The Federal Trade Commission (FTC) announced on Tuesday that it would use existing fair trade laws to ask courts to shut down some of the leading distributors of the tool that could spy on online activities and inundate screens with pop-up ads.
The acting director of the FTCs Bureau of Consumer Protection, Lydia Parnes, said: "Consumers don't deserve to be pestered and spied on by people who illegally hijack their computers.
"We're putting purveyors of spyware on notice: This is our first spyware case, but it won't be our last."
Confident of victory
US officials are said to be emboldened by recent advances of anti-spyware legislation in congress and the growing consumer sentiment in favour of curbing the practice.
The lawsuit targets Seismic Entertainment Productions, a New Hampshire-based company, and the man behind it, Sanford Wallace.
Court documents allege the defendant has operated websites that distribute spyware since last December, using a variety of tricks to direct consumers to them.
A contact with the smartbot.net site usually resulted in spyware being sneaked into personal computers unbeknown to their owners, the complaint said.
"Spyware is to computers what an open window is to burglars"
Joe Barton, chairman of Energy and Commerce Committee
The programs changed people's home pages, search engines, exposed them to an avalanche of pop-ups and caused their computers to slow down or crash, resulting in a loss of data.
The complaint also alleged the company then offered to fix the problem by selling affected consumers anti-spyware packages manufactured by another company for about $30 each, officials said.
The commission said the companies had engaged in unfair trade practices by downloading their product on to private computers without authorisation, causing serious harm, then forcing consumers to pay to fix it.
Riding the wave of popular alarm over misuse of the internet, the US House of Representatives last week approved the so-called Spy Act, requiring that consumers receive a clear and conspicuous notice before any spyware downloads.
The measure prohibits deceptive behaviour such as key-stroke logging, computer highjacking, and pop-up ads that cannot be closed.
Lawmakers expressed concern that some versions of spyware can enable intruders to gather personal data such as passwords and credit card numbers, which can then be sold for illegal purposes.
"Spyware is to computers what an open window is to burglars," said Representative Joe Barton, chairman of the House of Energy and Commerce Committee. A companion bill is awaiting passage in the US Senate.