[Ecommerce] A Fatal Blow to Shrinkwrap Licensing?

[Manon Ress]

Good news!

http://www.gripe2ed.com/scoop/story/2004/12/20/8257/4850


A Fatal Blow to Shrinkwrap Licensing?

By Ed Foster, Section Columns
Posted on Mon Dec 20th, 2004 at 08:02:57 AM PDT

Having so often been the bearer of bad news from the legal front, I am
thrilled to have some good news to report for a change. The
old-fashioned shrinkwrap license appears to have suffered from what may
well be a mortal wound. Microsoft, Symantec, Adobe, CompUSA, Best Buy,
and Staples have agreed in the settlement of a California lawsuit to
change their ways, and you can already see the first results at the
software retailer nearest you.

In January 2003, California resident Cathy Baker walked into her local
CompUSA store to return copies of Windows XP and Norton AntiVirus she'd
purchased there. When trying to install the programs, she had of course
been confronted by all the obnoxious terms in the Windows and NAV End
User License Agreements. Instead of clicking OK, she took them back to
the store for a refund, as the EULAs said she was supposed to do if she
refused to accept the terms.

At CompUSA, however, Baker was told the store's policy was that it could
not give refunds for software once the customer has opened the package.
Even though Baker had no way of seeing the EULAs until after she
purchased the products, took them home, opened the package and tried to
install the software on her computer, she was now told she could not get
her money back even when she rejected the terms. (In a somewhat bizarre
twist, after she protested enough, one CompUSA employee told her that
they had "secret instructions" from Symantec to provide refunds in such
circumstances.) So, like many others before her, Baker was confronted
with the classic shrinkwrap license conundrum: She could only see the
terms by opening the box, and opening the box meant she was stuck with
it. But Baker did something most others before her had not - she went
and got a lawyer.

"When Miss Baker came to us, we felt it was an important case to bring
for the benefit of the general public," says Baker's attorney, high tech
litigation specialist Ira Rothken. "In our research, we found that it
hadn't been discussed before - there was no guidance on it in the
literature. Here you have a multibillion-dollar industry that is using
improper business practices as a consistent policy, in violation of
federal and California consumer warranty statutes. As a practical
matter, the consumer couldn't review the terms and conditions prior to
the sale and couldn't reject them with any certainty they could get all
their money back."

After Rothken first filed the lawsuit in February of 2003, ensuing news
coverage brought more consumers forward with similar stories of their
own. An amended complaint to the case Rothken filed in May of that year
added a second plaintiff along with Baker and also included Adobe,
Staples and Best Buy as defendants with Microsoft, Symantec and CompUSA.
Ultimately the parties entered a mediation process and in April they
reached a settlement under which the six defendants had up to 120 days
to make the agreed-upon changes to their procedures. The entire
settlement along with the amended complaint and exhibits can be read in
a PDF file on Rothken's website, but it reads in part:

     "The Settlement Agreement provides to the General Public of
California, amongst other things, the right of consumers to return
applicable Symantec, Adobe and Microsoft software for full monetary
refunds even if the shrink-wrap has been opened ... In addition,
Symantec, Adobe, and Microsoft agreed to provide EULAs for the
applicable software products on their web site and notices on their
respective software packaging of the web addresses to such EULAs so
consumers can review such EULAs prior to purchase of the software."
CompUSA, Best Buy and Staples "agreed to provide such EULAS to consumers
upon request prior to sale of the above software at their retail stores
in California and to provide notices to consumers in such stores to
effectuate the above."

There's a lot in this settlement, and I'm going to have more to say
about why it's important in the near future. But there have already been
changes because of it, and I think there are going to be more. When
Baker walked into that CompUSA almost two years ago, there was basically
no way for her to see the Windows XP or Norton AntiVirus EULA before she
put her money down. Last week, as part of the General Public of
California myself, I strolled into my local Staples to see if anything
has changed now that these wayward defendants have had their 120 days to
shape up. Sure enough, the new packages for Windows XP Home Edition and
NAV 2005 direct you to Microsoft and Symantec web pages where those
EULAs are posted. In fact, newer packages for Microsoft Office
applications also have a URL for those EULAs, even though Office was not
formally part of the settlement agreement.

And that's why I think we can expect more changes to come. This
settlement isn't going to be just applied in California, it's not going
to only be honored by these three software companies, and it's not only
going to force brick-and-mortar software retailers to help their
customers see terms before they buy. Think about it. If you were a legal
advisor for Amazon, Autodesk, Borland, CDW, Circuit City, Intuit,
Macromedia, McAfee, Sears, or any number of other companies involved in
selling software to consumers, wouldn't you be suggesting they treat
this settlement as if it were binding on them as well?

Of course, the right to return opened software and the right to see
terms before you buy aren't going to rid us of all the nasty sneakwrap
terms overnight. But the first step has been taken. Baker took it two
years ago when she walked into a store to demand the rights that we all
should have.


--
Manon Anne Ress
manon.ress@cptech.org,
www.cptech.org

Consumer Project on Technology in Washington, DC
PO Box 19367, Washington, DC 20036, USA
Tel.:  1.202.387.8030, fax: 1.202.234.5176

Consumer Project on Technology in Geneva
1 Route des  Morillons, CP 2100, 1211 Geneva 2, Switzerland
Tel: +41 22 791 6727