The Federal Trade Commission said on Friday that HTC America, a subsidiary of HTC Corp in Taiwan, made millions of phones with programming flaws that allowed third-party applications to evade Android's permission-based security model.
This means that the Android operating system, which normally requires users be provided notice if sensitive data is given to third parties like data brokers, was prevented from giving notice to users, according to the FTC.
Sensitive data includes location or the contents of text messages. The settlement requires the company to establish a comprehensive security program and patch the software holes.
HTC spokeswoman Sally Julien said the company, working with carrier partners, has addressed the identified security issues on majority of devices released in the United States after December 2010.
"We're working to roll out the remaining software updates now and recommend customers download them once available," Julien said.
The regulator said in a statement that HTC America "failed to provide its engineering staff with adequate security training, failed to review or test the software on its mobile devices for potential security vulnerabilities (and) failed to follow well-known and commonly accepted secure coding practices."
It said millions of HTC devices were compromised, "potentially permitting malicious applications to send text messages, record audio, and even install additional malware" without the knowledge or consent of the user.
In a Twitter question-and-answer session, the FTC said that while the HTC America case was not the first on data security unfairness, it was the first that dealt with software security.
(Reporting By Diane Bartz and Alina Selyukh; Editing by Ros Krasny and Grant McCool)