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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
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.
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.
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).
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The casinos have to deal with the Nevada State Gaming Control Board that regulates Nevada's gaming industry. Will we see some thing like that for on line games with real cash money in them?
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...
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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.
Refs:
Similarly, if an artist or musician wants to get paid for painting or recording, he can find someone who'll agree to pay him for it. If he wants $10,000 to make a painting, and someone is willing to pay him $8000, he has the same options: accept the lower offer, look for another customer, or enter another line of work where customers are willing to pay more. What he doesn't need or deserve, however, is the option to make his painting for free, plaster copies of it all over walls and galleries, and then force anyone who looks at it or makes their own copy to pay him $10,000. That's just a way to avoid honest negotiations.
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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 could work out bad for the company in the future. And it is true that this precedent is not binding outside this jurisdiction, BUT, other judges who are asked to determine the legality of a click-wrap license in the future could well become aware of it, and that should not be discounted.
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.
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.
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