The Marketplace Report: Year-End Tech Stories

Farai Chideya talks to John Dimsdale of Marketplace about the biggest technology stories as 2005 comes to a close. Microsoft is reporting more flaws in its Windows operating system, Sony has tentatively settled a class-action lawsuit over the company's copy protection software on CDs, and USA Today reported this week that more than 50 million Americans have been exposed to identity theft through database break-ins.

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FARAI CHIDEYA, host:

Back now with DAY TO DAY. I'm Farai Chideya.

Microsoft is warning computer users about a newly discovered flaw deep inside the Windows operating system. It makes computers vulnerable to viruses, spyware and other nefarious break-ins by hackers. Windows runs on more than 90 percent of the nation's personal computers. John Dimsdale joins us from "Marketplace."

John, this sounds pretty serious.

JOHN DIMSDALE ("Marketplace"): Well, that's exactly the word used by Microsoft's own security response center. The company is scrambling to come up with a fix. This flaw is in most versions of the operating system, including the latest Windows XP and going back to Windows 98. And it's particularly bad because the vulnerability can be exploited just by viewing an infected image that might be sent to you in an e-mail. With most previous flaws, the user had to actually click on an e-mailed link to let the hackers in. But some e-mail programs automatically open e-mails in a preview box and with this new defect, just opening the e-mail could allow hackers to put malicious software on your computer. And you can't get around it by using a non-Windows browser like Netscape or Firefox, so computer security experts are saying be especially careful until Microsoft can come up with a patch.

CHIDEYA: Speaking of security breaches, I understand that Sony's music division has reached a possible settlement of lawsuits over surreptitious spyware that the company put on some of its CDs.

DIMSDALE: That's right. Remember back in October, people who transferred Sony CDs to their computers were discovering that the CDs were secretly installing copy-protection software. But the software also allowed Sony to monitor how their music was being used, and even reclaim if it the buyer tried to resell the CD. Worse, once the program burrowed into the computer, it opened it up to vulnerabilities to hackers and virus writers. So now Sony wants to settle--there were about 20 class-action lawsuits. They will replace the old CDs with clean versions and give everyone who bought one of the copy-protected CDs $7.50 in cash and a free download from a list of other Sony albums. The courts still have to approve this, but assuming they do, it's going to be a costly mistake for Sony, and it shows how tough it is for the music and video industries to grapple with the digital age that gives everyone the ability to make exact replicas of entertainment products.

CHIDEYA: It also shows how dangerous it is out there in cyberspace for all consumers, not just ones who are big computer lovers.

DIMSDALE: Yeah, that's right. There've been a number of major break-ins to sensitive computer databases that exposed millions of people to ID theft. This month alone there were breaches of the firewalls at Marriott, Ford, Sam's Club. USA Today reports that 2005 is the worst year ever for computer break-ins, 130 big cases this year, potentially putting sensitive financial information of about 55 million Americans in the hands of computer hackers.

Coming up on "Marketplace," we're going to find out why American caviar is overtaking beluga on world markets.

CHIDEYA: John Dimsdale of public radio's daily business show, "Marketplace." "Marketplace" joins us regularly at this time for discussions about money and business, and is produced by American Public Media.

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