Hola is a very well-known brand in the VPN and proxy space but the company has been roundly criticized for the manner in which its free core product operates.
While traditional VPN services use encrypted servers to relay customer traffic and tend to focus on privacy, Hola’s free model is based on utilizing the resources and bandwidth of its users. During December, Trend Micro published a scathing report, describing Hola as an “unsafe VPN”.
Hola fired back, stating that its free service isn’t designed for privacy or anonymity but agreeing that users’ bandwidth is utilized by Luminati Networks, the company behind Hola. But while controversial, it’s clear that Luminati is keen to protect its business model.
In a patent infringement lawsuit filed in the Eastern District of Texas which has largely flown under the radar, Luminati Networks Ltd is suing BI Science Inc., the company behind another so-called “residential proxy network” known as GeoSurf.
Both parties are based in Israel but Luminati claims the Court has jurisdiction, in part due to some GeoSurf users having residential IP addresses in Texas.
Luminati claims ownership over a number of patents, as listed on its website, which protect methods for “fetching content over the Internet through the use of intermediary tunneling devices.”
“Luminati permits its business customers to utilize its residential proxy network to access data over the Internet using residential IP addresses from various localities as required by the customers,” the suit reads.
“These residential IP addresses provide businesses with a number of advantages. For example, Luminati’s customers may use this network to anonymously compare prices leading to more transparency and lower prices for consumers. Luminati’s customers may also use residential proxy addresses to test their web sites from any city in the world.”
The lawsuit provides details of Luminati’s investor shareholders, whose representatives were given access to confidential information about the service in May 2015, including “trade secrets and know how.”
It’s claimed that these representatives, who previously founded BI Science in 2009, went on to introduce their own residential proxy service under the GeoSurf brand in July 2017, “having estimated that switching to a residential proxy service from a server-based service could dramatically reduce BI Science’s ongoing server costs and provide BI Science with new revenue streams from this capability.”
It’s further alleged that three former Luminati employees, who were under confidentiality and non-compete agreements with the company, went on to join BI Science “within months” of leaving Luminati.
“Upon information and belief, BI Science hired these former Luminati salespeople for the purposes of selling BI Science’s competing ‘Geosurf’ residential proxy service,” the suit notes, adding that Luminati lost customers as a result.
“Luminati has suffered damage because of the infringing activities of BI Science, its officers, agents, servants, employees, associates, partners, and other persons who are in active concert or participation therewith, and Luminati will continue to suffer irreparable harm for which there is no adequate remedy at law unless BI Science’s infringing activities are preliminarily and permanently enjoined by this Court,” Luminati adds.
The two patents allegedly being infringed upon by GeoSurf are also the subject of dispute in another suit filed in July against UAB Tesonet, the company behind residential proxy service Oxylabs.
While fairly complex from a technical perspective, the Luminati v BI Science lawsuit here (pdf) provides a broad yet useful overview of how so-called “residential” or “community” type proxy services operate.
The take-home for the privacy-aware is that these peer-to-peer proxy-based products should never be confused with what most people consider to be a strong, encrypted, privacy-focused VPN service.
There is a very good reason why Hola-style “community” services are mostly free to the home user, so consumers are strongly advised to study the small print before signing up to any service, to be absolutely sure of what they’re getting into.
If becoming part of a network that utilizes and monetizes your Internet connection behind the scenes sounds attractive, then “community” services are perfect for you. If not, a few dollars, euros, or pounds per month spent with a reputable company is a far superior option.
