May 5, 2008 | By Jennifer Granick

MSN Music Debacle Highlights EULA Dangers

When Microsoft announced that it will no longer support former MSN Music customers who want to play their DRM disabled music on new computers, DRM-hating consumer advocates justifiably cried out, “I told you so!” But this debacle is not just another example of the dangers of DRM: its also a reminder of the danger of overreaching end user license agreements, or EULAs

Just as DRM allows unprecedented corporate control over music and movies, the EULAs that Microsoft and other content vendors force users to click through before downloading songs, shows or films help enforce and expand that control. For example, EULAs usually claim that whatever happens, you can't sue the company--even for problems that are entirely of the company’s own making. And EULAs are often used to try to limit a company’s obligation to live up to its apparent promises.

What this means is that buying music (or software) on line is quite different from making your purchase at the store. When you buy a regular CD, you own it. You're allowed to do anything with it you like, so long as you don't violate one of the exclusive rights reserved to the copyright owner. So you can play the CD at your next dinner party (copyright owners get no rights over private performances), you can loan it to a friend or make a copy for use on your iPod. Every use that falls outside the limited exclusive rights of the copyright owner belongs to you, the owner of the CD. And if it won’t play, you get to bring it back and get a refund. Both technology and custom give vendors a lot more power when selling digital goods. Unlike the CD purchase, when I download from Microsoft Music, I don't just get the music, I get the “Service Agreement” as well. And if the Service Agreement tells me that there just might not be any Service, then I could be stuck with the digital version of an empty jewel box.

MSN Music’s EULA is a case in point. When active, MSN Music's webpage touted that customers could “choose their device and know its going to work”.

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But when customers went to purchase songs, they were shown legalese that stated the download service and the content provided were sold without warrantee. In other words, Microsoft doesn't promise you that the service or the music will work, or that you will always have access to music you bought. The flashy advertising promised your music, your way, but the fine print said, our way or the highway.

Microsoft isn't alone. Many other DRMed music services also make false promises to customers including Apple iTunes, RealNetworks and Napster 2.0.

Which applies, the marketing promises or the fine print?

To figure that out, you might start by looking at whether the agreement is a legally enforceable contract. For a contract to be valid, there must be an offer, an acceptance, and the exchange of some consideration—meaning, some kind of benefit, like a good, or service, or money. On-line, there are a variety of ways that vendors and users might enter into a contract. Software requires customers to click “I agree” before the product will install. Music requires a click before it will download. Contract formation doesn't require that the customer actually read and agree to the terms, as long as the terms are shown and the customer has the opportunity to walk away. Legal decisions are very fact-based and its hard to generalize, but website terms hidden behind a link are often unenforceable, while click and shrink wrap licenses are valid.

That covers offer and acceptance, but what about consideration? Is it a fair bargain if you purchase software, bring it home, and then learn that there are additional terms and conditions? After all, you paid money, got the software and now they want you to agree to additional restrictions without giving you anything extra for the favor. Arguably, these “terms after” lack consideration and should not be enforceable. However, in ProCD v. Zeidenberg, the Seventh Circuit held if you install software and click “I agree”, you are bound to those contract terms because you could have returned the software if you didn't want to comply. If you've ever tried to drive back to the mall, park, and get the store to take your opened software back, you know how crazy this rule is.

Consumers do have some protections. In California and many other states, a provision that is unconscionable—one that shocks the conscience, is unduly harsh or opporessive, and/or violates public policy—may be unenforceable. For example, courts might reject a provision that waives your right to go to court to resolve any dispute you have with the vendor, or a provision that is hopelessly one-sided (for example, one that imposes much more onerous restrictions on the customer than on the vendor),

Unfortunately, courts have generally tended to enforce even the more onerous EULAs, such as those that limit fair use rights. On the other hand, consumer advocates like the New York Attorney General’s Office have successfully forced some companies to remove “anti-benchmarking” provisions that stop people from criticizing the software from the EULA, and at least one California court has held that take-it-or-leave-it EULAs are procedurally unconscionable. For the average consumer, the best way to fight EULAs at present may be to vote with your feet. Read the EULA on your software. If it has terms you find offensive, look for alternatives. If you can find one with a better EULA, use it, and tell the first company why you are switching. If you do hold your nose and agree to a EULA you don’t like, tell the company your objections.

View EFF's guide on fighting EULAs.


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