Tag Archives: eula

Website terms and conditions were unenforceable because of fraud

Duick v. Toyota Motor Sales, U.S.A., Inc., 2011 WL 3834740 (Cal.App. 2 Dist. August 31, 2011)

Someone signed plaintiff up through a Toyota website to take part in a “Personality Evaluation.” She got an email with a link to a website, and on the second page that she had to click through, she was presented with the well-known check box next to the words “I have read and agree to the terms and conditions.”

Later plaintiff started getting creepy emails from an unknown male calling himself “Sebastian Bowler” who indicated that he was on a cross-country road trip to come and visit plaintiff. He even listed plaintiff’s physical address. One of the emails had a link to Bowler’s MySpace page, which revealed he “enjoyed drinking alcohol to excess.” A few days later plaintiff got another email from someone purporting to be the manager of the hotel in which Bowler had trashed a room, and attempted to bill plaintiff for the damage.

As one would expect, plaintiff was disturbed by these messages. She finally got an email with a link to a video that said Bowler was a fictional character and that the emails were part of an elaborate prank, all to advertise the Toyota Matrix.

Plaintiff sued Toyota for, among other things, infliction of emotional distress. Toyota moved to dismiss the lawsuit, arguing that the online terms and conditions contained an arbitration provision, so the case did not belong in court but before an arbitrator. The court rejected this argument, finding that the terms and conditions were void, because plaintiff’s agreement to them was procured by “fraud in the inception or execution.”

The court found that the terms and conditions led plaintiff to believe that she was going to participate in a personality evaluation and nothing more. A reasonable reader in plaintiff’s position would not have known that she was signing up to be the target of a prank. For example, the terms and conditions were under the heading “Personality Evaluation Terms and Conditions” and made vague and opaque references to terms such as “interactive experience” and a “digital experience.” Simply stated, plaintiff, through no fault of her own, did not know what she was getting herself into.

For these reasons, the court held that the terms and conditions were void, and all the provisions contained in those terms and conditions, including the purported agreement to arbitrate any disputes, did not bind the parties.

Customer violated software license by letting attorneys use application

The Compliance Store v. Greenpoint Mortgage Funding, — F.3d —, 2010 WL 4056112 (5th Cir. October 18, 2010)

A federal court in Texas has decided a case that could have notable implications for both providers and users of software. The court took a narrow view of the rights that licensees of software have to authorize third parties (i.e., independent contractors) to use software on behalf of the licensee.

Plaintiff software provider sued its customer for breach of the software license agreement after plaintiff learned that the customer allowed its attorneys to input data using the software. Plaintiff claimed that the use was not permitted by the terms of the license agreement.

Customer moved for summary judgment on the breach of software license claim and the district court granted the motion. Plaintiff software provider sought review with the Fifth Circuit Court of Appeals. On appeal, the court reversed.

The appellate court held that the license agreement should not be read to permit use of the software by a third party not expressly provided for in the agreement, even though such third party’s use of the software was on behalf of or for the benefit of the licensee.

The district court had relied on two earlier Fifth Circuit cases — Geoscan v. Geotrace Technologies and Hogan Systems v. Cybresource International — to look beyond the express language of the license agreement and hold that use of the software by defendant’s attorneys was permitted. The district court found such use to be permitted because it was done on behalf of or for the benefit of defendant.

But the appellate court distinguished Geoscan and Hogan Systems, finding that neither case stands for such an expansive proposition. Unlike the agreements in those cases, the license in this case contained no provision that permitted use by third parties on behalf of the licensee. Moreover, among other things, defendant was expressly prohibited from transferring or sublicensing the technology and was prohibited from assigning its rights under the license agreement. The software license agreement also contained a provision that served to excluse all third party beneficiaries to the agreement.

Photo courtesy Flickr user coiax under this Creative Commons license.

Software contractor not bound by EULA it clicked on behalf of client

BMMSOFT, Inc. v. White Oaks Technology, Inc., 2010 WL 3340555 (N.D.Cal. August 25, 2010)

Plaintiff, a software development company, sued defendant, a company that was performing software installation services for it client, the U.S. Air Force. Plaintiff alleged that defendant violated the End User License Agreement (“EULA”) for the software by copying and distributing the software in violation of the terms of the EULA.

Defendant moved for summary judgment, arguing that it should not be bound by the EULA, since when it purportedly clicked on the “I Agree” button during installation, it was doing so as an agent on behalf of a disclosed principal, namely, the federal government.

The court agreed, finding that the purchase orders clearly disclosed that defendant would be installing the software on behalf of its government client. And the terms of the EULA were clear in designating that the “You” authorized to use the software was not the defendant, but the government, at the location specified in the order.

So the court threw out the breach of license claim. One is left to wonder why facts that support copying and distribution of the Software in a manner prohibited by the terms of the EULA would not also support copyright infringement. But apparently there was no such claim in this case. Perhaps there are some nuances of the defendant’s conduct that would not necessarily violate a condition, but be merely a breach of covenant.

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No standing to sue Microsoft under XP EULA

Johnson v. Microsoft Corp., No. 06-900, 2008 WL 803124 (W.D. Wash. March 21, 2008).

A number of plaintiffs filed suit against Microsoft in federal court in Washington state, alleging, among other things, that the installation of Windows Genuine Advantage (“WGA”) (which enforces the validity of a user’s version of XP) violated the XP end user license agreement (“EULA”).

Microsoft moved for summary judgment against two of the plaintiffs, arguing that they did not own the computers at the time WGA was installed, and thus these plaintiffs lacked standing. The court agreed and entered summary judgment against these plaintiffs.

The court rejected these plaintiffs’ arguments that they had standing as computer users and business owners to raise the breach of contract claims. The plaintiffs had transferred their ownership to a company before WGA was installed. The parties were therefore not parties to the EULA and lacked privity with any party. Moreover, they could not be treated as third party beneficiaries of the EULA, so they lacked standing.