Sonyhas settled with the US Federal Trade Commission (FTC) following thecompany's inclusion of flaky copy-protection software in music CDs.

The proposed agreement, which FTC commissioners approved unanimously, will be open for public comment until 1 March, before the FTC decides whether to make it final.

The copy-protection software Sony shipped with music CDs created security risks for users and monitored their listening behavior on their PCs without their permission, the FTC said.

The copy-protection software installed itself without users' consent, was complicated to uninstall and limited the devices a CD could be played in, as well as the number of copies that could be made, the FTC said.

The FTC had alleged Sony had violated federal law by selling music CDs with this type of hidden software.

Sony agreed to settle the charges without admitting that it broke any laws. "We're pleased to have reached this agreement with the FTC," Sonysaid.

An outcry erupted over Sony's inclusion of copy-protection software in music CDs in late 2005, when a security expert charged that the XCP (Extended Copy Protection) software used "rootkit" techniques, which are normally only used by hackers, to conceal itself on Windows systems.

Although Sony initially defended its use of the software, it eventually reversed its position, ceased production of XCP-enabled CDs and issued a recall for them after malicious "Trojan horse" programs were written to exploit the XCP code.

Also at issue was Sony's use of another copy-protection software called MediaMax, which also installed itself on PCs without permission and surreptitiously collected and transmitted information about users' activities. Sony didn't recall MediaMax CDs, but issued a patch to remove it. An earlier version of MediaMax offered copy protection but didn't create security risks nor monitored user activity.

Under the proposed settlement, Sony agrees to clearly disclose limitations on consumers' use of music CDs and to never install software on consumers' PCs without permission. The company also agreed to let consumers exchange the CDs in question until 30 June and reimburse consumers for up to US$150 to repair damaged caused by the software to their PCs. Consumers will be able to exchange CDs with the software purchased before 31 December, 2006 for new CDs free of content-protection software.

Original story by IDG news service