| About InfoWorld : Advertise : Subscribe : Contact Us : Awards : Events : Store |
 |
||||
|
||||
 | ||||
 |
|
|||
 | ||||
|
|
|
||
|
||||||||||||||||||||||||||||||||||||||
 NEWSWhy worry about shrinkwrap licenses? By Ed Foster August 18, 2000 1:01 pm PT I've often said that the core problem with UCITA is that it makes all the one-sided terms in shrinkwrap licenses legally enforceable. But is that really so important? Unless you're the litigious sort, you are highly unlikely to wind up in a courtroom fighting over one of those terms, so you may think UCITA means nothing to you. But let me tell you a few stories before you make up your mind.
There was one little fly in the ointment, however -- a bug that caused the program to crash in certain circumstances. The software had crashed repeatedly while the company's staff was using it, but the data they had entered appeared unharmed once they rebooted, so they continued. (Software crashes all the time, after all, especially new software.) After winning the bid on the hospital, however, they discovered that the program had somehow wound up miscalculating, causing them to underbid the hospital job by $2 million. On learning this, company officials were rather upset and decided to sue the software publisher to recover their losses. As the construction company was gathering evidence for its case, an interesting fact came to light. At the time they were ordering the new version of the program, the software publisher was already aware of the bug, and a fix was available by the time the miscalculation occurred. But believing that the bug was not likely to cause serious problems (software crashes all the time, after all), the publisher chose not to notify customers of the bug or the fix unless they asked. Yet in spite of this, the construction company's lawsuit was eventually thrown out of court. The software came with a shrinkwrap-type license agreement that proclaimed the publisher could not be sued for consequential damages, and that was that as far as the court was concerned. Sad to say, this little fable is not a fiction. It follows the undisputed facts as described in a Washington state appeals court decision in the case of M.A. Mortenson vs. Timberline Software. Now, I have to say we don't know what evidence and arguments Timberline might have presented in its defense had the three-judge appeals court not enforced its shrinkwrap terms. Possibly Timberline would have demonstrated mitigating circumstances that would convince a court it shouldn't have to pay for Mortenson's loss. And possibly not. But that's just the point. Timberline didn't have to defend itself because of that term prohibiting a suit for consequential damages -- a term you'll find in every shrinkwrap license. Realize that Mortenson had some very good precedents in its favor for believing that Timberline's disclaimers of warranties and consequential damages would not be enforced. The basic facts of the case parallel closely those in a very well-known federal court decision (Step-saver Data vs. Wyse/The Software Link) in which such post-sale terms in a shrinkwrap-type license were ruled unenforceable. In addition, there have been innumerable cases in which software was treated as regular goods, and any merchant selling goods with a known defect without warning customers is invariably going to be held responsible. In this case, the appeals court instead modeled its decision after several recent, and still controversial, federal court decisions (ProCD vs. Zeidenberg, Hill vs. Gateway 2000) in which shrinkwrap terms were upheld. Interestingly, in its opinion, the appeals panel noted the existence of what was then the UCC Article 2B drafting effort; and the judge who wrote the opinion also told me that an "amicus" brief filed by the Business Software Alliance (BSA) defending shrinkwrap licenses had been very helpful to the court in reaching its decision. The BSA brief, quite naturally, presented much the identical arguments they used in lobbying for 2B/UCITA. So before UCITA was enacted in any state, its fundamental principle was already being enforced by the courts in the state of Washington. And that's a bit scary when you consider that Timberline isn't the only software company whose shrinkwrap licenses are governed by Washington law. But there's another story that I find even scarier. In the fall of 1995, Gateway 2000 celebrated its first decade in business by shipping the Gateway Tenth Anniversary System. Advertisements for the PC touted its state-of-the-art features including a Matrox MGA Millennium graphics card, a 6X CD-ROM drive and Altec Lansing "Surround Sound" speakers. For those who wanted the latest and greatest in PC technology, the $4,000 price tag seemed like a bargain, so Gateway had plenty of eager customers. Over the next few months, however, some of those customers began to wonder about the system's performance and to question Gateway about the components. Slowly, the truth began to come out. On March 4, 1996, Robert X. Cringely reported user complaints about the CD-ROM performing no better than 4X drives. By spring, further trade press reports revealed that the video card was not the high-end Millennium board but a cheaper Matrox product with fewer capabilities and that, while the Altec Lansing speakers had come in packages marked "Surround Sound," they were in fact not surround-sound speakers. After the Tenth Anniversary System's shortcomings became known, a class-action lawsuit was filed against Gateway by a couple named Hill. Gateway countered with a motion that the court enforce a mandatory arbitration clause in Gateway's 4-page "Standard Terms & Conditions" included inside the box with the PC. If enforced, the clause would prohibit the Hills from suing Gateway, and they would instead have to submit to an arbitration hearing under a set of rules that would require them to pay a $2,000 fee, regardless of the outcome. Because the most the Hills could hope to win in such a proceeding would likely be about $1,000 -- the amount it would have taken to upgrade the system to match what Gateway had advertised -- they would have lost in arbitration even if they had won. Initially, Gateway's motion to force arbitration was denied by a federal district court, which said in part that the Hills were not given adequate notice of the existence of the arbitration clause. A U.S. Court of Appeals reversed that decision, however, ruling that per Gateway's terms, the Hills had 30 days to return the computer if they objected to the arbitration clause or any of the other terms. At that point, all the terms became binding. It did not matter that the Hills had not actually read the terms closely enough to see the arbitration clause or that, if they had, the clause did not mention the $2,000 fee. It's true that the Hills could have returned the computer if they'd discovered in 30 days that it did not have the components Gateway had promised. With the Tenth Anniversary System, however, it took a number of technically astute customers working together online for many months to discover the truth. And if the Hills had seen the arbitration clause and been concerned about it, it would almost certainly have taken them more than 30 days to find out about the $2,000 fee, etc., because the details of the arbitration rules Gateway had chosen were only available from an obscure organization located in France. This case is disturbing on several levels. As with the Timberline case, we don't know what arguments Gateway might have used to defend its actions because the company was allowed to hide behind its fine print. And although it's easy for a court to say you're responsible for reading all that stuff, it's unrealistic to expect that one would return a product prior to discovering its defects on the basis of one vague term among all the other disclaimers. Perhaps most disturbing of all is that -- although this case epitomizes the legal system UCITA would implement for software -- this isn't a software case. The Hills weren't accusing Gateway of selling a buggy product; they were accusing the company of outright fraud in delivering something other than what it promised. If a computer manufacturer can avoid lawsuits by sticking a few lines of fine print inside the box, why couldn't a stereo manufacturer or an apparel catalogue do so as well? It's important to realize these recent court decisions are still considered controversial by many legal experts and that they run counter to many other court rulings. Judges have historically frowned on any "contracts" that are presented after the sale and in non-negotiable fashion, as is the case with shrinkwrap/clickwrap licenses. There are ample precedents the courts could have chosen to follow in order to rule differently in either of these cases. But they didn't, and UCITA's proponents can therefore point to these decisions and a few others as evidence of a trend toward blanket enforcement of shrinkwrap contracts. And while we may find these court rulings surprising, we probably shouldn't. Customers in these types of cases don't have large, well-funded organizations behind them ready and willing to pay for legal specialists, researchers, amicus briefs, etc. Even a big construction company is going to be overmatched when it realizes too late that it's taking on a whole industry. So there is a legal trend in UCITA's direction, but does that mean it's a healthy one? What does it mean for all consumers if software companies have no legal responsibility to tell us about bugs that they know could harm us? Do we want manufacturers to get away with sending us inferior products because we didn't read all their fine print? Most of us have absolutely no desire to ever be involved in any kind of lawsuit. But I suspect we would all like to think we would have that recourse if we found ourselves in a situation like these I've described. And that's only because we want the vendors we deal to will know that we have that ultimate recourse, so they will avoid putting us in those situations. And that's what UCITA takes away. SPONSORED WHITE PAPERS 
SPONSORED LINKS
|
||||||||||||||||||||||||||||||||||||||
|
||||||||||
|
||||||||||
