UK Report Slams EULAs

draevil writes "Britain's National Consumer Council has completed an investigation into the practice of software End User License Agreements(EULAs) with the conclusion that many consumers are signing away their legal rights and agreeing to unfair terms, which they could never have scrutinized before purchase. The report also acknowledges that even if the EULA were available prior to purchase, it would be unreasonable to expect an average consumer to understand the terms to which they were agreeing. Here are the full report (PDF) and a summary." The NCC recommends that the European Commission bring softwre licenses under the same consumer protections that apply to other products in the EU.

At Last!

Someone in power has been soundly beaten with the Common Sense Foam Cluebat. (Copyright, All Rights Reserved)

I am not handsome enough to be a lawyer

But I always felt that EULAs, especially 'shrinkwrap' ones, never met the old tests for a contract:
- a 'meeting of the minds'
- agreement in exchange for 'a valuable consideration received'

Re:I am not handsome enough to be a lawyer

And one more that you neglected:

The option to back out. By the time you have the EULA on your screen, you've already paid for the software. "Hell no" isn't a viable option; have you ever tried to return open software to a retail store?

Re:I am not handsome enough to be a lawyer

have you ever tried to return open software to a retail store?

Indeed, returning software is just not an option. I was just having this discussion with my girl friend about my BitTorrent usage, how I need to try before I buy games. That's simply not an option (trying) for many games, and even games that have demos available are quite often based on beta code. But anyways, why should I be penalized when everything on the box points to a runnable program, only to find out the requirements are a little more liberal than I would expect. It's the same deal with the EULAs, once cash money has been paid and you start reading those things... What do you do, take the hit? That appears to be the only option.

It needs to be pointed out, piracy is the stated reason I cannot return opened software. Yet not being able to return opened software is driving me to piracy...

Lets call it by its true name

The option to back out.

Let's call it by its true name: Coercion.

By the time you're presented with the EULA, you've already exchanged money for a box advertising the features of the software. That's a contract if ever I heard one. The EULA attempts to force you into a new contract, with NO CONSIDERATION beyond releasing their hold on the features and properties of the software that are already yours. That is coercion.

And no, disclaiming on the box that you have to agree to a contract is NOT sufficient if they are not disclosing the terms of the contract itself.

IANAL, but I have studied with one.

Re:Lets call it by its true name

And no, disclaiming on the box that you have to agree to a contract is NOT sufficient if they are not disclosing the terms of the contract itself.

Like it or not (I don't) many US courts have decided that such a disclaimer on the box is sufficient (see ProCD v. Zeidenberg).

However, I don't think this detracts from your coercion argument. Even if the EULA is considered to be an extension of the contract for sale that was begun in the store, the buyer has already taken on the responsibilities of ownership by the time the EULA is presented (e.g. risk of loss, theft, or damage to the goods in transit to the buyer's home). Therefore the buyer must also obtain the rights of ownership. One of the rights of ownership of software is the right to use the software with a computer (section 117 of the Copyright Act bestows this right). The EULA is an attempt to interfere with this right.

So, even if the EULA is viewed as an extension of the contract for sale, any terms in the EULA that interfere with the buyer's ownership rights are, by that time, unconscionable. And the attempt to force the user to agree to those unconscionable terms is still coercion.

Re:I am not handsome enough to be a lawyer

No, they probably wouldn't stand up in court. You don't get the chance to review the contract before you sign it.

A lawyer I know told me, "If you ever get presented with a gratuitously unfair contract, just sign it because it isn't binding anyway."

That advice is worth what you paid for it. Consult a local lawyer.

Re:I am not handsome enough to be a lawyer

Courts have upheld EULA's in the US on several occasions. Save for some terms that the 9th circuit recently found unconscionable (particularly arbitration clauses) the courts are ok with them. See the ProCD and Gateway2000 cases. (Law Student, graduating in May)

return-to-store test case

I'd love to see someone do a return-to-store test case:

Go to a Big Box Computer Retailer, use cash to buy an expensive item you know the manager won't "just let you return" in the interest of customer satisfaction, take it home, open it, start to install it, click "no, I don't agree," then try to return it. Use cash so it's clear you don't have recourse through your credit-card company.

The store says no. File a several-hundred-dollar-plus-court-fees small-claims action.

Wait for the store to transfer the case to regular court. Amend your suit to include legal fees and triple damages for being an ass, offering to settle for the original purchase price plus legal fees incurred so far all the while, so the judge knows you aren't being an ass.

Wait for the ruling that the contract was not complete until you click on "yes, I agree." The judge should rule that either:

*you had a contract with the store, in which case the product did not meet ordinary merchantability standards i.e. it would not work without imposing other obligations not present at the time of the contract, in which case you can void the contract

or

*The store is acting as an agent for the software maker. You gave the store owner funds to hold until you entered into a contract with the software maker. If you did not enter into the contract you have a reasonable period of time to seek a refund from the store.

In the worst case, the judge will let the store off the hook but allow you to add the software maker as a co- and later sole-defendant, and rule that the software maker owes you a full refund plus sales tax. In this case you will be out your legal fees though.

In any case, there will be a ruling giving consumers protection up to the point that they say "yes, I agree."

Re:return-to-store test case

The judge should rule that either:

*you had a contract with the store, in which case the product did not meet ordinary merchantability standards i.e. it would not work without imposing other obligations not present at the time of the contract, in which case you can void the contract

Part of the problem here is that in the UK, while you have some protections if you buy something that comes in a box, the general legislation (basically the Sale of Goods Act) may not apply to downloads that are purely electronic in nature because of some legal loopholes. It's not clear that under those circumstances there is any requirement of merchantability, suitability for a particular purpose, or similar.

US courts are okay with them, this is the EU/UK

There is a difference, in the EU consumer rights mean something.

Do you know about dead pixels in LCD screens? The one the industry tells you are acceptable? Dutch law clearly FORBIDS this. ANY LCD with a single defective SUB-pixel has to be replaced. No argument possible. The netherlands is the only country where sony replaced every PSP with ANY pixel problems.

So you are right in saying these EULA's are not illegal in the US, but the EU has far better laws for protecting the consumer and it has long been known by any who follows consumer afair programs they are entirely without worth within the EU and any company that tries to take you to court over one will find a very hostile judge. Hence why they never been tested, the companies know they will loose it.

They almost certainly aren't

The evidence I point to the most is that I work for a state university. As a state employee I can't sign anything for the university, it all has to be sent to legal. Have to make sure that everything is kept in a row as far as what the state agrees to. However they've told us we can just click through on the licenses on software. Clearly, it is because they don't believe they are enforceable, and they are a rather cautious lot.

As for being a contract it fails in several ways:

1) As you noted, there's no exchange. A contract MUST have an exchange to be valid. Even if you do something like quit a claim to a house (like you helped your kid by co-signing for it and now you are giving it over to them) it will still read "For the sum of $10 and other valuable consideration." Why? If there wasn't an exchange, the contract would be null.

2)It's ex post facto. Contracts have to happen before the sale, not after. That's why when you buy a house all the loan documents and such are done before you take ownership, before money changes hands. You can't try and say "But you agreed to this!" after the fact, you do it before hand or it is too late.

3) Not open to negotiation. That's what the "meeting of minds" thing means. A contract has to be open to negotiation. You don't have to meet face to face or anything (often it is done through the mail) and you certainly don't have to accept what the other side proposes, but you have to be open to it. You can't hand them a contract to sign and then have no way to get back to you.

4) No proof of agreement. That someone clicked "I agree" means nothing. There's no proof you agreed to it, or indeed that you were capable fo doing so. What happens when a minor buys a game and installs it? A minor can't enter in to a contract on their own, the parents never cosigned, etc.

There is really nothing about an EULA that meets the normal standard of what a contract is. If they want a contract governing their software, they need to have you sign it beforehand. However I'm going to guess that if people are presented with a 10 page wodge of text (EULAs are longer than any rental agreement I've seen) to read and sign when they try and buy an Xbox game, that it'll prove quickly to be an unworkable business model.

By replying to this message

By replying to this message, you agree to sign away all your rights to me, and once a month, go to a public place, stand on one foot and howl at sky at 12am.

What no replies?

*yawn*

Re:By replying to this message

And by reading the subject line of this reply, you agree to give me all my rights back.

However, I'll voluntarily do the one foot, howl at sky thing. Sounds fun enough.

Unfair Contract Terms Act 1977

UK consumers who have reason to contest contract terms would likely be protected by the Unfair Contract Terms Act 1977 [wikipedia.org].

EULA Crossout utility

If you are presented with a contract by a company, you can cross out sections of the contract that you can't live with. If the company's agent accepts that contract, they are bound by it. (subject to vagaries of contract law)

If I were to write a utility that would allow me to electronically cross out sections of an electronic EULA, and then the program (the owner's agent) accepted that modified EULA, would both parties be bound by the new contract? What if my utility allowed me to add sections as well. i.e. If this MS program crashed, MS will pay me $1,000,000

Most EULAs will allow you to print them before accepting them. I could make the same modifications to the paper copy as well. Even if there was a pre-clause that said the EULA couldn't be modified, I could cross that out too.

So would such a program mean the end of EULAs as we know them? Would software publishers have to fall back to straight copyright and save the legal mumbo-jumbo?

Unfortunately the document

Contains a EULA which forbids it from being read.

The Borland "It's like a book" license c. 1980s

In the 1980s, Borland products came with a "treat it like a book" license.

It was written in Plain English. It essentially said you could trade, lend, buy, sell, resell, etc. as long as no more than one person had copies at a time and that the software wasn't being used on more than one computer at a time.

TPB license agreement

...which one reason why lots of people have, rightly or wrongly, replaced their EULA with the pirate bay version. Download it illegally, ignore the license, install and play with it. If they need it or are using it and feel guilty buy it. Even when they do buy it a lot of users continue to ignore the EULA. I'm not condoning this behavior but I am saying that onerous conditions in the EULAs directly contribute to piracy.

The other thing is that no one reads all their EULAs thoroughly. If they did heavy computer users would be complaining about spending weeks installing software (or not understanding something about the EULA), when in reality software installation is something people often are doing in their "spare" time after all their other obligations are met. I've found that those people who suggest they do read all their EULAs are either doing it for a job or socially impaired or just plain liars.

Most people just understand that unless it's free software it's not legal to copy. Beyond that they use their software however they choose paying no mind to the EULA. In fact I've come across many a game forum where people openly are flouting the terms of the EULA and the company who creates the game turn a blind eye and don't wish to even discuss licensing issues beyond regurgitating the "copying is stealing" mantra. This is enough enforcement for the company to benefit from the inclusion of the EULA for individual users. Only when the software is used on a grander scale contrary to the EULA does the company act to put a stop to that use, and even then only when it hurts their commercial interests.

Not a day to soon.

"The NCC recommends that the European Commission bring softwre licenses under the same consumer protections that apply to other products in the EU."

Software companies has enjoyed unprecedented loose consumer protections. In fact, no protections has existed at all. The only protection is really the laws about advertising. That is, the software should act and do something that atleast is near what the adverts says.

If EU would bring normal consumer protection to software it should also work as expected. That is, it should not crash and burn without the manufacturer fixing it for you. With the same protections as for hardware it would cost countless millions to make your users the beta testers.

My work as an sysadmin would more be about tailoring solutions and less about getting expensive systems running with bandaid, duct-tape and broken patches that shouldnt be there in the first place.

Its about time software stops being treated like books and start living under the same rules as everything else. If a patch hooses my system the most i can hope for today is a patch regardless if it costs me millions in business. Most often in my case the answer has been "buy our next version, it really works this time, promise, cross my heart".

Things like this would punishing poor quality and i think that is really about time. Right now software really sucks.

I Do Not Agree letter

A contract is binding when you agree to it. I have always been tempted to simply mail them a letter before installing the software in which I say "I am writing to inform you that I do not agree to your EULA, and I do not agree that I need a license to use this software. Since you sold me these nice shiny CDs containing the software, I am going to go ahead and install it. Have a nice day." Now this violates the Do Not Poke The Bear principle, but is on firmer legal ground than just ignoring it and hoping it will go away. The question is, when their lawyers send you a reply, what can they argue about? You didn't violate copyright (you bought a legal copy from the owner). You didn't agree to a contract so it isn't breach of contract. What legal grounds do they have to say "don't use our software", other than "we don't give you permission"? And who says I need their permission? It's my computer. If nothing else, their demand letter would have to include a refund check, otherwise they are in violation of their own EULA.

Re:I Do Not Agree letter

This is precisely the type of case the USA needs to settle this matter once and for all. Cases like ProCD v. Zeidenberg (the currently going "Gold Standard" for enforceability of EULAs) only affirmed that EULAs are enforceable if they are voluntarily agreed to.

But what happens if you disagree? I'm unaware of any ruling that would indicate that you MUST return software if you disagree with the EULA. In fact, most cases -- including ProCD, use the UCC for analyzing EULAs. Here's my prediction of how such a case would go down:

1. The court would find that a CD or DVD containing software is, by definition, a "copy" of software [17 USC Sec. 101 [cornell.edu]].
2. The court would find that ownership of the copy is transferred to the buyer once the buyer has physical possession of the copy [UCC 2-401(2) [cornell.edu]].
3. The court would find that, as owner of the copy, the buyer has a legal right to use the copy of software [17 USC Sec. 117 [cornell.edu]].
4. The court would have no choice but to rule that the buyer has the right to use the software even if they refuse to agree to the EULA.

The beautiful thing about this hypothetical case is that the statutes involved are all very clear and unambiguous leaving very little room for interpretation by the courts. Of course, IANAL so I could be ridiculously wrong.

Not quite

In many country (in EU for example) you cannot give up fundamental right, or agree to give up protection of the law by signing a contract. This in many case nullify the contract utterly. But surprise, surprise, many of those EULA (particularly the one drafted for the US and just translated) just do that, for example in saying they are not liable for any damage occasioned by the software. Although in recent year I saw in a lot of EULA added "except in the country which forbid such clause, in which case it does not apply" or something similar.

I USED to before install go and change the text of the EULA for fun (so that the CEO of the software maker give me his first born). Or delete the text file before install. Or ask my nephew to install your software (kids aren't contractible if parents refuse). Such shenanigan would not happen with a real signed contract.

Re:They didn't review the GPL

GPL is a distribution license, not an EULA. Section 0 specifically says you don't need to agree to it to use the software.

GPL doesn't take away any of your (end users) rights under copyright law, it adds additional rights.

GPL (at least GPL2) is readable and pretty much understandable by mere mortals.

Re:Where's my signature?

IANAL, but how does clicking a button on a VB form constitute a legally binding signature?

A signature isn't the only way to legally agree to something. There are verbal contracts, contracts and licenses agreed to by an action (think GPL), the Uniform Commercial Code [wikipedia.org] which sets the terms of many sales unless both parties expressly agree to some alternative arrangement, and others. A signature is just one way (albeit a common one) to acknowledge your agreement to something.

In college I asked a law professor about EULAs and his take was that (generally speaking) EULAs are enforceable only if the buyer has had an opportunity to review them prior to the sale. I think this is a reasonable argument, especially since in practice you cannot return opened boxes of software. He would be the first to acknowledge that this has not been widely tested in court however so take what I'm saying with however much NaCl suits you.