LGJ: FTC could target EULAs

Each week Mark Methenitis contributes Law of the Game on Joystiq ("LGJ"), a column on legal issues as they relate to video games:

A few weeks back, I mentioned that the FTC was looking into regulating DRM. Well, in part on some discussions at the Game::Business::Law Conference, I have a sneaking suspicion that the FTC likely won't stop with DRM. In fact, I would be willing to guess that within the next few years, the often maligned End User License Agreement ("EULA") may fall into the realm of being regulated as further "consumer protection." Is it necessary? Well, that's a matter of opinion, really. The only certainty is that it will be able to bring in additional revenue for the government, which is certainly short on cash these days.

If the FTC opts to regulate EULAs, I see three probable scenarios to accomplish its goal. Before I get ahead of myself, I should describe what the theoretical goal of consumer protection is: to prevent companies from taking advantage of consumers. Generally, though, it isn't necessarily the average consumer who's seeing the greatest benefit from the regulations. Often it's the most uneducated consumer, which usually means the regulations tone things down to a level of near absurdity.

So, what are these three methods by which a consumer could be "protected" from the EULA? The first and most common method is what is known as a "plain language requirement." The idea is that contracts written by lawyers are full of legal terms and are written in such a way that it takes a lawyer to decipher the actual meaning of all of the clauses. A "plain language requirement" means that the document in question has to be written in such a way that anyone can read and completely understand what is written. This has been used before in many different areas, notably in the franchise realm related to the required disclosure document for the sale of a franchise unit.

This would be relatively easy to accomplish, with the contracts simply being re-written and approved by some government agent. Likely, there would be a "review fee" and other elements that keep cash flowing into the system, as well as potential penalties for non-compliance. It's in this review process where plain language can often border on ridiculous. Generally, there is a list of words that are "not allowed" under plain English requirements, but much of the time there are included terms like "prior to" and "so long as." Feel free to comment if you disagree, but terms like that are, in my opinion, pretty unambiguous and easily understood.

Of course, on the complete opposite end of the spectrum, it could be required that companies abandon EULA contracts all together in favor of a collection of FTC approved bullet points. The development and legal communities would, I assume, vehemently oppose this idea, but it is possible. Basically, the FTC would come up with a list of things all EULAs include, then a list of optional provisions that the licensor (the game company) could include. Then the licensee (you) gets a pop-up box with a list of provisions you'll see dozens of times and should be relatively familiar with. This would be the most burdensome and limiting option for developers, but it likely wouldn't generate income for the government, so I don't see it as probable.

The third option, which is basically a hybrid of the previous, would work something like this: The developer could write the EULA as pleased (or subject to a plain language requirement), but then also present a "key points" section that outlines how the agreement treats some key issues. That may be a text based outline, or it could even be some graphic based system. In the event this is accompanied by plain language, the government would actually have two chances to collect: once related to the plain language; and once related to the accuracy of the outline elements compared to the agreement. If income is a primary driver, as I suspect it is, then this may be the most likely of the three options for that reason alone.

All of this begs the question: Do consumers need to be protected from EULAs? My gut feeling is: No. EULA enforcement isn't often focused on gray areas; it's typically based on things most consumers know are either generally acceptable or not acceptable. Yes, the contracts are long and even many lawyers don't take the time to read them before clicking "Accept." But that doesn't mean there's a mountain of evidence that EULAs are being used to harm consumers. In fact, one particular EULA did just the opposite. Until such a time when EULAs are actively being used to defraud or otherwise harm the consumer base, as opposed to the "theoretical possibility" that something could be done based on the terms, I think making software developers jump through additional hoops to get the product to market is unnecessary.

[Image credit: gruntzooki]

Mark Methenitis is the Editor in Chief of the Law of the Game blog, which discusses legal issues in video games. Mr. Methenitis is also a licensed attorney in the state of Texas with The Vernon Law Group, PLLC and a member of the Texas Bar Assoc., American Bar Assoc., and the International Game Developers Assoc., where he is a board member of the Dallas chapter. Opinions expressed in this column are his own. Reach him at: lawofthegame [AAT] gmail [DAWT] com.

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