'Free iPod' firm hit with privacy-breach suit

A Web company that offered free iPods, video games and condoms to qualified registrants now faces a lawsuit alleging it sold millions of user e-mail addresses that it had vowed to keep private.

The suit, filed in the state's supreme court in Manhattan, marks the latest chapter in Spitzer's charge against what he has labeled the largest deliberate breaches of privacy in Internet history. Earlier this month, the attorney general announced a $1.1 million settlement with Datran Media. The e-mail marketer had been accused of buying at least 6 million files from Gratis, despite knowing that the transaction ran contrary to the seller's privacy policy.

In Thursday's filing, the state claims that Gratis violated its own privacy policies by collecting and selling personal information on more than 7 million users, over a period of three and a half years. Gratis sold the information to three independent e-mail marketers, including Datran, in 2004 and 2005, according to the suit. Those marketers went on to fire off tens of millions of unsolicited e-mails to the addresses obtained, the complaint alleged.