US FTC sues New Hamsphire "spyware" operation

WASHINGTON (Reuters) - US regulators asked a court on Wednesday to shut down a maker of what they termed computer "spyware" that steers internet users to fake search engines and tracks their movements online.

Odysseus Marketing Inc of New Hampshire said its free Kazanon software would allow users to share music anonymously over "peer to peer" networks to avoid prosecution from the recording industry.

But the software doesn't work as advertised and the company's work should be halted, the Federal Trade Commission said in a complaint filed with a US court in New Hampshire.

The FTC said the software serves as a trojan horse for other, unwanted programs that deliver "pop up" ads and track the user's online movements, the FTC said.

Those infected with Odysseus' spyware have their search results corrupted as well, the FTC said. When they try to use a search engine like Yahoo or Google, they are steered to a look-alike page that prominently lists Odysseus clients in the results.

Those who use an Odysseus software tool to remove the spyware only draw more unwanted programs on to their computers, the FTC said.

Odysseus principal Walter Rines was not immediately available for comment.

The US House of Representatives voted in May to stiffen jail sentences and establish multimillion-dollar fines for spyware purveyors. Similar legislation has been introduced in the Senate.