Revealing the surprises in software's fine print
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That's what the 33 million subscribers of the nation's largest Internet service provider, America Online, should have felt when they clicked on the "I agree" button as they signed up for Internet access.
Tucked into paragraph 25 of the 3,942-word America Online agreement each subscriber accepts electronically is a sentence that reads: "The laws of the Commonwealth of Virginia, excluding its conflicts-of-law rules, govern this Agreement and your membership." On the face of it, the stipulation seems quite ordinary. After all, the company is based in Dulles, Va.
But after a brief aside, AOL's legal department again hammers the point home: "You expressly agree that exclusive jurisdiction for any claim or dispute with AOL or relating in any way to your membership or your use of AOL resides in the courts of Virginia and you further agree and expressly consent to the exercise of personal jurisdiction in the courts of Virginia in connection with any such dispute. ... "
If it didn't sink in the first time, here it is again: If you've got a problem with AOL or any of its companies, AOL wants you to settle it in its home state's courts.
But here's what's not apparent: The emphasis on Virginia is disingenuous because AOL didn't explain its significance: The state doesn't allow class-action law suits.
"Without class actions, very few consumers have any rights," explains Cem Kaner, an attorney, author of a consumer guide called "Bad Software," and professor of computer sciences at the Florida Institute of Technology.
The AOL example points out something computer software users ought to treat with more awareness than they traditionally have: the agreements they sign to use a program or service. It wouldn't be a stretch to say the vast majority of users don't even scroll through those agreements.
Yet they often contain interesting provisions that may limit what those users can do should anything go wrong.
It's in the details
The unstated restriction on filing class-action suits in AOL's agreement, for one, is telling. Such suits are one of the few legal tools that consumers have to force corporations to live up to their promises. They're usually filed by attorneys on behalf of a large group of consumers whose economic grievances against a company are too small to be worthwhile to file individually. Virginia is one of only two states — Mississippi is the other — that have made it impossible for consumers to file class-action lawsuits.
Along with the usual boilerplate disclaimers of liability, this means that when you click on AOL's "I agree" button on its online agreement, you're effectively giving the company the green light to write software of any standard that has the potential to do untold damage to your computer — and then not be answerable to you for however much damage it inflicted.
That's the theory, anyway, if you read AOL's contract.
For its part, AOL defends the agreements. "The terms-of-service agreement is very pro-consumer and a very consumer friendly outlining of what the contractual relationship will be between a member and the AOL service in terms of utilizing e-mail, Instant messaging, chat and other (things) associated with our service," says AOL spokesman Nicholas Graham.
It's not clear how enforceable these contracts really are. But one class-action lawsuit struggling to come to life in the courts of Washington, D.C., provides a glimpse of the freedom from accountability any software company, Internet service provider or seller of digital information could enjoy if judges decide to enforce all the terms of these so-called click-wrap contracts.
A case in D.C.
Late in 2000, several people in Washington, D.C., Virginia and Maryland who signed up for DSL service from Verizon either experienced slow and spotty service, didn't get hooked up until several months after the promised hook-up date, or weren't connected at all. Their experiences were, in effect, the opposite of what Verizon had promised in its advertising — a speedy Internet service "without wait" and "instant," according to a complaint filed on behalf of former Verizon customers by Cohen, Milstein, Hausfeld & Toll. The lawyers said Verizon knew about its problems, but didn't disclose them to potential customers.
When the consumers filed suit, Verizon pointed to the clause in its customer contract stipulating that all disputes had to be settled in Virginia. The trial court decided to enforce the clause and dismissed the case.
The consumers' lawyers, who are appealing the decision, argue that such a contract is unfair and unconscionable.
"Even the most conscientious reader who might have read every single line would have ultimately found that they were required to bring a lawsuit in Virginia and would not have thought that a problem — because the average person has no idea that Virginia doesn't permit class actions," says Victoria Nugent, one of the lawyers who filed the brief.
The ideal situation would be one where consumers are given enough information to make an informed decision, she says.
"If someone really looks at it and thinks: 'If I agree to this, and I can never sue if something goes wrong,' it might be something that makes them think twice about using that particular service provider," she says.
A Verizon spokeswoman declined comment other than to say the suit "has no merit."
This case highlights what consumer advocates worry about most in these click-wrap contracts — extreme, nonnegotiable terms that could make companies unaccountable to customers and free not only to write recklessly buggy software, but to not live up to their advertised promises.
Software-industry lobbyists insist that this isn't true because existing consumer-protection laws would automatically override the provisions in these click-wrap contracts. But as the Verizon case shows, the area of consumer protection and contracts involves the interaction and interpretation of several sets of laws, and it's not always clear the consumer comes out ahead.
New proposal
The movement to make such click-wrap agreements enforceable has been afoot for a while. Industry lobbyists are pushing what is known as the Uniform Computer Information Transactions Act (UCITA). The model statute's goal is to re-interpret the foundations of American commercial law to spell out the rules governing the transactions in and licensing of intangible products such as software, Internet service and digital information. So far, Virginia and Maryland are the only two states that have adopted it. (The class-action prohibition that is part of Virginia's legal system is not part of UCITA.)
Several other states, including Washington, are considering UCITA. Boeing, along with many other large business users of off-the-shelf software, steadfastly oppose UCITA. Microsoft is for it.
The state Senate has introduced legislation that would enact UCITA. But in a sign of how controversial the proposed rules are, the Senate has also introduced another bill that would allow a customer subjected to a click-wrap contract to decline the terms and choose to be governed by existing Washington state law, instead.
"There's a lot at stake," says Art Butler, counsel to Tracer, a group of large business users of software, and a telecommunications attorney at Ater Wynne in Seattle.
Legal experts charge that click-wrap contracts are especially pernicious to businesses because the terms have the effect of making the software companies unaccountable for glitches in software that could either lead to serious accidents or botched transactions. In Washington state, for example, building contractor M.A. Mortenson in 2000 lost a case in which it sued Timberline Software for buggy software that caused Mortenson to underbid a contract by $1.95 million.
Software-industry lobbyists insist that UCITA won't overturn traditional consumer-protection laws. And they say that in order for the software industry to flourish they need to operate in a legal environment that provides clear, enforceable rules for commerce. Currently, enforcement of the terms found in click-wrap contracts varies with the way various judges interpret existing commercial law for tangible goods.
Lawyers group weighs in
But a key report released by the American Bar Association in late January blasted the latest version of UCITA and called for a major rewrite. Among its many criticisms is that the proposed law's language regarding consumer protection leaves too much room for interpretation.
The effect of the bar association's lack of support, says Kaner, is that state legislatures will now be more reluctant to enact UCITA.
Does this mean the issue is dead?
Hardly.
"The impact of UCITA has been to convince a wide range of courts that the principles underlying contract law have changed," Kaner explains. And Tracer's Butler points out that these issues are certain to generate more attention as software companies such as Microsoft better control customers' use of their products and multimedia information. In early February, software-magazine columnist Ed Foster detailed how Microsoft updated its Windows XP's user-agreement to grant itself automatic access to XP customers' workstations for updates and fixes.
Butler is on an informal committee created last November to work on Washington's version of UCITA, SB 6226. His objective is to make sure that all the pieces of the puzzle are in place in front of the software user when they click "I agree."
"We're looking for something more reasonable and not surprising to users, and which doesn't impose unfair costs on them," he says.
Sarah Lai Stirland is a free-lance writer in New York. She can be reached at sarah@sarahstirland.com.