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The Basics of EULAs
Garthilk writes "Blizzard recently made a bit of press when they announced that they would be actively enforcing their End User License agreement and prohibit the third party sale of game items and characters. Many people don't believe these clickthrough EULAs to be enforceable contracts. Thankfully Don Shelkey from the Corporate Finance and Technology section of the law firm Buchanan Ingersoll stops by to give us the low down. Mind you he is speaking on his own behalf and not on behalf any of his clients."
RTFA.
EULA's have been enforced.
The standard disclaimer applies that this is not legal advice and is only offered for your viewing pleasure.
The law of contracts is the law of promises. Long before computers were invented, people were making promises. At some point, the law had to designate which promises it would enforce and which promises it would let slide. The former are called "contracts." That is, a contract is simply a legally enforceable promise.
To have a contract, you have to meet certain elements. I refer to the terminology of my professor and renown expert, John E. Murray, Jr., author of Murray on Contracts, a first year law student's bible on the matter. To have a contract, you must have 1) an offer, 2) an acceptance and 3) a validation device, most often, consideration.
The offer and acceptance parts are quite simple the vast majority of the time. Usually one party says "I will provide you with X if you provide me with Y," which qualifies as an offer. The other party says "I agree" and the deal is done. Consideration is sometimes a little bit tricky, but in order for a contract to be valid, there must be a bargained for exchange. Lack of consideration is why gift promises, even in writing, are not enforced. I say "I agree to give you $100 because I love you." We put it in writing signed by 10 nuns, each of which testify that I fully intended to give you $100. That is not a contract because there was no bargained for exchange of value. Promises to make gifts are simply not a type of promise that the law chooses to enforce.
Ok, so lets look at the typical EULA to see if it's a contract. The gaming company makes you and offer to play the game. In exchange for playing the game, you must agree to pay a fee each month and follow the EULA. That is the offer. You accept the offer by clicking "I Agree" when you log in. You technically do not need to do it each time that you log in, but most companies do this simply to remind the consumer that it is bound by the agreement (and to provide notice of any modifications). The promise is supported by consideration, namely the company permits you access to the service, and you pay the fees.
Tada, contract! So, what is all the fuss about? Well, you see there is good reason for confusion.
When software companies first started, it was easy. They had a product that they made. They wanted to license it to someone else to use, so they drew up an agreement, and said "sign on the dotted line." Those were the early EULAs and they were no doubt enforceable. But then software companies wanted to make its product easy to buy, so they threw it in a shiny box and popped it on a shelf. They certainly couldn't ask the clerk behind the counter to execute contracts for them, so they simply tucked it inside the shrink wrap and included "acceptance language" stating "by opening this box, you agree to these terms."
Wow, now wait a minute here?!? There is something messed up with the timing of the whole thing. It doesn't jive with standard contract formation process. So, I pay the fee, get the thing that I paid for home, open the box, and accept the offer before I see it? Hmm. Well that didn't make much sense, and judges weren't really familiar with how this whole thing worked, so cases came down that said these types of agreements, shrink-wrap "EULAs," are not enforceable. They aren't enforceable because they do not meet the elements of a contract.
But wait again! Some smart guy decides "this is great" and he goes and buys a piece of software that contains something like a telephone directory of the entire United States. He rips the contents off the CD and makes his own CD that does the same thing, and competes with the original company. The original company says "we will see about that" and the ProCD case is born. In that case the court determined that EULAs are enforceable because everyone knows what's in them, and everyone reasonably should expect to be bound by certain terms and conditions. Later cases came out, however that said EULAs are a special kind of c
Ceci n'est pas une signature.
Many people don't believe these clickthrough EULAs to be enforceable contracts.
And in Germany they are 100 percent correct. After all, a contract requires a clear volition from all parties. And a click on a virtual button or opening the shrinkwrap is not sufficient for that, as you can't even tell who made the click (maybe my cat stepped over the keyboard while I was out of the room).
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It really doesn't matter if click-through is binding or not. Most companies just play the "Right or wrong, we'll sue your ass into the ground and bankrupt you on court costs."
Depends on the state, but in some of them they can get hit with fines in addition to having to pay the defendants full legal costs for filing a SLAPP lawsuit. (Strategic Lawsuit Against Public Participation) Mattel found this out the hard way when they sued that artist using Barbie dolls in his art. Mattel didn't like the way he used them and sued. A judge threw it out, fined Mattel a large amount and made them pay the guy's full legal fees.Who does an 800 pound gorilla sue? Anyone he wants.
Sadly not all states have anti-SLAPP laws on the books, they all should.