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Second Life Arbitration Clause Unenforceable
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."
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.
-.no
IMO it was only a matter of time until a judge ruled that he had jurisdiction, EULAs be damned.
You can't take the sky from me...
I wonder if this will be applied to other service on the web. It seams that every site has one of these agreements.
I prefer Flambe as apposed flamebait.
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.
Google's Super Secret Search Algorithm: SELECT @search_results FROM internet WHERE @search_results = 'good'
I've long suspected that a contract was invalid if it was unfair, and one-sided, but IANAL. I looked up unconscionable. It seems to be what I thought.
A merican_law
http://en.wikipedia.org/wiki/Consideration_under_
Write your own Choose Your Own Adventure. http://www.freegameengines.org/gamebook-engine/
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.
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.
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.
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
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.
The Fight for Student Power on Campus: www.forstudentpower.org.
Does this mean I can get my Xbox360 console unbanned from Xbox Live?!
It was in Pennsylvania you moron!
They ban your ass at the drop of the hat. Had a friend who was "dual box'n". After a 24 hr gamefest he was banned and all accounts associated with the credit card because blizzard declared he was using wowglider which he was not. When asked for proof of his transgression they offered none and the ban stood. So he went from paying for two accounts w/6 month signups with a few transfers at $25 per pop for around at least $140+ every 6 month to not paying a dime. Just because "blizzard" said so.
top it off with my situation where after coming back for the expansion to find my account stolen and activated (of whom i suspect someone at blizzard since they hit my account only after i didn't renew the first time and appeared to quit after i did renew) then turned around and disputed the charges for the months they did play which their cc company did, and when I asked blizzard about it they wouldn't tell me the cc company so i could take up the matter with authorities or the persons name, even though the cc that i paid for initially and then renewed with was exactly the same. To reactivate me account I had to pay for those months i didn't pay for otherwise my character would have been "banned" because of the theifs credit card dispute.
fine they can take the game and go home, like a little baby, for all i care. I'm glad i quit after hitting 70 and ended up with "nothing fun" to do again like when i hit 60." Doubt i'd go back for the next expansion now after playing through the last one already.
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.
DNA is a Turing machine. You, however, being dynamic and emergent, are not.
As most competent players have always felt, the TOS found in most all video games is unenforceable. How long until the first banned account decides to sue the video game companies for taking 'their' items and characters away. I'm very excited for this as it's one step closer to making gold selling legally acceptable.
The contract must be *both* procedurally (e.g., take-it-or-leave it, no alternatives, pre-printed) and substantively (e.g., unfair or hidden terms) unconscionable to be unenforceable. One is *not* enough - unfair isn't enough. The process must be unconscionable as well. BTW, arbitration clauses are presumed enforceable otherwise. Please do *not* rely on this as legal advice (but especially do *not* rely on Wikipedia for legal advice!). IAALBNYL (I Am A Lawyer But Not Your Lawyer).
Slashdot "libertarians": Small government for me, big government for those I disagree with. -1, I disagree with you
Why is it that EULAs can get away with this and yet this can't?
I like muppets.
The software package I wrote contains a small snippet in the EULA which dictates that any female users of the program must perform fellatio on me if I should so request it from them, and if the end user is a male, I can require the same service from his wife.
Do the job, or you're breaking the license agreement. Don't like it? read the fine print next time. God I love stupid people that think they can't argue.
Life is good.
Many non-material items are legally real property. Drug formulae, music, video game software, and others are ideas. People deserve to own their ideas and make money with them.
Every Second Life player adds to the game's economic value by using it. They build linden "currency", which equals real US dollars. Players pay to join, right? No Las Vegas casino could let people play, and then refuse to cash in their chips for money.
This bodes well for the guy who's suing Dell 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.
Sometimes boldness is in fashion. Sometimes only the brave will be bold.
..it is more than likely being anal raped now.
(about time)
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.
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 it gets to that. However, IANAL, so I'm not sure if this is even an appealable order (not every order is).
One of the most interesting parts to me were the notion that this is a LOT less expensive than arbitration. Or, at least, the judge thought so. That seemed to be a major factor in the decision per my non-lawyer reading. Which is odd to me because I thought that companies liked binding arbitration because it was supposedly faster and cheaper. Or maybe they just don't end up paying out as much money, I dunno. I was kinda surprised that we have a federal case made out of $300 of virtual land, though. Couldn't that go to small claims? Or maybe their whole account was worth more, who knows?
Now, unfortunately, I don't see this destroying EULAs so much as rewriting them, but I DID find it very interesting that, at least using the CA law they did, the contract might be unconscionable if you can't find anyone who doesn't give such harsh terms of service ("we can disconnect you if we feel like it", which is WAY too "standard" when you sign up for internet service). There was some other talk about that being except if there are "business realities" (which you either have to prove or describe in your contract), but I'd dearly LOVE to see the "CYA clause" as I call it stricken from ISP terms of service. Comcast with their "abuse of service" crap if you break their secret bandwidth limits on their "unlimited" service (by which they allegedly mean "always on", not "without limit").
I wonder if anyone will retain a lawyer and become the test case for that one?
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.
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.
Any guest worker system is indistinguishable from indentured servitude.
The arbitration is cheaper for the company, but not always for the individual. In this specific case, I suspect that arbitration would mean this poor guy showing up in California in person. The cost of that might get higher than going to a local court, even with a lawyer.
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 ridiculous, but let's not go on that tangent.) I'm just saying that LL shouldn't get away with arguing two exact opposites. Either one or the other. You can't have _both_. If they say it _is_ worth RL dollars, then they should legally be held responsible when (going by that notion) they arbitrarily caused someone a loss.
That's the important part: not whether it's really real or not, but whether or not Linden Labs itself says it's worth real money. They do, so they damn better act that way.
I suspect that's one reason why most other games insist on forbidding any kind of sale, and insisting that all their virtual stuff is their property and you're only allowed to use it. Because when it gets officially convertible to real money, and _owned_ by you, then banning an account becomes directly equivalent monetary damages.
Think about it. For example, new plots of virtual land get auctioned starting at 1000$. Plots of old land that in the meantime are in the middle of a popular place, can go for a helluva lot more. Don't laugh, they have at least one person whose virtual estate is officially worth millions of dollars. And Linden Labs isn't just turning a blind eye, it's actively encouraging that idea that it's worth RL money (because that's the only thing that can convince one to give Linden Labs their RL money for that.)
So once they sided with that position, shouldn't they be held responsible to act accordingly?
A polar bear is a cartesian bear after a coordinate transform.
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)?
--
WHO ATE MY BREAKFAST PANTS?
Pennsylvanian Amish Beat those California Surfers !
Get'em!
Virginia and Maryland. Look up UCITA.
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!).
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unilateral "cancel at any time" clauses can be illusory (a promise that isn't real, therefore non-binding, therefore no contract). What is generally required is a minimum time before they can cancel (e.g., "after 30 days") or notice requirement (e.g., "on 5 days notice"). A contract which allowed you to cancel or alter it 5 minutes after it was signed (or clicked) would not be a contract; it would be illusory.
Slashdot "libertarians": Small government for me, big government for those I disagree with. -1, I disagree with you
Make people sign agreements and send them in before you activate their accounts.
:)
There - signed, on paper, contract. Then states like PA can shove it up their ass
I bought an Internet communication product. After activation, I found it had limitations I couldn't live with. I got my money back and later the program wouldn't work. It seems the software calls home each time it runs to see if it has an authorized user. While it seems fair, if their auth server went down or they went out of business, the sofware would no longer work. That would be a problem.
I don't get it, what does this actually mean for the people who play Second Life?
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 legally valid term in all fifty states (all 49 except Lousiana as a result of the UCC, Virginia and Maryland doubly so on account of UCITA, Louisiana cf. Lousiana License Act [see Vault v. Quaid, among others]).
Yes, you need both Procedural and Substantive Unconscionability, but the implication of the statements in the judgement is that (based on prior case law) you already have one of the two in a click-through EULA. In III.C.1.(a) on page 27 it states (citations removed):
"A contract or clause is procedurally unconscionable if it is a contract of adhesion. 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." Under California law, "the critical factor in procedural unconscionability analysis is the manner in which the contract or the disputed clause was presented and negotiated." "When the weaker party is presented the clause and told to 'take it or leave it' without the opportunity for meaningful negotiation, oppression, and therefore procedural unconscionability, are present."
This implies that Procedural Unconscionability is present in any and all click-through licenses, since they are drawn up by the party with the stronger position and presented in a "take it or leave it" manner. Given that a click-through license is implicitly Procedural Unconscionable any term that is Substantive Unconscionability is unenforceable.
If intelligent life is too complex to evolve on its own, who designed God?
One aspect of the virtual property rights issue is often confused in these discussions (and seems to be confused in the court ruling):
Ownership of the intellectual property related to content developed in a virtual environment is not the same as ownership of the virtual items.
Linden's TOS recognizes creators rights to the content created within SecondLife http://secondlife.com/whatis/ip_rights.php but that does not extend to ownership of the virtual items:
http://www.washingtonpost.com/wp-dyn/content/artitjjfv
http://tjjfv.com
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.
In God we trust, all others require data.
One would certainly hope that the software wouldn't immediately panic if it couldn't call home and that there would either be a last update as they went out of business or a mode that could be activated through the auth server... kinda like what was intended when DIVX folded... of course we know how well that turned out.
Help Brendan pay off his student loans
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 to someone whose job it is to attorn for them and provide them with a decent defense.
Now let's go to contracts. There's a whole bunch of civil code out there regulating contracts, property and the like. For the consumer, these are the laws that govern the thousands of transactions in daily life. For a business, there's a subset of laws that govern the transactions that constitute the business' function. To use an analogy, a single person eats say, one hamburger a week; a fast-food chain may make millions of hamburgers. The fast food chain, having any business sense, can invest far more in the makeup of the hamburger than the consumer. Heck, it's even possible that the consumer choose the hamburger that's not -- to her or his personal taste -- the "best-tasting", or "healthiest", or whatever.
So switching to law. There exists therefore the expectation that, in these daily transactions, the business is more versed in the legal circumstances than the consumer. And in law, the duty of a representative of a business to know the law governing that business is greater than the duty of a consumer to know the law governing every single transaction.
Now, EULAs, fancy "take it or leave it" contracts, and the rest, may contain attempts by a business to make sure they get the best end of a dispute. In this case, the court finding (in my understanding), was that:
A. The EULA was not negotiable; it was a "take it or leave it" deal.
B. Linden Labs has distinguished themselves from others in the market by claiming they treated user's "virtual property" as "real," and the CEO has gone around making exactly that claim.
C. In the event of a dispute, the EULA/TOS gave LL a whole range of options, starting with "self-help", i.e., determining the case by themselves, and resolving it. On the other hand, the consumer was forced to an arbitration process.
D. The clause compelling arbitration in San Francisco was buried in the EULA/TOS document under "General Provisions" (or something like that).
E. Arbitration would cost the plaintiff considerably more than a lawsuit.
F. The details of the arbitration would be confidential, so that, in future arbitration disputes between Linden Labs and the Consumer, only Linden Labs would have access to that information.
G. No further information on arbitration procedures was provided in the TOS or on teh website.
So no, it's not Paris Hilton at all. The ruling is: If a company supplies a EULA, those terms must at least pretend to be fair to the consumer.
'Cause I just read Microsoft's EULA last night... and at the end it said something about daily blowjobs to Bill gates...
Hrm...
Granted, my game was free and as such, I wonder if would have been subject to the same rules.
"The problem with socialism is eventually you run out of other people's money" - Thatcher.
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."
What if a player/group of players find a bug in the game and are able to use it to cheat?
Then suspend the accounts of players who use the bug, instead of terminating them; restore the access after you patch the damn bug. As compensation, be sure to credit the account for the time lost due to suspension; possibly credit a extra percentage to reduce arguments. If you want incentive, give your coders a quarterly bonus equal 20% of their base salary... but with the bonus pool being reduced by the value of that extra percentage that has to be given out due to bugs. (That would certainly get ME paying more attention to my code.)
Or worse, use it to gain access to the personal computers of OTHER players without their permission?
That can probably be prosecuted under several federal laws. Get the FBI involved, suspend as above when ready to make an arrest. Include in the TOS clauses stating that conviction (or guilty or nolo contendere pleas) of a federal criminal offense using their servers will result in account termination and ban — all digital assets forfeit for liquidation to cover damages, internal investigation costs, with any residual to be paid to the US treasury. If the corporate lawyers feel cautious, the proceeds of liquidation might be escrowed while any appeals get filed.
Approaches with more subtlety, finesse, and equity are more likely to gain public approbation and to stand up in court... and to avoid going there in the first place.
//Information does not want to be free; it wants to breed.
If you're running an online business in SL, you're already liable for income from it. This isn't new.
The problem with the ToS/EULA of many MMOs and online services is that the unfair balance of power being in the developer's hands is a violation of a consumer's rights. When you subscribe to an online service you are paying the developer for the right to use the service for the period of time agreed upon. The problem that arises with the developer's holding the power to terminate your service at any time is that with online games in particular, you are investing time and energy to obtain digital goods. Whether it be characters and equipment in a RPG or digital real estate in something like Second Life, you are paying for the right to obtain these goods. This makes those goods your property. Now the developer has every right to control your access to this property as agreed upon when you pay your subscritpion, they do not however have the right to terminate your access without due cause. It is my belief that with the size of the market in the MMO industry, there should be more government regulation as to the rights of the consumer. When you begin to assess the amount of time and energy invested by many MMO gamers you will quickly realize that there is more at stake than just a monthly subscription fee. These customers have invested many hours to obtain what they have, whether it be progression of the character or goods that the character posses, or perhaps less material, the experiences and relationships that are gained from this type of game. These by-products of the services rendered should be acknowledged and supported by the gaming industry as well as consumer advocacy groups and goverment regulations. I believe the key to fair play in this issue is that the developers should be required to maintain and continuosly update a grocery list of behaviors that would constitute a violation of your agreement with them in regards to the product rendered. Cheating/exploitation etc should be well defined and there should be a system in place to properly process violations of this. My personal opinion is a publicly posted list of behaviors constituting revokation of your access and a three strike policy. Players of these games should be required to read and agree to a Terms of Service that clearly details exactly what is considered a violation of the agreement. If they fail to comply with this policy they should initially be issued a warning, stating that such behavior/activity is prohibited and that further violation will result in termination of service. This will give accidental violations more leeway while punishing those that truely seek to violate the terms. I'm reminded of two situations from my own past, both examples derived from the MMORPG Everquest, considered largely to be the first large scale successful MMO game. The first issue arose early on in the game's existence when a player had written fan fiction that involved aspects of the shared world provided by the content of the game, in this fan fiction some largely abbherant behaviors were discussed such as Bondage/BDSM type sexual acts. When this was brought to the attention of Sony Online Entertainment, which as the time may very well have been micro managed by the original developer Verant, they quickly examined the incident which occured off of the company's resource/properties and terminated the user's account. This caused a public uproar among some members of this customers immiediete community of fellow users. It is my opinion that in this issue, the developer was in the wrong, as the incedent occured outside of the company's servers and therefore was not eligible for their judgement. What right they did have however was to address any potential copyright infrigement of their intellectual properties. This should not have resulted in a termination of service, but should have been handled as any other copyright infringement incedent would, with a cease and decist order. Another incedent that comes to mind was in regards to how large scale encounters in the game were handled, as these events were meant to be strategy based gameplay there were occasionally questio
Guns DO work pretty good. So do small explosives. Of all ironies, Iraq proves the right wing view of the 2nd amendment. Get enough people on the ground with guns and explosives, and any government that does not have popular consent does not govern.
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