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Second Life Arbitration Clause Unenforceable 161

NewYorkCountryLawyer writes "In a decision that could have far-reaching implications, a federal court in Pennsylvania has held that the California arbitration clause in the 'take it or leave it' clickwrap agreement on the Second Life website is unconscionable, and therefore unenforceable. In its decision (pdf) in Bragg v. Linden Research, Inc., No. 06-4925 (E.D. Pa. May 30, 2007), the Court concluded that the Second Life 'terms of service' seek to impose a one-sided dispute resolution scheme that tilts unfairly, 'in almost all situations,' in Second Life's favor. As a result, the case will stay in Pennsylvania federal court, instead of being transferred to an arbitration forum in California."
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Second Life Arbitration Clause Unenforceable

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  • by jt418-93 ( 450715 ) on Friday June 08, 2007 @04:47PM (#19444873)
    lack of mutuality. The TOS gave Linden Research the right to terminate users "for any reason or no reason," the right to invoke several one-sided remedies to protect its own rights, and the right to modify the TOS at any time, including the arbitration provision.

    no more 'we can kill your account any time and you suck it' from online game companies. a lot of tos's just went invalid today. the shakeout from this will be huge in the pay for online gaming sector.
    • by Liberaltarian ( 1030752 ) on Friday June 08, 2007 @05:00PM (#19445021)
      Sadly, no! The most that will happen, save it reaching the Supreme Court, is that the decision will apply to the users/companies in the 3rd Circuit court's jurisdiction alone.

      A majority of Federal courts have ruled that shrinkwrap licenses are in general unenforceable, though a minority have affirmed that it is indeed a legally-binding document.

      However, we're dealing with what's called a "clickwrap" license, which hasn't nearly the legal history that shrinkwrap licenses have. This decision, if upheld (I guarantee it's going to be appealed), is certainly an important early move in the right direction.
      • by rewt66 ( 738525 ) on Friday June 08, 2007 @05:44PM (#19445501)
        IANAL.

        But the judge didn't rule it unenforceable because there was no law stating that clickwrap agreements were valid. He ruled that the terms were so one-sided that it was "unconscionable" (horribly one-sided), and therefore invalid. If the same terms were in a shrinkwrap license, or even a signed contract, the same terms would have had the same problem.

        The statement that it doesn't apply everywhere until upheld by the Supreme Court is, however, quite correct.
        • Re: (Score:2, Interesting)

          by MilenCent ( 219397 )
          IAalsoNAL....

          You are correct, really, but it's important to note why.

          The idea of a contract is that two parties enter into a mutually beneficial arrangement. A contract that gives one side of the deal nothing (or, apparently, almost nothing) is not a valid contract.

          Most "click-wrap" licenses, as we understand the term, would fail this test for the same reason Second Life's license failed it, as practically all of them are CYA deals that exist primarily to restrict users from doing unforeseen things that co
          • Re: (Score:3, Interesting)

            by MilenCent ( 219397 )
            Hm...

            Reading over the article a bit more, okay, let me amend my statement....

            The fact that Second Life has a kind of monopoly in virtual land sale seems to enter into it. So this might not be a strike against click-wrap licenses in general. Hmm.
            • Re: (Score:3, Funny)

              by 56ker ( 566853 )
              Well not entirely a monopoly on virtual land sales, I think there's someone who sells people title deeds to bits of the moon.
        • Re: (Score:3, Informative)

          by asuffield ( 111848 )

          He ruled that the terms were so one-sided that it was "unconscionable" (horribly one-sided), and therefore invalid. If the same terms were in a shrinkwrap license, or even a signed contract, the same terms would have had the same problem.

          Obligatory proviso: while this is basically true, a signed contract may be valid anyway - if it can be shown that the party who loses out to the contract was fully aware of this at the time when they signed it, that the terms of the contract were negotiated by both parties,

          • Licenses or contracts are only rejected in this manner when one party failed to understand the implications of the contract (and "would not have signed it if they had known") or when the terms were dictated by one party alone ("contract of adhesion", which is normal for clickwrap and shrinkwrap, but unusual for a signed contract).
            Contracts for residential Internet service and mobile phone service are signed, yet they're still contracts of adhesion.
        • Re: (Score:3, Funny)

          by Thing 1 ( 178996 )

          IANAL.

          Please people, please: use IMNAL. We're not interested in your bedroom behavior.

      • Re: (Score:3, Insightful)

        by mr_matticus ( 928346 )
        What world are you living in where a majority of jurisdictions have ruled shrinkwrap licenses "generally unenforceable"?! Name just one jurisdiction in the US to have done so.
        • I think the burden is on you; name one place where you can enforce an agreement on someone that they aren't a party to (other than in purposely interfering in other people's contracts, e.g. google non-compete chinese guy case)?
          • The burden of proof always lies with affirmative, never the status quo. A EULA is a rights grant from the owner to a party, just as assignment in real property. The rightsholder (owner) is free to impose whatever legal terms s/he desires in the licensing of their goods. See franchise licensing, real estate leasing, trademark and patent licensing, and any other relevant field where use is transferred but only partial (if any) ownership.

            As for "being a party to" EULAs, it's a standard form contract and a l
  • Finally (Score:3, Insightful)

    by Scrameustache ( 459504 ) on Friday June 08, 2007 @04:48PM (#19444877) Homepage Journal
    IMO it was only a matter of time until a judge ruled that he had jurisdiction, EULAs be damned.
  • The Second Life TOS was a take-it-or-leave-it clickwrap deal. The site operator had superior bargaining power over the plaintiff and, Judge Robreno found, there were no reasonable available market alternatives to Second Life.

    I wonder if this will be applied to other service on the web. It seams that every site has one of these agreements.

    • Re: (Score:3, Insightful)

      by Zironic ( 1112127 )
      The problem would be that for most other services there are "reasonable available market alternatives". The thing I wonder though is that if all the companies have the same crappy TOS does that then mean that there isn't any reasonable option and all the TOS's get invalidated?
    • by Original Replica ( 908688 ) on Friday June 08, 2007 @06:10PM (#19445737) Journal
      I have to wonder if the the Linden Dollar (and linden real estate) having a real world value weighs the need for a two sided arbitration more heavily. From the courts view (I imagine) the only thing at stake in a WoW arbitration is your $15 subscription fee, where as Second Life has some more significant monetary attachments. When there is real money involved the government is sure to follow.
  • Oh darn now I gotta rewrite my new program's EULA that says "if you don't like my program or it breaks your computer, go **** yourself." Lol I think it's good idea to force game makers actually responsible for stuff that happens in it and its customers well being.
  • Precedent? (Score:4, Informative)

    by evanbd ( 210358 ) on Friday June 08, 2007 @04:54PM (#19444931)
    Unless I'm mistaken, this isn't an appeals court, and therefore doesn't actually set precedent. Other courts can still apply the same logic though.
    • Re: (Score:3, Informative)

      by Qzukk ( 229616 )
      It doesn't set a "real" precedent, but a lawyer can walk into a court in Texas and say "well, in this parallel case here, the decision was..." and the judge can either ignore it or not, at his discretion.
    • Re:Precedent? (Score:5, Informative)

      by nomadic ( 141991 ) <nomadicworld.gmail@com> on Friday June 08, 2007 @04:57PM (#19444993) Homepage
      Persuasive authority is a lot more useful than most people realize, especially federal court decisions.
      • Re:Precedent? (Score:5, Informative)

        You are absolutely correct, nomadic. Those who say it's not a precedent do not understand how the common law system works.

        Judges are looking for reasoning that helps them to resolve the case that is before them. When they find that another judge has thought these issues through carefully, and has fashioned an eminently sensible and just conclusion, they will usually go for it.

        Of course it's easier for a judge if there's an appellate decision from his circuit telling him what he must do, but many, perhaps, most, litigated issues don't have the benefit of that kind of binding 'precedent'.... otherwise the issue would not even be in litigation. The lawyers would have read the binding precedent and followed it rather than frivolously ignore it.
  • An eye on WoW (Score:4, Interesting)

    by BobMcD ( 601576 ) on Friday June 08, 2007 @04:56PM (#19444959)

    I, for one, will be VERY interested to see if Blizzard responds to this in any way. Their policy is very much the same, as is their penchance for banning accounts and restricting access to real-world-value. (And remember, legality does not negate value in most cases. The IRS would have you pay income tax on your drug deals, if you follow the letter of the law.) So will the rules shift in favor of the end-user?

    Likewise, what other EULA's might fall victim to the 'no viable market alternative' argument? Windows comes to mind.

    This will surely die on appeal, but still, the possible implications are interesting.
    • Re: (Score:3, Funny)

      by AaxelB ( 1034884 )
      Seems risky to say "no viable market alternative" to Windows on Slashdot, as arguable as that may be.

      It would be interesting if MS were attacked on those grounds, because the obvious (IA certainly NAL) defense is highlighting the viable market alternatives, which any monopolist is loath to do. Likewise, all those who would enjoy seeing MS lose would be caught in the Catch-22 of admitting that [insert favorite minority OS] is a non-viable alternative... I think this has solid potential for some entertainin
      • by tepples ( 727027 )

        Seems risky to say "no viable market alternative" to Windows on Slashdot, as arguable as that may be.
        It might be easier to argue that there is no viable market alternative to some of the specialized applications that are exclusively designed for Windows.
    • Re:An eye on WoW (Score:4, Insightful)

      by sampson7 ( 536545 ) on Friday June 08, 2007 @06:04PM (#19445689)
      One key element of the Judge's (very well written) opinion is that Second Life holds itself out as granting something akin to a traditional property right in the virtual world that it has created. Blizzard's policy, in contrast, has always been that it owns the virtual "property" and grants you a license to play with it.

      In other words, Second Life offers to let you buy a portion of its sandbox, while Blizzard merely lets you play in it. In one case, you can take your toys and go home since you own the toys, in the other, you cannot.
  • by realmolo ( 574068 ) on Friday June 08, 2007 @04:57PM (#19444983)
    While I agree that the terms of the "click-through" license are fairly ridiculous...

    We ARE talking about a computer game, here. There is no *real* harm done to anyone if their account is terminated.

    And more importantly, the makers/administrators of giant multiplayer games (or worlds) kind of NEED to be able to terminate accounts at will. What if a player/group of players find a bug in the game and are able to use it to cheat? Or worse, use it to gain access to the personal computers of OTHER players without their permission? If they had to go through a whole "termination process", players could wreak havoc at will in those kinds of situations. And what could the admins of the servers do? They can't terminate the accounts. They can't just shut off the servers (because that would be the equivalent of terminating *everybody's* account). The only recourse it to quickly try and patch the software before the problem gets entirely out of hand. They do that anyway, really, but it's a lot harder when the entire server is going to hell because of the exploit.

    I won't even get into the whole idea of Second Life property being equivalent to "real" property. That's just ridiculous, and I expect this guy to lose his case because of that anyway.
    • Re: (Score:2, Insightful)

      by jt418-93 ( 450715 )
      --]I won't even get into the whole idea of Second Life property being equivalent to "real" property. That's just ridiculous, and I expect this guy to lose his case because of that anyway.

      except linden has set up a direct dollar to linden exchange procedure, giving things a real world value. that is something they created themselves.

      as to other games, whether you agree or not, as long as someone will pay real money for something, it has value and is treated 'real'. they're going to tax your online income i
    • by cduffy ( 652 ) <charles+slashdot@dyfis.net> on Friday June 08, 2007 @05:02PM (#19445039)

      We ARE talking about a computer game, here. There is no *real* harm done to anyone if their account is terminated.
      Not just any computer game, though -- a computer game where very large amounts of real-world money are exchanged. "Linden Dollars" are exchangeable for real ones; there are folks whose in-game activities constitute their entire income.
      • by Rich0 ( 548339 )
        Additionally, the REAL harm argument is pretty vague. What REAL harm do you suffer if I steal a couple of rocks out of your bedroom - it isn't like diamonds are edible, provide warmth, or provide shelter? So, you don't really suffer "REAL" harm just because I stole $50k worth of them.

        If I possess something that can be legally traded for cash, and I'm deprived of it, then I've suffered harm. Now, there might be an argument as to whether the person who caused the loss had a duty to care for your stuff. If
    • by Zironic ( 1112127 ) on Friday June 08, 2007 @05:07PM (#19445121)
      I think you missed what the judge decided.

      So far the judge has decided it is unreasonable to expect users to have to go through Arbitration court since it gives all the benefits to the company and all the downsides to the user.

      The case itself though will most likely be lost by the user since virtual property doesn't have any real value (if it had you would have to pay tax for it and I wouldn't want to do that).

      What I would like to see is that admins get to keep their ability to ban people for whatever reason but that users get a fair chance to defend themselves if they feel they became unjustly banned.
      • by hibiki_r ( 649814 ) on Friday June 08, 2007 @05:21PM (#19445251)
        That's backwards: If it can be converted into money, it has real value. You can exchange US dollars for linden dollars and vice versa, by going through the developer itself!

        Besides, what does taxing have to do with anything? If I don't pay taxes on something that the tax code claims should be taxed you are not dealing with something with no value: what you have is tax evasion. Don't put the cart before the horse
        • Kind of like how they put "no cash value" on coupons huh? I think there's something illegal about creating your own tender or money in the US.
          • Re: (Score:3, Insightful)

            by VidEdit ( 703021 )
            "I think there's something illegal about creating your own tender or money in the US."

            It isn't about creating "your own legal tender," it is about creating something which has value. And in the case of Second Life, the value can be potentially bartered or sold.
            Keep in mind that stocks are virtual property, too, but you wouldn't want the NYSE kicking out of trading and keeping your stocks. Also, the IRS **is** looking into the possibility of taxing virtual property in games.

            "Kind of like how they put "no cas
    • Re: (Score:3, Insightful)

      by ponos ( 122721 )

      We ARE talking about a computer game, here. There is no *real* harm done to anyone if their account is terminated.

      To the extent that the people involved pay real money and to the extent that they feel genuinely frustrated about losing the account, the harm is very, very real. Using your logic, there is no harm in being publicly ridiculed or finding out that your girlfriend enjoyed a whole soccer team. An MMO can be an important social activity (in the sense that it involves people) and please realize th

    • There's nothing preventing the maintainers from suspending an account immediately, pending a fair evaluation and possible reinstatement. The options are not simply "do nothing" or "can the account instantly." Like it or not, MMORPGs (or whatever the currently preferred abbreviation is this week) have created worlds that contain items with real-world value. This quite probably creates responsibilities for the maintainers that they can't just opt out of. Obviously, the legal landscape will take time to de
    • Not in Second Life. Second Life is _based_ on converting its game currency to and from RL dollars, so harm can actually be measured in RL money. The issue isn't whether the virtual items are real, but whether they're worth RL dollars. And Linden Labs say they are, and happily lets you exchange RL money to and from their virtual currency. They also actually sell stuff like plots of land for RL dollars.

      Note that I'm not arguing whether that equivalence to RL money is ridiculous or not. (Ok, so I do think it's
    • "And what could the admins of the servers do?"

      1) Ask the users nicely not to do it, warning them of suspensions if they do not listen
      2) suspend them
      3) Fix bug
      4) unsuspend them

      That seems pretty straightforward to me.
    • by makomk ( 752139 )
      The idea of Second Life property being equivalent to "real" property may seem ridiculous, but it's one that the makers of Second Life, Linden Labs, have encouraged. There's some interesting coverage of the case at the Second Life Herald [secondlifeherald.com].
    • And more importantly, the makers/administrators of giant multiplayer games (or worlds) kind of NEED to be able to terminate accounts at will. What if a player/group of players find a bug in the game and are able to use it to cheat? Or worse, use it to gain access to the personal computers of OTHER players without their permission? If they had to go through a whole "termination process", players could wreak havoc at will in those kinds of situations. And what could the admins of the servers do? They can't te

    • There is no *real* harm done to anyone if their account is terminated.

      Just like there is no "real" harm done if J. Random Blackhat changes the computer records of your bank account to indicate you spent the past month withdrawing it all as cash overseas? After all, it's only numbers in a computer; the fact that they're directly equivalent to and exchangeable with "real" money is irrelevant.

      To misquote Philip K. Dick, "Reality is that which, just because you don't believe in it, doesn't go away."

      Wha

  • by RyanFenton ( 230700 ) on Friday June 08, 2007 @04:59PM (#19445009)
    I'd like this decision to be reinforced at every level of the American justice system: No matter what you force someone to sign, you can't take away their right to challenge you on a legal issue in a public court.

    America shouldn't be in the business of forcing people to obey the random "magical wishes' contained within every contract some jerk forces people to sign.

    The next thing I fear: We'll have to find a federal judge to sign our EULAs to authorize the active denial our own rights before we get to play a game. Either that, or a law passed by congress or a new ruling by the justice department to take away the rights they can't get by contract anymore.

    Ryan Fenton
    • by DaHat ( 247651 )
      Forced to sign?

      Care to share which contracts you have been forced at gun point to sign? I've signed a few in my day and clicked I Agree to plenty of others... but never were firearms involved... in those cases I felt the contract's terms were 'unfair'... I simply refused to sign.
      • Forced to sign as in "Agree to this or waste the money you spent buying this game because you can't play unless you do and few companies accept returns with opened boxes, a prerequisite to seeing this screen."

        I don't know of any recourse you can take to get your money back in the case you don't agree with, say, Battlefield 2142's EULA. The moment you see that EULA none of the game stores I know of will let you refund as you opened the box and the company's just going to tell you to accept it.

        Force doesn't necessarily mean physical force. In many cases the most potent forces are the ones of the mind, a blackmailer doesn't hold a gun to your head but I don't think you'd say he's not forcing you to do something. In the same way many software companies hold your money ransom and demand you accept or lose it and get nothing back.

        This becomes irrelevant if you can returned the open game or find the EULA before opening the box but both are exceedingly rare where I live. You really have no good choices if you don't like the EULA, you can decline and lose your money or accept and lose your freedom. What a choice...
        • by DaHat ( 247651 )
          So... after voluntarily buying the game the user is forced to agree to the EULA? Again, they made the choice to buy the software, almost certainly knowing that there would be an enclosed EULA and if they did not take the proper steps to know what they were getting themselves into ahead of time, it is their fault for not being informed consumers... you know, buyer beware.
          • "Again, they made the choice to buy the software, almost certainly knowing that there would be an enclosed EULA"

            Okay...so I buy a product that I know will take away, say, 1 of my rights. I open it up and read the right it wants to take away to let me use the product. I don't want to give up that right. I'm therefore at fault for deciding to buy the game? Just because I know there's going to be a EULA for the game doesn't mean I know what it's going to demand. If I don't know what it's going to demand I have
        • They really gotta start printing EULAs on the outside of the box, clearly visible. That's the only way they can be considered enforcible. Shame that there will be less room for any screenshots.
          • easy way to get around this a "Standard Title WebHome" this would have

            1 a correct and complete description of the game
            2 a list of currently available patches
            3 a list of currently available addons
            4 the [redacted] EULA: to be put on a separate page suitable for printing

            What i would like to see is more companies that will do things like Steam (if i don't own the game then i should always be able to get a new copy from the publisher)
      • Re: (Score:3, Insightful)

        by timeOday ( 582209 )

        Forced to sign? Care to share which contracts you have been forced at gun point to sign?

        That argument is a sham. It relies on the assertion that a person could realistically read and understand the ridiculously complicated legal agreements that govern a hundred different things you do every day, from credit card agreements to software EULAs. That assertion is false. Pretending people could take the time and have the expertise to plow through multitudes of lengthy legal documents is just absurd. Busin

        • Well spoken, timeOday.

          It was a classic contract of adhesion, and the decision is a very important precedent.
        • by DaHat ( 247651 )
          You realize that the argument you are making is quite similar to the defense Paris Hilton used... that she didn't actually read the previous agreement where she was told she couldn't drive.

          As any judge will tell you, ignorance of the law is no excuse.

          If you are unwilling or unable to understand the details of a contract you've got two options... don't sign it and go without, or sign it and blindly hope that everything goes without a problem.
          • Paris Hilton's "agreement" was part of criminal court proceedings. And if the heiress could not afford a lawyer to explain the terms to her, the court would appoint one for her.

            That's the whole reason why there exists a "right to an attorney" in criminal cases: a defendant cannot be expected to know all the niceties of the legal system the State imposes, enforces and adjudges. Those with a chance of competing in that system are mostly professionals, a.k.a. lawyers. Therefore, the defendant must have access
      • by NMerriam ( 15122 )

        but never were firearms involved... in those cases I felt the contract's terms were 'unfair'... I simply refused to sign.

        It's a great thing to grow up in a modern western society where you're so wealthy and protected that you can't even conceive of anything existing outside your utopian libertarian ideals. I hope you aren't too disappointed when you get out of high school and realize Ayn Rand was a writer of fiction, and the people in power dynamics she discussed had little relationship to reality.

        • by DaHat ( 247651 )
          What a lovely ill-informed ad-hominem attack.
          • by NMerriam ( 15122 )

            What a lovely ill-informed ad-hominem attack.

            If you believe that firearms are the only way to force anyone to do anything, then you're the one who is ill-informed.

            I was merely being optimistic that you are in junior high or high school and recently read Ayn Rand to be clinging so dearly to such a naive view of power dynamics. That your views happen to coincide exactly with her fictional libertarian utopian ideals -- and not with any form of economic, political or social reality in world history -- was me

            • by DaHat ( 247651 )
              Like I said, ill-informed.
              • by NMerriam ( 15122 )
                I can only go by what you write. If you say that the use of a gun is the only form of force, then your display of inexperience can only be judged by your own words.
                • by DaHat ( 247651 )
                  > If you say that the use of a gun is the only form of force, then your display of inexperience can only be judged by your own words.

                  Did I say that a gun is the only form of force? No. Do you honestly think that I think that firearms are the only way of exerting force? Don't bother answering, I really don't care what you think and am done.

                  I'd suggest though being less quick to pronounce judgment... or are you the sort that if someone sounded cheap you'd call em a jew? If they sounded lazy you'd call them
        • I hope you aren't too disappointed when you get out of high school and realize Ayn Rand was a writer of fiction, and the people in power dynamics she discussed had little relationship to reality.

          I'm not sure what you mean here... If you are saying that Ayn Rand views on top down government and control are to fictional to have any weight in the here and now of this reality, Id have to say that you haven't done your home work, and you aren't capable of seeing truth in fiction. People use lies to reveal the tr

      • Re: (Score:2, Insightful)

        by Hal_Porter ( 817932 )
        What happens if all the alternatives games have these terms? Or there are no alternative games?

        And example would be banking in the UK. Even thóugh in theory there are four or five highstreet banks and you can change between them, few people do because most banks have the same terms. For example they all decided to charge for cash withdrawals from other banks machine within days of each other. Similarly, when charges for cashing cheques increase, the increase is done by all the banks simultaneously. So
    • No matter what you force someone to sign, you can't take away their right to challenge you on a legal issue in a public court.
      That is a rule which is enforced all the time in the US. The problem we typically have with EULAs is that we see them as "forcing," and many others do not see them as "forcing" anything. If the license is not "forcing" the end user to do anything against their will, then the rule does not clash with a decision in favor of the software company.
  • by Randym ( 25779 ) on Friday June 08, 2007 @05:07PM (#19445111)
    (a) Procedural Unconscionability: A contract or clause is procedurally unconscionable if it is a contract of adhesion. Comb, 218 F. Supp. 2d at 1172; Flores v. Transamerica HomeFirst, Inc., 113 Cal. Rptr. 2d 376, 381-82 (Ct. App. 2001). A contract of adhesion, in turn, is a "standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it."

    The interesting thing about this is that is being adjudicated under *Federal* law, rather than state law, because it involves interstate commerce. Any EULA -- not just Microsoft's -- is now in jeopardy, because, according to this ruling, an EULA is -- by definition -- a "contract of adhesion".

    The next thing that they should go after is the concept that you don't actually *own* software that you purchase, you only "license" it. That could certainly be seen as a "contract of adhesion" ('procedurally unconscionable') imposed in a one-sided way and thus unlawful as well.

    • EULAs are unenforceable in most states. If your state has a "Sale of Goods" act, then it probably defines things. The main purpose of a EULA is to scare people off and fill in any gaps that may exist in the state legislation. So, even though most SW companies would like to pretend that you are only leasing their software, in most cases you are in fact buying it, with all the privileges that go with owning it.
    • by Anonymous Coward
      IANAL, but when I read the decision, they based large parts of the reasoning on California law (due to the license saying that it was governed by California law). So that may make it harder to apply in other states. I think they even mentioned some cases under another state (PA?) and said that that precedent didn't apply because of that clause putting it under CA law.

      I think this sets some precedent already, but also that it can end up in the Federal Court of Appeals, and eventually the Supreme Court if i
    • by taustin ( 171655 ) on Friday June 08, 2007 @06:35PM (#19445941) Homepage Journal
      The next thing that they should go after is the concept that you don't actually *own* software that you purchase, you only "license" it.

      Adobe v. Softman is old news, and addressed exactly that, and was ruled in the correct way. In California, at least, if you A) pay a set amount, and B) get indefinite use of the software for that payment, it's a Sale of Goods, and the Right of First Sale (under Title 17) applies. That ruling is at least four or five years old now.

      This is why Microsoft is so desperate to get Windows and Office transferred over to a "pay per month or we turn it off" model.
    • Wrong wrong wrong (Score:4, Informative)

      by unassimilatible ( 225662 ) on Friday June 08, 2007 @10:25PM (#19447767) Journal
      The interesting thing about this is that is being adjudicated under *Federal* law, rather than state law, because it involves interstate commerce.


      No, federal district court jurisdiction is granted either via diversity jurisdiction (plaintiffs and defendants from different states in suits exceeding $75K) or federal question jurisdiction. In this case, since the court is obviously using state law, diversity is how they got into court (and of course the judge finding CA arbitration unenforceable). Pennsylvania plaintiff, California defendant, = federal court diversity jurisdiction using state substantive law (but federal civil procedure and evidence).

      The next thing that they should go after is the concept that you don't actually *own* software that you purchase, you only "license" it. That could certainly be seen as a "contract of adhesion" ('procedurally unconscionable') imposed in a one-sided way and thus unlawful as well.



      Also wrong! Read the case or the article, for a contract to be unenforceable, it must be both procedurally and substantively unconscionable. Contracts of adhesion are enforceable if they do not contain grossly unfair terms. And software licenses are generally considered enforceable (assuming no grossly unfair terms - read the article or case!).

    • by trifish ( 826353 )
      you don't actually *own* software that you purchase

      If you owned Windows by buying one copy of it, you could e.g. start selling it. Ownership of software (as opposed to ownership of a copy) means ownership of intellectual property rights, i.e. ownership of copyright. You didn't that by buying a copy you own the software, did you.
  • Why is it that EULAs can get away with this and yet this can't?
    • You're exactly correct. They are so closely related (the clickwrap and EULA) that a scenario where this ruling also applies to certain operating systems is not out of the question. IANAL
    • Re: (Score:3, Informative)

      by flyingfsck ( 986395 )
      As I wrote elsewhere, EULAs are mostly bull. Go and read your state's "Sale of Goods Act" - it should have one and that is pretty much all that matters. The reason is that a Sale is the default action. For a transaction to be a Lease, the parties have to jump through very specific hoops and EULAs seldom do. Therefore, If it Looks like a Sale, Quacks like a Sale and Flies like a Sale, then it is a Sale, meaning that you most likely OWN your copy of MS Windows outright, despite what MS likes to pretend fo
  • This bodes well for the guy who's suing Dell [slashdot.org] over the claim that they gave him a computer so broken that he couldn't even read the Adhesion contract that supposedly took away his right to go to court.
  • by CubanCorona ( 759226 ) on Friday June 08, 2007 @05:36PM (#19445399)
    Remember, the Federal Arbitration Act strongly favors the enforceability of arbitration agreements. This case likely came out the way it did because the practical implications of arbitration (in this specific case) would result in an unjust bias favoring Second Life or would make dispute resolution prohibitively expensive. A classic case regarding the enforceability of arbitration clauses is Adkins v. Labor Ready, Inc., 303 F.3d 496 (4th Cir. 2002) (upholding an arbitration agreement in an employment contract where the plaintiff could not show unconscionability or failure of consideration). While the enforceability of clickwrap agreements is a contemporary and evolving area of contract law, I don't think the implications of this decision are very far-reaching. This case deals specifically with an arbitration clause and so is a unique situation. I haven't read the opinion, but I suspect that the court held specifically that the arbitration clause was unconscionable as opposed to the entire clickwrap agreement. That is certainly important to note--the agreement may still be otherwise enforceable notwithstanding the arbitration clause.
    • by DingerX ( 847589 )
      I read it. For California, unconscionability has two parts, procedural and substantial, and to be determined unconscionable, both parts may be met, to a level reflecting an inverse relation between the two. So a contract can be procedurally unconscionable, but as long as the conditions are reasonable, it will meet the test. A "clickwrap" agreement is procedurally unconscionable. Being substantially unconscionable can include elements such as surprise (e.g., putting in a section entitled "Complimentary Copi
  • By recognizing that the property value of items in second life have to be recognized on par with property values that are tangible, the courts will validate all the ownership rules. Ie, by making ownership of the property in Second Life no longer at the whim of a private organization but recognized by courts (and thus the government) the court actually did Second Life a favor.
  • Arbitration (Score:3, Insightful)

    by Stormcrow309 ( 590240 ) on Saturday June 09, 2007 @06:53AM (#19449729) Journal

    Several state judicial systems have already found that out-of-state arbitration limits due process. Alltel got hit hard for this and their 'consumer pays all arbitration fees' clause a couple of years back. I don't think arbitration will last much longer, especially since many businesses are moving to mediation for b2b stuff.

  • Back around 1999 - 2001 I ran a server with the opensource Promisance browser based MMOG. I rememer as part of my policy I had the "could terminate account for any reason" clause so I could deal with any problem players as judge jury and IP (as in TCP/IP tables not intellectual property) executioner.

    Granted, my game was free and as such, I wonder if would have been subject to the same rules.

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