Microsoft sues three for 'massive' click fraud scam

Microsoft filed a lawsuit on Monday against three people accusing them of running a "massive" click fraud scheme that involved harnessing hundreds of thousands of computer IP (Internet protocol) addresses to target advertisers promoting auto insurance and the World of Warcraft on-line game.

The lawsuit centers on a scheme to bilk competitors by clicking on their on-line ads, Microsoft said in court filings. Typically a percentage of those clicks result in sales and cover the amount paid for the traffic. However in the instance of alleged click fraud, no sales were made and the victim companies lost money. This type of activity also hurts the performance of the ads and can push them down in rankings.

The complaint, filed at the U.S. District Court for the Western District of Washington, alleges Eric Lam, Gordon Lam and Melanie Suen, of Vancouver, Canada, breached Microsoft's adCenter contract by running a click fraud scheme along with several companies and other, unnamed parties.

The lawsuit is Microsoft's first for click fraud and the company is asking the court for at least US$750,000 in damages.

"The on-line advertising industry has been making strides in this area for years, implementing technology, best practices and techniques to help address issues such as click fraud," wrote Tim Cranton, the software company's associate general counsel, in a blog posting. "Today’s action is one more step to expand that effort by utilizing the legal system to combat click fraud. Enforcement can play a critical safety role, supplementing technology and industry best practices, by using lawsuits and criminal prosecutions to stop the most egregious violators and hold them accountable for the fraud they commit."

Microsoft's investigation began on March 24, 2008, when it received an unusually high number of complaints regarding suspicious activity from auto-insurance advertisers that use its sites. There had been a large spike in the number of searches submitted that exactly matched the keywords on which the insurance companies had bid and within a short time the top search results were being clicked.

It found hundreds of thousands of IP addresses were being used to disguise the true source of the traffic.

A similar series of searches and clicks occurred on April 24 of the same year targeting World of Warcraft advertisers and Microsoft entered into a cat-and-mouse game whereby it would filter the traffic, see its characteristics change and adjust its own filters again, it said. Subsequent cycles of suspicious activity were again detected in June, July and December of 2008.

Microsoft said it had traced back the clicks in question to computers or servers run by Lam, who has links with both a World of Warcraft on-line store and auto-insurance advertising.

The IDG News Service is a Network World affiliate.