The bitter legal dispute between Australian software security vendor PC Tools and controversial adware company Zango appears to be over, with both claiming to have won.

The case dates from May this year when Zango – a company previously accused of installing unauthorised spyware on user’s PCs – sued PC Tools for allegedly characterising its software as spyware during anti-malware scans. In June, a US district judge ruled against Zango, pointing out that the company enjoyed a poor reputation and that PC Tools’ assessment was therefore reasonable.

Zango countered that the judgement was irrelevant because PC Tools had down-rated its software from spyware to a less serious category, a charge PC Tools has denied, claiming the re-rating pre-dated the suit. Zango has endured bad publicity and a $3 million fine by the US Federal Trade Commission (FTC) in its time, but says it has since reformed.

“Zango yesterday dismissed a lawsuit against Australian software maker PC Tools because the fundamental reason for the suit has been rectified,” said a blog on the company website. “PC Tools has made changes and no longer eliminates or blocks Zango software as it did previously.”

PC Tools, by contrast, put a very different interpretation on events, claiming that Zango was rationalising a legal defeat.

"PC Tools did not change the rating of Zango's software as a result of the lawsuit. Prior to the lawsuit, the rating of Zango's products was being changed and Zango was notified of this process," said PC Tools CEO, Simon Clausen in a statement to Techworld.

"We can only assume they chose to go ahead with the lawsuit so they could attempt to spin the decision and infer the re-rating was somehow influenced by legal pressure. This now appears to have back-fired on them and they have withdrawn their application,” he said.

What is not in doubt is that Zango has now withdrawn its legal case against PC Tools completely, and that PC Tools no longer classifies Zango’s software in as aggressive a fashion as it once did. Superficially, the case has the look of a legal tie. What is less clear is why Zango brought the case in the first place when there was nothing to complain about, and why PC Tools, for its part, re-classified Zango at all when some still have doubts about it.

Researcher Ben Edelman remains convinced that Zango has not fully complied with the terms of the original 2006 FTC ruling against it. “In my hands-on testing, Zango continues numerous practices likely to confuse, deceive, or otherwise harm typical users as well as practices specifically contrary to Zango's obligations under its November 2006 settlement with the FTC,” he says in a recent post on his website.