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Clash Between Free Speech and Software Licensing
By Jay Hollander
Jay Hollander, Esq. is the principal of Hollander and Company LLC, www.hollanderco.com, a New York City law firm concentrating its efforts in the protection and development of property interests relating to real property, intellectual property and commercial interests, as well as related litigation.
The content of this article is intended to provide general information relating to its subject matter. Providing it does not establish any attorney-client relationship and does not constitute legal advice. Personal advice in the context of a mutually agreed attorney-client relationship should be sought about your specific circumstances. Introduction
Many cases have been reported in the press where courts
have been called upon to decide whether software code was
constitutionally protected as free speech. In all these
cases, the distributors of the software generally argued
in favor of broad access to, and commentary on, software
in the interest of the public's right to know.
However, a case filed by New York State against Network
Associates, the owner of the popular McAfee anti-virus
and security software programs, presents a classic "man
bites dog" scenario, because the suit claims that
the software publisher is curbing its customers' free speech
rights and engaging in deceptive sales practices in violation
of public policy.
The box or the label on the installation diskette of many
popular programs sold under the McAfee brand contain warning
messages prohibiting anyone from publishing any review
of the product without prior consent, as well as warnings
stating that unspecified "rules and regulations" prohibit
consumers from releasing the results of any product performance
test absent the company's "written approval."
In State of New York v. Network Associates d/b/a McAfee
Software, the attorney general of New York sued Network
Associates and asked for money damages and an injunction
preventing the company from continuing to sell products
that carry these messages on the ground that they amount
to deceptive, fraudulent and illegal acts or business practices
in violation of New York state law.
While the case is still in its early stages, and while
not every state may have statutes identical to those of
New York, let's examine the claims up close to see what
lessons can be drawn for software developers and distributors
to stay clear of similar litigation in the future.
New York Sues McAfee for Its "Censorship
Clause"
The provisions on the McAfee boxes or diskettes that led
to New York's claims read as follows:
Installing this software constitutes your acceptance of
the terms of the license agreement in the box. Please read
the license agreement before installation. Other rules
and regulations of this software are:
The customer shall not disclose the results of any benchmark
test to any third party without Network Associates' prior
written approval... and
The customer will not publish reviews of this product
without prior consent from Network Associates, Inc.
According to the New York state petition, the equivalent
of a complaint, these warnings also appear on a web page
when the software is downloaded instead of purchased in
a box.
So what are the problems with these clauses? According
to the New York attorney general, they amount to nothing
less than censorship. So much so that, in its court papers,
the New York attorney general's office characterized these
restrictions as the "Censorship Clause."
As noted in the Memorandum of Law filed by the attorney
general: "The Censorship Clause restricts consumers
and the media alike from reviewing the software or disclosing
important design or product flaws... [and] ... is also
a deceptive practice" all in claimed violation of
certain provisions of New York State law.
According to the attorney general, the clauses amount
to censorship because they tie the hands of the media and
the public while serving "no legitimate purpose, such
as protecting trade secrets or confidential material." What's
more, the clause, to the extent it refers to certain "rules
and regulations" as justifying its prohibition, is
claimed to be deceptive because it allegedly "misinforms" consumers
since "no 'rules and regulations' actually exist under
federal or state law."
What New York Law Says
But are these clauses really illegal under New York State
law? And does the attorney general have the right to bring
a civil action for money damages and an injunction because
of it? Here's where close attention to the laws is vital.
Pertinent provisions of the laws of the State of New York
give the state's attorney general broad powers to bring
suit for what it perceives to be illegal or fraudulent
business practices.
For example, Section 63(12) of New York's Executive Law
specifically allows the attorney general to bring suit
regarding cases of "persistent fraud or illegality
in the carrying on, conducting or transaction of business".
The statute says, "[t]he term 'persistent fraud' or
'illegality'... shall include continuance or carrying on
of any fraudulent or illegal act or conduct ". In
fact, under the section, the term "fraud" includes "any...
deception, misrepresentation, concealment, suppression,
false pretense, false promise or unconscionable contractual
clauses" and does not necessarily require wrongful
intent.
In the Network Associates case, the claimed fraudulent
conduct is that the Censorship Clause refers to allegedly
non-existent rules and regulations. Even more so because
the actual license agreement inside the box mentions nothing
about this clause and otherwise makes clear that the four
corners of the license agreement represent the entire agreement
with the purchaser. Such conduct is claimed to be "illegal" because
it is an "unenforceable covenant, invalid as against
public policy," according to the complaint.
In other words, according to the New York attorney general,
Network Associates' warning was fraudulent not only because
it wrongly referred to non-existent rules and regulations,
but also because the plain terms of the license agreement
would have excluded such a clause, found only on the box,
label or download page of the software, from even being
enforceable and because the restriction violated public
policy by creating a "chilling effect" on legally
permitted speech that would be beneficial to the consumer.
Interestingly, under cited case law interpreting this
statutory section, proof that Network Associates actually
intended to defraud or mislead isn't necessary. Yet, according
to the attorney general, Network Associates has shown this
intent anyway.
In its legal memorandum, the attorney general said that
Network Associates tried to use the Censorship Clause to
kill an unfavorable review of its "Gauntlet" firewall
software by Network World magazine, allegedly invoking
the clause to threaten the magazine with legal action if
the review was not taken down from the magazine's web site
and otherwise retracted.
Under the terms of this New York State law provision,
when the attorney general finds such conduct, it has the
right to seek broad relief, including financial damages
and injunctions to stop the practice from continuing.
Similarly, Section 349 of New York's General Business
Law makes unlawful "[d]eceptive acts or practices
in the conduct of any business, trade or commerce or in
the furnishing of any service in this State" and allows
the attorney general to file suit for an injunction and
for restitution, that is, the return of money wrongfully
given.
As set forth in the attorney general's memorandum, the
disputed Network Associates clauses "unfairly chill
the consumer's enthusiasm to enforce" their rights.
What is particularly alarming about this statute, from
the point of view of a defendant like Network Associates,
is that it also authorizes a private right of action, allowing
any individual harmed by the practice to sue for as much
as $1,000 and recovery of counsel fees based upon deceptive
practices prohibited by the law. So, if New York state
were to be successful on this claim, a multitude of individual
suits might be in the offing, perhaps even a class action.
Lessons for Software Developers and Distributors
To be sure, there are many more salvos to be fired in
this case and Network Associates has still to be heard
from in its own defense. But the existence of the case
should ring a warning bell to all software developers and
distributors for a variety of reasons:
First, since this case has been brought by a state agency,
the potential exists for similar suits to be brought by
the attorneys general of other states, greatly exposing
a defendant to potentially staggering costs.
Second, to the extent that other states' laws similarly
convey private rights of action, allowing individuals to
sue, the sheer potential number of such lawsuits could
overwhelm even the most stable and profitable company.
Third, when and if a case like this succeeds, the possibility
exists that liability could be sought against third-party
distributors of the software that continue to market and
sell it, notwithstanding notice of the claimed deceptive
practices.
Fourth, and, in some ways the most important, the inevitable
sullying of the reputations of the developer and/or its
distributors may be irreparable.
While it's too soon to know what the ultimate disposition
of the Network Associates case will be, responsible software
developers and distributors should run -- not walk -- to
their legal counsel for review of their license agreements'
contractual terms, web sites and packaging to make sure
that, however innocently, nothing allows the conclusion
that consumers are being misled, warned or guided against
the exercise of their rights, or that free speech, by consumers
or the media, is being curtailed.
Additionally, a thorough review of the applicable law
in the states where the software is distributed certainly
would be warranted, as the wording of the statutes is likely
to differ in important ways, even when covering the same
basic legal terrain.
Of course, fixing the problem may not stop a suit for
damages based upon previous actions, but it will no doubt
be a powerful disincentive against state action aimed at
restricting a company's business practices and also may
garner good publicity for a company's its civic-minded
attention to self-improvement.
Copyright © Jay Hollander, 2007. All Rights Reserved.
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