End user agreements under pressure over right to resell

A US appeal court's decision to utilise a EULA to judge the legitimacy of second hand software sales could prove to be a crushing blow to the used games market if it serves as a precedent to the rest of the industry, GamesIndustry.biz has been told.

Gamerlaw's Jas Purewal said that the use of the terms of an End User Licence Agreement to prevent the resale of second hand software could prove to be the crucial factor in the next stage of major publishers' battle against the second hand market.

The US court of Appeals for the Ninth Circle recently reversed a decision to allow a man to sell copies of design program AutoCAD via his eBay business. Their decision was based on the exact terms of the EULA, which stated that what was being purchased was a licence to use the software, rather than the software itself, and that the licence was non-transferable. These terms are relatively common in videogame EULAs.

"EULAs have been coming under increasing pressure and scrutiny in recent years which is why they're being more and more carefully drafted, and there's increasing consumer pressure on EULA's too," Purewal told GamesIndustry.biz.

"It's testing times for the EULA, but what hasn't been tested is whether EULA's can be used to prevent second hand sales in the UK altogether. Obviously the point in this case is that those arguments are now being made in the US - and the decision from the courts at the moment seems to be that a EULA can be used to prevent second hand sales, which has a very wide potential application, not just to games but to all forms of software, as well as to books and music.

"Very much the future of the second hand market lies in the balance...It's very complicated and it's very early. Certainly as an off the cuff observation, is that this sounds, potentially, like an absolute goldmine for the US games industry if they can actually use it and push for a stop to second hand sales, but that's going to be incredibly litigious."

Purewal was keen to stress that there is no immediate threat to the sector, however, as there is no way to directly transfer the ruling outside of the US.

"This is very much going in the states at the moment. The decision was made upon detailed provisions of US law, it relates to consumers who are buying software in the US, it has no bearing on people in the UK or Europe, although if there is any similar litigation on similar issues, brought here, then you could see similar arguments being made.

"Whether or not that would actually wash is far too much like gazing into the crystal ball. It's far too premature. What I would say is that the consumer protection laws are much stronger in the UK than they are in the US, it may be that a more consumer friendly approach may be advanced. "

Game rental companies could potentially be affect by the longterm ramifications of the ruling, too, as they would be covered under the same EULAs as regular consumers.

"The American Library association, the Electronic frontier foundation and the association of college and research libraries all made submissions in relation to this litigation. They were essentially saying the same thing, that the precedent which this sets could be very harmful to all forms of resale, not just software, but books or any other kind of works because similar logic could apply," Purewal argued.

"The court saw the force of those arguments but they said it didn't affect the legal decision. What they usually mean when they say that is that it's up to the legislature, congress in the states or parliament here, to actually decide the issue one way or the other."