Zango.

                        COMMITTEE CONSIDERATION

    On Thursday, April 19, 2007, the Subcommittee on Commerce, 
Trade, and Consumer Protection met in open markup session and 
approved H.R. 964 for full Committee consideration, amended, by 
voice vote. On Thursday, May 10, 2007, the full Committee met 
in open markup session and ordered H.R. 964 favorably reported 
to the House, amended, by voice vote.

                            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. 
There were no record votes taken on amendments or in connection 
with ordering H.R. 964 reported. A motion by Mr. Dingell to 
order H.R. 964 favorably reported to the House was agreed to by 
voice vote.

                      COMMITTEE OVERSIGHT FINDINGS

    Regarding 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. 964 is to protect consumers by prohibiting 
deceptive practices related to spyware and adware programs and 
by requiring notice and consent for the execution of 
information collection programs.

   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    Regarding compliance with clause 3(c)(2) of rule XIII of 
the Rules of the House of Representatives, the Committee finds 
that H.R. 964 would result in no new or increased budget 
authority, entitlement authority, or tax expenditures or 
revenues.

                  EARMARKS AND TAX AND TARIFF BENEFITS

    Regarding compliance with clause 9 of rule XXI of the Rules 
of the House of Representatives, H.R. 964 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI.

                        COMMITTEE COST ESTIMATE

    The Committee adopts as its own the cost estimate provided 
by 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:
                                                      May 24, 2007.
Hon. John D. Dingell, 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. 964, the Securely 
Protect Yourself Against Cyber Trespass Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                                   Peter R. Orszag.
    Enclosure.

H.R. 964--Securely Protect Yourself Against Cyber Trespass Act

    Summary: H.R. 964 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 bill would direct the Federal Trade Commission 
(FTC) to enforce the bill's provisions relating to spyware, 
including assessing and collecting civil penalties for unfair 
or deceptive business practices. Based on information provided 
by the FTC, CBO estimates that implementing the bill would 
increase spending by $1 million in 2008 and $7 million over the 
2008-2012 period, assuming appropriation of the necessary 
amounts.
    Enacting H.R. 964 could increase civil penalties and thus 
could affect Federal revenues, but CBO estimates that such 
effects would not be significant in any year. Enacting H.R. 964 
would not affect direct spending.
    H.R. 964 contains an intergovernmental mandate as defined 
in the Unfunded Mandates Reform Act (UMRA), but CBO estimates 
that the resulting costs to states would fall significantly 
below the threshold established in UNRA ($66 million in 2007, 
adjusted annually for inflation).
    H.R. 964 would impose private-sector mandates, as defined 
in UMRA, on persons who use computer programs to collect 
certain information from another person's computer. In 
addition, by preempting certain State laws, the bill would 
impose a mandate on private entities by eliminating any private 
right of action under those laws. CBO estimates that the direct 
cost of complying with most of those mandates would be small 
and fall below the annual threshold for private-sector mandates 
established by UMRA ($131 million in 2007, adjusted annually 
for inflation). However, due to a lack of information about the 
number of claims that would be filed by private entities under 
state laws in the absence of this legislation and the value of 
awards in such cases, CBO has no basis to determine the loss of 
compensation from awards or settlements, if any. Consequently, 
CBO cannot determine whether the aggregate direct cost of all 
the mandates in the bill would exceed the annual threshold.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 964 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--

                                                               -------------------------------------------------
                                                                  2008      2009      2010      2011      2012
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

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

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted during fiscal year 2007, that the 
necessary amounts will be provided for each year, and that 
spending will follow historical patterns for similar programs.
    Implementing H.R. 964 would increase spending by the FTC to 
enforce regulations prohibiting the unlawful use of spyware, 
subject to the availability of appropriated funds. Based on 
information from the agency, CBO estimates that such activities 
would cost about $1 million in 2008 and about $7 million over 
the 2008-2012 period.
    Enacting H.R. 964 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.
    Estimated impact on state, local, and tribal governments: 
H.R. 964 would preempt state laws that specifically regulate 
the use of spyware. This preemption constitutes a mandate as 
defined in UMRA. Some states may incur costs in the form of 
lost court settlements, however, because the bill would 
preserve the rights of states to enforce their own consumer 
protection, trespass, contract, and/or laws, CBO estimates that 
any such costs would fall significantly below the threshold 
established in UMRA ($66 million in 2007, adjusted annually for 
inflation).
    Estimated impact on the private sector: H.R. 964 would 
impose private-sector mandates, as defined in UMRA, on persons 
who use computer programs to collect certain information from 
another person's computer. The bill would require a person who 
transmits or executes an information collection program on 
someone's computer to receive prior consent from the owner or 
authorized user of that computer. An information collection 
program is defined in the legislation as computer software that 
(1) collects personally identifiable information and sends the 
information to someone else or uses such information for 
advertising purposes, or (2) collects information regarding the 
user's Internet activity and uses such information for 
advertising purposes, except for software collecting 
information within particular Web sites. The bill would require 
the Federal Trade Commission to provide the manner and form of 
the notice to obtain consent. In addition, the bill would 
require an information collection program installed on 
someone's computer to be easily identifiable and removable. 
Based on information provided by industry sources and the FTC, 
CBO expects that the direct costs of complying with those 
mandates would fall below the annual threshold established by 
UMRA for private-sector mandates ($131 million in 2007, 
adjusted annually for inflation).
    Also, by preempting state laws that expressly regulate the 
same activities covered by the bill, H.R. 964 would impose a 
mandate on private entities by eliminating any private right of 
action under those laws. The direct cost of the mandate would 
be the net loss of compensation from awards and settlements in 
cases where the private entity could recover full compensation 
for its injuries only through a private right of action that 
would be eliminated by H.R. 964. Because of uncertainty about 
the number of claims that would be filed in the absence of this 
legislation and the value of awards in such cases, CBO cannot 
estimate the cost of the mandate. Consequently, CBO cannot 
determine whether the cost of the mandate would exceed the 
annual threshold established by UMRA.
    Previous CBO estimate: On May 7, 2007, CBO transmitted an 
estimate for H.R. 1525, the Internet Spyware Prevention Act of 
2007, as ordered reported by the House Committee on the 
Judiciary on May 2, 2007. That bill would establish a new 
federal crime for the use of certain computer software 
(spyware) to collect personal information or to commit a 
federal criminal offense, and would authorize the appropriation 
of $40 million over the 2008-2012 period to prosecute 
violations of the new law.
    Estimate prepared by: Federal costs: Susan Willie; Impact 
on state, local, and tribal governments: Theresa Gullo; Impact 
on the private sector: Amy Petz.
    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 unfair or 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 the following conduct: (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 (10) installing or executing on 
the 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 individual 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)(9) 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 subsections (c) and (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 for software collecting 
information regarding Internet activity within a particular Web 
site. 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 the user's Internet activity, and used to 
deliver advertising to or display advertising on the protected 
computer, is either (A) information regarding Web pages within 
a particular Web site, or (B) in the case of any Internet-based 
search function, user-supplied search terms necessary to 
complete the search and return results to the user; (2) such 
information is not sent to anyone other than the provider of 
the Web site accessed or Internet-based search function, 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 exempts this narrow activity. It does not 
create a blanket exemption for Internet search functions from 
the notice and consent requirements of section 3. It does not 
exempt the collection of other Internet activity by toolbars if 
it is used to deliver or display ads, nor does it exempt 
toolbars that are downloaded onto consumers' computers 
surreptitiously as figured in the FTC's cases in the matter of 
Enternet Media and ERG Ventures.
    This section also 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 ``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 ongoing 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 function. 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 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 3(f) directs the FTC to conduct a study to 
determine the applicability of the information collection 
prohibitions of section 3 to personally identifiable 
information that is input directly by users in a field provided 
on a Web site. The FTC is directed to examine: (1) the nature 
of the fields for user input; (2) how the user's information is 
used once input and whether it is sent to a person other than 
the provider of the Web site; (3) whether such information is 
used to deliver advertisements to the user's computer; and (4) 
the extent of any notice provided to the user prior to such 
input. The FTC is required to transmit a report, including its 
findings and recommendations, to the House and Senate Commerce 
Committees not later than six months after final regulations 
are issued under section 9. The FTC is authorized to adopt 
rules granting an exemption from the requirements of this 
section or modifying the notice requirements of this section 
with respect to such information input directly by the user, if 
the agency finds that users have adequate notice regarding the 
uses of this information, and that the exemption or 
modification is consistent with the public interest, the 
protection of consumers, and the purposes of this Act. The 
Committee does not intend to deny consumers the important 
protections provided by this Act, but is willing to have the 
FTC take a serious look at this issue. While the Committee 
understands that responsible online marketers and retailers 
have readily available privacy policies, the Committee has 
received information about abuses and enforcement actions that 
militate against providing an exemption without such a study 
and assurances that such an exemption or modification is 
appropriate and not contrary to the public interest, the 
protection of consumers, and the purposes of this Act.

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 or 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. The Committee 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 FTC 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 (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, 
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. The Committee further intends that the 
activities covered by this exemption shall be carried out in 
accordance with all other applicable laws.
    Section 5(b) provides an exception for monitoring or 
interaction with a protected computer for legitimate security, 
fraud prevention, and technical support purposes. This 
important exemption provides that nothing in this Act shall 
apply to any monitoring of, or interaction with, a protected 
computer (1) in connection with the provision of a network 
access service or other service or product with respect to 
which the user of the protected computer is an actual or 
prospective customer, subscriber, registered user, or account 
holder, (2) by the provider of that service or product or with 
such provider's authorization, and (3) that involves or enables 
the collection of information about the user's activities only 
with respect to the user's relationship with or use of such 
service or product, to the extent that such monitoring or 
interaction is for the purpose of network security, computer 
security, diagnostics, technical support or repair, network 
management, authorized updates of software, or for the 
detection or prevention of fraudulent activities. The primary 
goal of this legislation is to combat fraudulent and abusive 
Internet practices resulting from spyware and related nefarious 
technologies. The Committee intends to exempt technologies that 
combat practices that result in fraudulent transactions. For 
example, companies like Experian partner with financial 
institutions and online retailers in providing fraud prevention 
software where consumers apply for credit online. It is 
important to ensure that these fraud detection tools are not 
undermined.
    Section 5(b) 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), the so-called ``Good Samaritan'' provision, 
provides protection from the threat of Federal Trade Commission 
enforcement to the developers of anti-spyware software and 
services under specified circumstances. The section thus 
provides that no provider of an 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 customer's computer, if the provider notifies 
the customer and obtains consent before undertaking such 
action. This protection would not apply to litigation between 
private parties or to enforcement of State law by State 
attorneys general. The section also provides that nothing in 
subsection (c) shall be construed to limit the liability of a 
provider of computer software or of an interactive computer 
service for any anti-competitive act otherwise prohibited by 
law.
    Section 5(d) provides that 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 that the manufacturer or retailer is manufacturing or 
selling. This provision does not excuse from liability a 
manufacturer that includes its own software on computers that 
it manufactures.
    Section 5(e) provides a limited exemption for certain 
services provided by cable operators or satellite carriers. The 
section provides that it shall not be a violation of section 3 
for a satellite carrier or cable operator to (1) utilize a 
navigation device, (2) interact with such a navigation device, 
or (3) transmit software to or execute software installed on 
such a navigation device to provide service or to collect or 
disclose subscriber information, if such actions with respect 
to such information are subject to section 338 or section 631 
of the Communications Act of 1934. The Committee intends to 
avoid duplicative regulation, not to deny consumers the 
protections afforded by this Act. Accordingly, if there is a 
provision in Section 3 of this Act that does not have a 
corollary in Section 631 of the Communications Act, then the 
scope of this exemption would be limited to what the Federal 
Communications Commission actually has required of cable 
operators. The Committee expects the FTC to consult with the 
Federal Communications Commission in connection with 
interpretation and enforcement of this provision.

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 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 that those acts relate to acts of 
general consumer fraud. The Committee intends to preserve the 
ability of State Attorneys General to enforce these law 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 FTC's authority under any other 
provision of law, including the authority to issue advisory 
opinions, policy statements, or guidance regarding the Act.

Section 7. FTC report on cookies

    Section 7(a) requires that, no later than the expiration of 
the 6-month period that begins on the date on which final 
regulations are issued under section 9, the FTC submit a report 
to the Congress regarding the use of cookies in the delivery or 
display of advertising to the owners and users of computers. 
The report shall examine the extent to which cookies are or may 
be used to transmit to a third party personally identifiable 
information of a computer owner or user, information regarding 
Web pages accessed by the owner or user, or information 
regarding advertisements previously delivered to a computer, 
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. 
The report shall compare the use of cookies with the use of 
information collection programs, as such programs are defined 
in section 3, to determine the extent to which such uses are 
similar or different. Section 10(4)(B)(ii) contains an 
exception clarifying when cookies are not ``computer software'' 
subject to the requirements of section 3. 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 FTC to look into these and other 
functionally similar information collection programs to 
determine whether and, if so, how they use and transmit 
consumer information. The Committee also intends for the FTC to 
examine privacy safeguards that currently exist regarding the 
management of cookies by online entities.
    Section 7(b) provides that the section shall take effect on 
the date of enactment of this Act.
    Section 7(c) provides an exemption from the Paperwork 
Reduction Act for any such report in order to facilitate its 
completion within the statutory time frame.

Section 8. FTC report on information collection programs installed 
        before effective date

    Section 8 requires that, no later than the expiration of 
the 6-month period that begins on the date on which final 
regulations are issued under section 9, the FTC submit a report 
to the Congress on the extent to which there are installed on 
protected computers information collection programs that are 
not covered by the notice and consent requirements of section 3 
because such programs were installed prior to the effective 
date under section 11(a) of the Act. The report shall include 
recommendations regarding the means of affording computer users 
affected by such programs the protections of section 3, 
including recommendations regarding requiring a one-time notice 
and consent by the owner or authorized user of a computer to 
the continued collection of information by such a program. 
Section 8 also provides an exemption from the Paperwork 
Reduction Act for any such report in order to facilitate its 
completion within the statutory time frame.

Section 9. Regulations

    Section 9(a) provides that any regulations issued under the 
Act shall be issued not later than the expiration of the 9-
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 standard to guide FTC 
rulemaking under the Act, requiring a determination that such 
regulations are consistent with the public interest and the 
purposes of this 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 ``collect,'' ``computer software,'' ``disable,'' 
``personally identifiable information,'' ``transmit,'' ``unfair 
or deceptive acts or practices,'' ``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 recipient, or stored 
on the protected computer in a manner such 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 Web 
sites. 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 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. The term also does not include text or data 
files known as cookies to the extent that such text or data 
file: (1) is used, written to, or placed on the computer of a 
user by such provider, service, or Web site, or any entity 
acting with the authorization of and on behalf of such 
provider, service, or Web site, and (2) can be read or 
recognized solely to return information to such provider, 
service, or Web site, or any entity action with the 
authorization of and on behalf of such provider, service, or 
Web site. The Committee intends to offer an amendment during 
Floor consideration to clarify that computer software does not 
include a cookie or any other type of text or data file that 
solely may be read or transferred by a computer.

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, and further that it will sunset on December 31, 
2013. Section 10 also provides that the notice and consent 
requirements of section 3 shall not apply to an information 
collection program installed on a protected computer before the 
effective date of the Act.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    H.R. 964 does not amend any existing Federal statute.

                                  
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