LGJ: FTC could target EULAs
by Mark Methenitis 
{ Jan 30th 2009 at 11:00PM } 
Each week Mark Methenitis contributes Law of the Game on Joystiq ("LGJ"), a column on legal issues as they relate to video games:
A few weeks back, I mentioned that the FTC was looking into regulating DRM. Well, in part on some discussions at the Game::Business::Law Conference, I have a sneaking suspicion that the FTC likely won't stop with DRM. In fact, I would be willing to guess that within the next few years, the often maligned End User License Agreement ("EULA") may fall into the realm of being regulated as further "consumer protection." Is it necessary? Well, that's a matter of opinion, really. The only certainty is that it will be able to bring in additional revenue for the government, which is certainly short on cash these days.
If the FTC opts to regulate EULAs, I see three probable scenarios to accomplish its goal. Before I get ahead of myself, I should describe what the theoretical goal of consumer protection is: to prevent companies from taking advantage of consumers. Generally, though, it isn't necessarily the average consumer who's seeing the greatest benefit from the regulations. Often it's the most uneducated consumer, which usually means the regulations tone things down to a level of near absurdity.
So, what are these three methods by which a consumer could be "protected" from the EULA? The first and most common method is what is known as a "plain language requirement." The idea is that contracts written by lawyers are full of legal terms and are written in such a way that it takes a lawyer to decipher the actual meaning of all of the clauses. A "plain language requirement" means that the document in question has to be written in such a way that anyone can read and completely understand what is written. This has been used before in many different areas, notably in the franchise realm related to the required disclosure document for the sale of a franchise unit.
This would be relatively easy to accomplish, with the contracts simply being re-written and approved by some government agent. Likely, there would be a "review fee" and other elements that keep cash flowing into the system, as well as potential penalties for non-compliance. It's in this review process where plain language can often border on ridiculous. Generally, there is a list of words that are "not allowed" under plain English requirements, but much of the time there are included terms like "prior to" and "so long as." Feel free to comment if you disagree, but terms like that are, in my opinion, pretty unambiguous and easily understood.
Of course, on the complete opposite end of the spectrum, it could be required that companies abandon EULA contracts all together in favor of a collection of FTC approved bullet points. The development and legal communities would, I assume, vehemently oppose this idea, but it is possible. Basically, the FTC would come up with a list of things all EULAs include, then a list of optional provisions that the licensor (the game company) could include. Then the licensee (you) gets a pop-up box with a list of provisions you'll see dozens of times and should be relatively familiar with. This would be the most burdensome and limiting option for developers, but it likely wouldn't generate income for the government, so I don't see it as probable.
The third option, which is basically a hybrid of the previous, would work something like this: The developer could write the EULA as pleased (or subject to a plain language requirement), but then also present a "key points" section that outlines how the agreement treats some key issues. That may be a text based outline, or it could even be some graphic based system. In the event this is accompanied by plain language, the government would actually have two chances to collect: once related to the plain language; and once related to the accuracy of the outline elements compared to the agreement. If income is a primary driver, as I suspect it is, then this may be the most likely of the three options for that reason alone.
All of this begs the question: Do consumers need to be protected from EULAs? My gut feeling is: No. EULA enforcement isn't often focused on gray areas; it's typically based on things most consumers know are either generally acceptable or not acceptable. Yes, the contracts are long and even many lawyers don't take the time to read them before clicking "Accept." But that doesn't mean there's a mountain of evidence that EULAs are being used to harm consumers. In fact, one particular EULA did just the opposite. Until such a time when EULAs are actively being used to defraud or otherwise harm the consumer base, as opposed to the "theoretical possibility" that something could be done based on the terms, I think making software developers jump through additional hoops to get the product to market is unnecessary.
[Image credit: gruntzooki]
Mark Methenitis is the Editor in Chief of the Law of the Game blog, which discusses legal issues in video games. Mr. Methenitis is also a licensed attorney in the state of Texas with The Vernon Law Group, PLLC and a member of the Texas Bar Assoc., American Bar Assoc., and the International Game Developers Assoc., where he is a board member of the Dallas chapter. Opinions expressed in this column are his own. Reach him at: lawofthegame [AAT] gmail [DAWT] com.
The content of this blog article is not legal advice. It only constitutes commentary on legal issues, and is for educational and informational purposes only. Reading this blog, replying to its posts, or any other interaction on this site does not create an attorney-client privilege between you and the author. The opinions expressed on this site are not the opinions of AOL LLC., Weblogs, Inc., Joystiq.com, or The Vernon Law Group, PLLC. As with any legal issue that may confront you in a particular situation, you should always consult a qualified attorney familiar with the laws in your state.
If the FTC opts to regulate EULAs, I see three probable scenarios to accomplish its goal. Before I get ahead of myself, I should describe what the theoretical goal of consumer protection is: to prevent companies from taking advantage of consumers. Generally, though, it isn't necessarily the average consumer who's seeing the greatest benefit from the regulations. Often it's the most uneducated consumer, which usually means the regulations tone things down to a level of near absurdity.
So, what are these three methods by which a consumer could be "protected" from the EULA? The first and most common method is what is known as a "plain language requirement." The idea is that contracts written by lawyers are full of legal terms and are written in such a way that it takes a lawyer to decipher the actual meaning of all of the clauses. A "plain language requirement" means that the document in question has to be written in such a way that anyone can read and completely understand what is written. This has been used before in many different areas, notably in the franchise realm related to the required disclosure document for the sale of a franchise unit.
This would be relatively easy to accomplish, with the contracts simply being re-written and approved by some government agent. Likely, there would be a "review fee" and other elements that keep cash flowing into the system, as well as potential penalties for non-compliance. It's in this review process where plain language can often border on ridiculous. Generally, there is a list of words that are "not allowed" under plain English requirements, but much of the time there are included terms like "prior to" and "so long as." Feel free to comment if you disagree, but terms like that are, in my opinion, pretty unambiguous and easily understood.
Of course, on the complete opposite end of the spectrum, it could be required that companies abandon EULA contracts all together in favor of a collection of FTC approved bullet points. The development and legal communities would, I assume, vehemently oppose this idea, but it is possible. Basically, the FTC would come up with a list of things all EULAs include, then a list of optional provisions that the licensor (the game company) could include. Then the licensee (you) gets a pop-up box with a list of provisions you'll see dozens of times and should be relatively familiar with. This would be the most burdensome and limiting option for developers, but it likely wouldn't generate income for the government, so I don't see it as probable.
The third option, which is basically a hybrid of the previous, would work something like this: The developer could write the EULA as pleased (or subject to a plain language requirement), but then also present a "key points" section that outlines how the agreement treats some key issues. That may be a text based outline, or it could even be some graphic based system. In the event this is accompanied by plain language, the government would actually have two chances to collect: once related to the plain language; and once related to the accuracy of the outline elements compared to the agreement. If income is a primary driver, as I suspect it is, then this may be the most likely of the three options for that reason alone.
All of this begs the question: Do consumers need to be protected from EULAs? My gut feeling is: No. EULA enforcement isn't often focused on gray areas; it's typically based on things most consumers know are either generally acceptable or not acceptable. Yes, the contracts are long and even many lawyers don't take the time to read them before clicking "Accept." But that doesn't mean there's a mountain of evidence that EULAs are being used to harm consumers. In fact, one particular EULA did just the opposite. Until such a time when EULAs are actively being used to defraud or otherwise harm the consumer base, as opposed to the "theoretical possibility" that something could be done based on the terms, I think making software developers jump through additional hoops to get the product to market is unnecessary.
[Image credit: gruntzooki]
Mark Methenitis is the Editor in Chief of the Law of the Game blog, which discusses legal issues in video games. Mr. Methenitis is also a licensed attorney in the state of Texas with The Vernon Law Group, PLLC and a member of the Texas Bar Assoc., American Bar Assoc., and the International Game Developers Assoc., where he is a board member of the Dallas chapter. Opinions expressed in this column are his own. Reach him at: lawofthegame [AAT] gmail [DAWT] com.
The content of this blog article is not legal advice. It only constitutes commentary on legal issues, and is for educational and informational purposes only. Reading this blog, replying to its posts, or any other interaction on this site does not create an attorney-client privilege between you and the author. The opinions expressed on this site are not the opinions of AOL LLC., Weblogs, Inc., Joystiq.com, or The Vernon Law Group, PLLC. As with any legal issue that may confront you in a particular situation, you should always consult a qualified attorney familiar with the laws in your state.
Reader Comments (Page 1 of 1)
J.Goodwin @ Jan 30th 2009 11:08PM
Nothing wrong with "before" or "if," except for lawyers.
Poisoned Al @ Jan 30th 2009 11:13PM
Is it too much to ask to have a clear warning, stating:
"This game will install useless DRM that will most likely bugger your machine up. It will do nothing to stop pirates, but it will make your PC crash every time you try to shut it down. We just install this becuase the person who sold us this crap, lied to our idiot bosses."
BananaBoat @ Jan 30th 2009 11:44PM
I think it's absolutely necessary. For years now, they've been silently attempting to switch us all from a buy-to-own market, to a rent-and-never-own market. Personally, I refuse to pay the same price as I've always paid to own something, for a rental. If the FCC is willing and able to protect the consumer from these types of shenanigans, then more power to them.
I've been protecting myself by not renting anything under the guise of buying. I'm looking at you Spore.
Haggard @ Jan 31st 2009 9:16AM
It's the sad truth of being a PC gamer that pretty much every game I buy now is 'rented' rather than actually bought. Far Cry 2, Dead Space, Mirror's Edge, Mass Effect, Crysis Warhead, BioShock - all of them have limited activations, and it sucks donkey balls.
BananaBoat @ Jan 31st 2009 10:11PM
I've missed out on a few games because of securom. I don't consider spore a loss (I played it on a friends computer, I hated it), but I'm feeling the loss of World in Conflict (looks like it would be fun... it's a shame)
They'll learn, one day. Or maybe the FCC will fix this for us before then, but I'm not getting my hopes up.
Duoae @ Feb 2nd 2009 7:04AM
I agree. I think there are lots of unfair terms that publishers and developers stick in there under the assumption (and fact) that we can't look at the EULA before opening the game and thus being unable to return it. I've been saying for years that consumers need protection from the increasingly draconian games industry.... I mean, think about this - Moto GP '07 has a requirement that only the purchaser of the game is allowed to play it. You can't lend it or allow another person to play the game under your 360 account or whatever.
Now, i know EULAs are questionably legal but they have been ruled as both unlawful/unenforceable and as legally binding. If it came down to being taken to court i wouldn't want to be bound by a contract that i have to agree to that's implicitly one-sided. Where's the option for me to refuse the contract and send the game back for a full refund? Where's my consumer rights? Even the movie and music industries allow you to 'share' your paid content - just not at large public events. Imagine if you couldn't watch the DVD your parents bought you because it was legally theirs and no one elses but they had none of the legal rights granted to 'ownership'....
liedra @ Jan 31st 2009 12:38AM
I'm writing my PhD thesis (at the Centre for Applied Philosophy & Public Ethics, Australia) on just this problem from a technology ethics point of view. It's almost ready for submission so I'll be publishing some papers soon, and have one draft PDF available at http://liedra.net/papers/
I think you're wrong in your last paragraph, and that there are many parts of EULAs that affect consumers adversely, even if it doesn't seem to be much of a problem at the time. It's ultimately an informed consent issue. Things like data privacy and such can be "hidden" amongst 5000 words of legalese, which is, as you say, so hard to read that many lawyers don't read all the way through. Ethically speaking, this is atrocious, and not something that should just be fixed when something awful happens, because it has already happened (look at software like Zango etc. which installs third party applications, websites where you sign away all your copyright to them when you upload a photo, etc.), and even if it hadn't happened, that's not a good excuse to allow companies to continue to use EULAs like these. I could ramble all day about this (and have done so in my thesis for 250 pages) so I'll leave it short and simple :)
Max Headroom @ Jan 31st 2009 12:57AM
I think that many companies are abusing EULAs. I've seen quite a bit of software that comes with a clause saying that it cannot be resold. I should have the right to resell software I purchased legally, just as I can resell a CD or DVD. Companies say they are "licensing" the software, but it sure seems like I'm "buying" it when I make a purchase in the store. I don't know if the FTC is the answer to this problem, but something does need done.
CH3BURASHKA @ Jan 31st 2009 1:37AM
I don't have a source on me, but I remember a similar situation where one guy read a EULA and in it, it said whoever contacted first would get a hundred bucks (or something). The dude got his money about 2 years after the EULA was made.
Personally, I have NEVER read a EULA, but after reading numerous stories such as this, I am more aware of them, meaning I feel my neck hairs bristle right before I click the Accept button.
XLM @ Jan 31st 2009 12:48PM
Source is right there in the link in the last paragraph.
Dave @ Jan 31st 2009 1:44AM
Pardon my ignorance, but what the HELL is this guy talking about?
Yuccadude @ Jan 31st 2009 2:32AM
End User License Agreement: A contract that you sign by clicking I Accept at the bottom of a giant block of text allowing you to run the program that you just installed on the computer. Harmful effects to your computer are possible by signing some EULAs due to the wording in certain areas of it where you give the company access to your computer in a specific example.
The government wants to protect consumers from this, but it's difficult to do with the legal wording necessary for a contract, and there are three options discussed in the article that the government could change about EULAs in order to make them easier(read:possible) to understand and read the whole thing.
So, basically RTFA dude.
t_m @ Jan 31st 2009 2:59AM
Is it me or is this article mostly talking about the author's views on government and not really about the subject. Its written in a very partisan tone, and essentially comes across as "government is bad and its just after your money".
Of course, this is a blog not a press site, but it seems like addressing the issues without inserting the personal bias would be a little more useful.
Assuming we ignore the author's implication that all consumer protection is a con, then I'd definitely support option 2. In fact i think i suggested it a few times a few years back.
Its worked pretty well for the CC licenses, and they can essentially be boiled down to a few logos. I don't see why EULAs couldn't be boiled down to 3 or 4 sections/ideas that devs could choose from... and then we could have a simple box on the back of the box (like a ratings box) that shows us the license clearly, plus any extra warnings.
NO ONE ever reads EULAs. Companys themselves don't stick to them, or even expect users to stick to them. Its ridiculous at the current time.
Basically all they say anyway is:
1 - We keep the copyright. (obvious)
2 - Don't copy it. (pointless)
3 - It might have bugs.
4 - If you mod it/hack it then we aren't responsible. (obvious).
Why do we need hundreds of lines of legal jargon for that? We don't need it with any other product/media. We don't have to sign something to buy a DVD or watch a movie or read a book.
Jason K @ Jan 31st 2009 6:12AM
I think it's kind of funny that while making the argument the EULA regulation is not required you link to an article showing that almost nobody ever reads the dang things.
The idea that there haven't been abuses of EULA's seems kind of ridiculous. Do you really think that everyone who downloaded eWallet would have done so if they knew that it was going to install software that tracked their web use and caused pop up ads? I highly doubt it. They are getting away with it by burying it in a giant EULA that they know nobody is going to bother to read. How is that not against the interests of the consumer?
The problem isn't that they are too hard to read, it's that they are way to long, and sometimes reserve so many powers that it's hard to tell what all you have agreed to. Who has time to read page after page of EULA every time? What about those EULAs that keep getting updated, do you think people are really going to go find the old EULA and figure out what is differnt to see what they are agreeing to now? The situation is so bad that there are software programs you can download to analyze EULAs for you.
A little consumer protection sounds like a great idea just to collectively save us from signing away our first born. At the very least it will save countless man hours for the people who do actually read EULAs.
fred @ Jan 31st 2009 7:19AM
Since we can only read the EULA on install. Has anyone ever tried to return (for full refund) a PC game because they do not agree with an EULA?
AwesomeTown @ Jan 31st 2009 8:27AM
I was thinking that same thing. That needs to be the number one issue fixed in this. Maybe allow it to be read on the website would be the only logical remedy.
katz @ Jan 31st 2009 7:56AM
EULAs are pointless. You can only read them AFTER purchasing the game and if you disagree with them and violate them, then you're basically in violation of a contract which you signed blindly. That gives the companies legal terms to sue you.
It's like you've signed a blank piece of paper and then they lift off the covering layer and you discover it's a shitty restraining contract.
aristokrat @ Jan 31st 2009 3:54PM
That's why they are called shrink-wrap contracts, which are generally not enforceable. Technically, if you don't agree with the EULA, you should be able to take it back to the store for a full refund.
katz @ Jan 31st 2009 9:31PM
that's in theory.
in theory communism also works for the people...
we know how much it worked for Russia and the Eastern block
why not the LS2LS7? @ Jan 31st 2009 12:18PM
I don't get why it would add to government revenue.
But yes, this needs to be regulated. The EULAs are so long and meaningless except to the companies who want to take things away from you.
So in other words, the only real purpose of a EULA is to help companies deliver less of a product in the box than you thought you had.
Many of EULAs give up so many things to the companies who make them. Things like no resale, or the right for the companies to come into your computer through their servers and modify the contents of your computer, including removing data (with no restrictions on the data to be removed listed in the EULA).
Powerlord @ Jan 31st 2009 12:20PM
By the way, in the US at least, a EULA is a document that takes away some of the rights given to you under Copyright law but attempts to give you the impression that it is granting you rights.
http://www.copyright.gov/title17/92chap1.html#117 has a list of specific rights applicable to computer programs.
Of particular interest is the section on "Making of Additional Copy or Adaptation by Owner of Copy."
It essentially says that it's OK to make a copy so long "that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner."
In today's world, that would be the copy the installer creates and the copy made in RAM when the program runs.
TK00 @ Jan 31st 2009 2:08PM
EULAs can't take away rights. Their contracts; they must valid in order for them to mean anything.
why not the LS2LS7? @ Jan 31st 2009 6:11PM
"They're" (not their) contracts.
In this case, you are agreeing to give up rights in order to use the software.
So yeah, they take away rights.
Funkul @ Jan 31st 2009 1:34PM
Also remember that EULA's are proliferating into areas where they really have no business being. Monsanto,for example, is an agribusiness that sells genetically modified seeds. BUT! they have the most restrictive EULA's around for using those seeds. For many farmers, the EULA's are basically locks control of the farm with Monsanto, who can give or take "user capabilities" at a drop of a hat. Im in the camp of dumping EULA's altogether, and just let copyrights and patents cover things. The First Sale doctrine should over-ride any EULA, as the First Sale doctrine is upheld in court, and EULA's are not.
clayton @ Feb 3rd 2009 2:46PM
No, this discussion doesn't beg that question at all. It may raise the question, or call it to mind, perhaps, but it has nothing to do with the logical fallacy of begging the question.
I hate linking to this website, but: http://begthequestion.info/