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A Fatal Blow to Shrinkwrap Licensing?
The Gripelog ^ | Mon Dec 20th, 2004 at 08:02:57 AM PDT | By Ed Foster

Posted on 12/20/2004 9:04:30 PM PST by ScuzzyTerminator

A Fatal Blow to Shrinkwrap Licensing?

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

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.


TOPICS: Business/Economy; US: California
KEYWORDS: adobe; bestbuy; compusa; eula; licenseagreement; microsoft; nav; norton; shrinkwrap; software; staples; symantec; windowsxp

1 posted on 12/20/2004 9:04:30 PM PST by ScuzzyTerminator
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To: ScuzzyTerminator
In tiny print at the bottom of the license agreement:

We have the right to abduct your first born female child....

2 posted on 12/20/2004 9:08:52 PM PST by Hunble
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To: ScuzzyTerminator

I thought that it was something important like shrinkwapping a boat??? My Bad.


3 posted on 12/20/2004 9:11:30 PM PST by Ethyl (when)
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To: ScuzzyTerminator

If one reads many software agreements closely, one doesn't buy the software, but are 'leasing' its use.

Unlike buying a book or a CD that you can give away or sell at a yard sale or trade, software ownership is usually retained by the software creator.

Technically, when you upgrade, for example, you are supposed to destroy the old software. The software company retains the right to reclaim it at will.


4 posted on 12/20/2004 9:27:57 PM PST by TomGuy (America: Best friend or worst enemy. Choose wisely.)
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To: TomGuy
"If one reads many software agreements closely, one doesn't buy the software, but are 'leasing' its use."

That, and everything else you have said in your post is true.

However, it is interesting to note that even the mighty Microsoft has NEVER filed suit or claimed a licensing violation against any individual. While it is true that they have gone after some businesses for violating EULA agreements by selling more than one copy of Windows98 or 2K with the same CD key, they have never gone after an individual because they know that the EULA is worthless and would lose in court.

5 posted on 12/20/2004 9:50:21 PM PST by El Gran Salseron (My wife just won the "Inmate of the Month Award!" :-))
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To: El Gran Salseron

What I don't understand is if you purchase software that doesn't work, no one will take it back and give you your money back.

I paid $299 for Adobe Acrobat and after I installed it had problems. I called the company and they wanted another $179 to let me speak to tech. I tried to return it and the store wouldn't take it back. Needless to say, I am not happy with Adobe and if this is the way they treat a $300 sale, I can see why people pirate software because I sure as hell am NEVER AGAIN spending $300 on any software ever again.


6 posted on 12/20/2004 10:08:07 PM PST by Auntie Mame ("Whether you think you can or think you can't -- you are right." Henry Ford)
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To: TomGuy
Legally: "software ownership is usually retained by the software creator."

As a Software Engineer, anything that I create is owned by the company.

Friday, I hit them with my own personal law: I demand to become a partner in this company, or my software will never get completed!

To my absolute amazement, on Monday morning, they offered me voting stock in the company!

7 posted on 12/20/2004 10:15:06 PM PST by Hunble
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To: ScuzzyTerminator

When I opened the shrink wrap I heard a loud voice say, "All of your software are belong to us!"


8 posted on 12/20/2004 10:59:27 PM PST by UbonGhostrider (Fire for effect)
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To: TomGuy
If one reads many software agreements closely...

On the other hand, if one does not read the agreement and does not positively signify that he enters into the agreement, then there is no agreement. The software is thereby protected by copyright law but not a EULA.

Since you paid cash in exchange for a copy of the software without entering any subsequent agreement, you may do whatever you like with your copy. As long as you do not copy, distribute or otherwise violate the copyright, the copyright holder can not touch you.

Unlike buying a book or a CD...

Why is it unlike buying a book or CD? Books and CDs have the same copyright protection as software. The video industry actually tried "EULAs" to prevent rentals and failed as the "right of first purchase" prevailed.Or, why couldn't a seller slap a EULA on a book? Imagine that when you get home and start reading your newly purchased book, somewhere between the Table of Contents and the Preface you find a page declaring that you are only leasing this book and that by reading any further you agree that this copy can only be read by you in your own home and if you do not agree you must return the book for a refund. These terms could indeed be binding if you agree before purchase, but having already purchased the book you may tear the page out and do with the book as you please, as permitted by copyright law.

The point is, there is a difference between violating a copyright and violating a license agreement. In order for the copyright holder to claim a violation of a license agreement, he must show that an agreement was reached. This is impractical unless the agreement is made before purchase.. Failing that, he only has rights designated by copyright law.
9 posted on 12/20/2004 11:09:40 PM PST by ScuzzyTerminator
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To: El Gran Salseron
Agreed! The shrinkwrap EULA violates the most very basic principle of imposing terms on a buyer AFTER the sale is consummated. A BIG NO,NO! It would just be inconceivable (and laughable) in any other circumstance for the seller, after the sale of something to go "Hey, by the way, here are some additional terms that you agreed to."
10 posted on 12/21/2004 12:39:47 AM PST by AmericaUnited
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To: Hunble
Friday, I hit them with my own personal law: I demand to become a partner in this company, or my software will never get completed!

Usually, a company will let you get hit in the ass by their front door if you pull that stunt.

11 posted on 12/21/2004 12:42:34 AM PST by AmericaUnited
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To: ScuzzyTerminator
there is no agreement

How many times have you had to click the "I agree with the terms" button; otherwise, installation ceases. Agree and install continues; disagree (thus decline) and installation ceases. Then try returning the package to the store. That was the intent of the lawsuit in the article.

Does all software follow that method? No, but most of the major and many of the minor do. Those companies that are most knowledgeable with EULAs and copyrights do.

The point is, there is a difference between violating a copyright and violating a license agreement

That is why MY comments were regarding software licensing and not book/CD copyright (Unlike buying a book or a CD ). I am very familiar with copyrights. I have been directly involved in copyrighting both text materials (books/manuals) and software program code. EULAs are simply statements of terms of agreement (thus, creating a contract) between two parties: the software creator and the user.

By mixing copyright and EULA in your response, you are muddling the issue. The problem/concern was with EULA and its validity. It has nothing to do with copyright. Copyright on software pertains to protecting the code. It has nothing to do with software use. EULA is the usage agreement. That usage agreement typically says you can use the software but the company still owns all rights to it.

The point of the lawsuit was that the EULA terms were not external. One had to start the install to see the EULA terms. If one disagreed and ceased installation, one should have been able to return the package to point of purchase. In this case (and for most stores/chains who had a similar policy), you open the package, you cannot return it for a refund. This lawsuit makes the point of purchase responsible for making available a copy of EULA at pre-purchase time.

Years ago, many stores had a 'you break it, you bought it' policy. Someone took that to court. The stores lost (IIRC). You only see such signs in small mom-pop type stores any more, because the policy is not enforceable.
12 posted on 12/21/2004 6:19:50 AM PST by TomGuy (America: Best friend or worst enemy. Choose wisely.)
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To: Hunble

Good for you.

Most agreements for contract employees specifically said anything developed by the contractor became the property of the employing company.

Copyright law even has writing/development-for-hire provisions that give the employER, not the hirEE, rights to projects developed by the hirEE during employment.

Disclaimer: All agreements/contracts should be read closely.

I worked for a copy once, as a full employee, not contractual. We were required, however, to sign an agreement. That agreement stated than, if we left the company, they had the right to disavow that we had ever worked for them. (The company developed software for grocery wholesalers and stores; it wasn't secret DOD stuff. lol.) Needless to say, we balked at that provision and refused to sign until that was removed.


13 posted on 12/21/2004 6:28:13 AM PST by TomGuy (America: Best friend or worst enemy. Choose wisely.)
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To: TomGuy
In a company of only three people, the two of us finally put some pressure upon the other one. We did not think we would win the argument, but it was worth a try.

To our surprize, we were told Monday that we would be given shares in the company.

Nobody was more suprized, than the two of us.

14 posted on 12/21/2004 6:38:25 AM PST by Hunble
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To: ScuzzyTerminator

Linux people have tried this is the past. WHen they could only get a particular piece of computer hardware by buying it with Windows, they bought it, then when Windows first booted and demanded the acceptance of Microsoft's terms, they refused. Since all they wanted was the hardware in the first place (planning to install Linux on it), the then tried to return the WIndows software for a refund, as the demand window said they could do. Hilarity ensued, as one web site frequently puts such things.


15 posted on 12/21/2004 6:40:15 AM PST by John Jorsett
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To: ScuzzyTerminator
...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...

How altruistic of you, counselor.

And did you do this pro bono, for the benefit of the general public?

Or are you working a scam to suck money out of the software manufacturers?

Lawyers are the scum of the earth.

16 posted on 12/21/2004 7:13:22 AM PST by OldSmaj (Islam is a false religion. It's adherents and followers are doomed to hell.)
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To: TomGuy
EULAs are simply statements of terms of agreement (thus, creating a contract) between two parties: the software creator and the user.

Statements of terms of agreement are not valid unless the purchaser enters into the agreement. When you buy a copy, you do not need permission to use it. If the copyright holder, after purchase, offers you an EULA contract to use it, you have every right to decline and continue using it. The copyright holder has no legal power to revoke your right to use after purchase by saying "if you click this you agree."  You have every right to disagree and click anyway. Its you copy, you own it and you can do whatever you want with it, subject to copyright law.

The situation is totaly different when the EULA contract is offered before purchase. You can not legaly obtain the copy without permission and the EULA contract is what is require to get permission.

By mixing copyright and EULA in your response, you are muddling the issue.

Not muddling. The point is that it is copyright law that is in effect untill the purchaser enters into the EULA contract and copyright law remains in effect if the purchaser declines the EULA contract. If you decline the EULA contract you may do whatever copyright law allows you to do with a purchased copy, that is, you may use it.
17 posted on 12/21/2004 11:53:03 PM PST by ScuzzyTerminator
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