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Shrinkwrap Licenses: Threat or Menace?


Last updated: 2020.01.11

I had the good fortune to have this article published in the November 1996 issue of Microtimes, a free computer magazine distributed in the San Francisco Bay area. I used to link directly to the article on their Web site. Unfortunately, shortly after Microtimes was acquired by another publisher in 1998, they erased from their Web server all back-issues published prior to the transition.

The article is reproduced below, as I submitted it to then-editor Mary Eisenhart. Virtually the only modification she made was to give it the title: "Shrinkwrap Licenses: Threat or Menace?"

You know, you don't actually own any of your software. The software tools that let you accomplish your day to day work, in which you may have invested thousands of dollars, don't actually belong to you. And they can be taken away from you, at any time, for any reason, without notice or refund.

At least, that's what most computer industry lawyers would like you to believe.

It has to do with a little thing called a "license agreement." You know, the ones printed in Flyspeck 3 Condensed on the envelope containing the floppies that say, "Opening this package/using this software shall indicate that you have read, understand, and agree to be bound by the terms of this agreement." I place the term "license agreement" in quotes because no one I know (who isn't a lawyer) has ever taken these things seriously or treated them as a legitimate, binding contract.

Have you ever read one of these things? They're insidious. What's more disturbing is that they're virtually everywhere. It's been rare that I've seen a software package that didn't have one of these things attached to it. They're even starting to show up on shareware.

And what's most fascinating about these things is: They don't seem to accomplish anything. There's nothing covered in these documents that isn't already covered by law. At best, they're redundant. At worst, they're an abridgement of common sense and fairness.

Illusion of Necessity

Back when computers were Big Iron, purchasable only by large organizations which typically had an on-site programming staff, the software market was extremely tiny (only a few hundred customers or so), and license agreements made a lot of sense. The company availing itself of the software would agree to not take it apart or modify it, not give copies to other potential customers, and other restrictions. In return, however, the company would typically receive some form of continuing service, e.g. for a periodic lease fee (monthly, yearly, whatever), the vendor would supply the customer with regular updates and support, both on- and off-site.

Shrinkwrap "licenses" no doubt owe their heritage to these lease agreements. However, the marketplace has changed radically since then. Customers now number in the millions, and copyright law has been explicitly extended to cover computer software. One single illicit copy no longer represents a significant fraction of the market, and is now forbidden anyway by copyright law. Further, the mechanics of procuring software have changed. You had to first contact the vendor and negotiate a lease before you could get your hands on the software, so you knew beforehand what you were getting into. Today, software is sold over the counter, and is handled and treated just like any other retail purchase.

Many of the reasons which originally caused software licenses to be drafted no longer exist. Moreover, the change in the way software is procured makes the validity of any attendant "license" highly questionable.

An Example

Let's go through an imaginary license point by point (I've taken some creative liberties here and there, but the main thrust of most such documents is preserved):

"This is an agreement between MegaHuge Software Company, Ltd. ("Company") and you, the purchaser ("Hapless Sucker"). By opening the package or by using the software, you indicate that you have read, understand, and agree to be bound by the terms of this agreement. If you do not agree to these terms in full, return the software unopened to the place of purchase for a full refund."

These "licenses" are typically printed on a sheet of paper or an envelope contained inside the box, hidden from view. When you purchase the software, you have no way of knowing the specific terms and conditions of the agreement inside, or even that there are terms and conditions attached to your purchase above and beyond those imposed by law.

When you make a purchase, you make some fairly basic and perfectly valid assumptions about in whom title to your purchase vests. The "agreement" inside seeks to nullify these assumptions after the fact. This alone calls into serious question the enforceability of any such document.

Further, contracts (for a license agreement is a contract) are traditionally negotiated on a one-to-one basis, and terms and conditions are retained or rejected as the negotiations progress. Shrinkwrap "licenses" are take-it-or-leave-it affairs, with zero negotiation. Courts generally frown on such practices, preferring instead to support contracts where both parties entered into an equitably negotiated agreement, fully informed, in good faith.

Given the everlasting and rather draconian covenants such "agreements" seek to impose, it seems common sense that a reasonable individual would insist on explicit negotiation. Let's take a look at some of these covenants:

"The Software, manual contents, and all accompanying materials both printed and recorded on disk, are and remain the property of the Company."

Here is where the vendor seeks to remove ownership from you, despite the fact that you may have just paid hundreds of dollars for the program.

"The Company hereby grants a non-exclusive license to the Hapless Sucker to execute and use the Software on a single computer system."

Assuming the agreement were valid, this is what you, in fact, would have purchased: The right to use the software, not the software itself.

There is no precedent for this kind of consumer transaction outside of explicitly negotiated contracts. Let's assume you went out and bought a CD. What have you purchased? Not a "license to use" as the software lawyers would have you believe, but the actual, physical CD, and all the bits on it. It's yours to do with as you please. You can't perform it publicly, or give or sell copies to anyone, of course, as that violates copyright law. But beyond that, you can have at it as you will. The same is true for books. You don't own a "license to read," you own the book. Same thing with videotapes. You can't make or distribute copies, but you can do virtually anything else.

Software is no different. It's information recorded on a medium, just like CD's, books, and videotapes. It's protected by copyright law, just like CD's, books, and videotapes. And it's your property.

In a clumsy attempt to offer you some rights, most "agreements" have a paragraph stipulating copying privileges:

"The Hapless Sucker may not make copies of the Software, except as necessary to load the Software into the computer's temporary memory for execution, or to make backup copies for archival purposes only. The Hapless Sucker will inscribe upon all archival copies the Company's copyrights and trademarks. The Software may not be transmitted from one computer to another over a network, nor over any other form of electronic connection. The accompanying printed manuals may not be copied under any circumstances, nor may they be reduced to electronic form, nor stored in a retrieval system, nor faxed, nor bent, folded, mutilated, or spindled, nor may those obnoxious yellow highlighters be applied to the pages for the purposes of making the manual more intelligible. The Hapless Sucker may retain a copy of the manual in his or her brain only for the purposes of using the Software."

Okay, let's get serious. For the sake of argument, I presume most of us can agree that copying software is bad. What such paragraphs seek to do is prevent you from using the software "unfairly," e.g. if you have two computers, you really ought to buy two copies of your screen blanker for them. But it gets a little fuzzier for other things, like word processors. If you have a desktop machine at home, and take a laptop with you on the go, is it ethical to buy only one copy of CostlyWord 5.1 and install it on both machines, or are you morally obligated to purchase two? After all, you're not likely to be using both machines at the same time, and no one else ever uses the machine you're not using... So where's the line?

As important as this subject is, shrinkwrap "agreements" do not help to clarify these issues. In fact, they often confuse it. In the above example, is it legit to copy the software to your hard disk? Hey, that's a real, honest-to-God copy of the software, which is expressly forbidden by the "agreement." But wait! Maybe you could regard the floppies you bought as the archival copy, and the copy on the hard disk as the "real" one. The agreement doesn't say anything about that. But then, the copy you'd be making to the hard disk wouldn't be the actual archival copy, and making anything other than an archival copy is verboten...

US copyright law, on the other hand, has tons of case law relating to "fair use." While the term's meaning is still muddy in the digital domain, recent cases suggest that "fair use" of digital material is likely to be interpreted in the same light as have all other intellectual properties in the past. "Fair use" is sufficiently broad to allow the individual reasonable flexibility in using copyrighted works, while still admirably protecting the rights of the copyright holder.

Of all the restrictions laid out in shrinkwrap "licenses," this one causes me the most ire:

"The Hapless Sucker understands and acknowledges that the Software contains methods, techniques, mechanisms, copyrighted material, trade secrets, easter eggs, evidence of incompetent programming, and other intellectual properties that are and shall remain proprietary to the Company, and to protect them, the Hapless Sucker agrees to not inspect, analyze, disassemble, reverse-engineer, decompile, artistically interpret, or by any other means reduce the Software to human-perceivable form, nor may the Hapless Sucker modify the Software in any manner."

I'm a software engineer. I make my living by writing software. I have done this all my professional life with the expectation that people would take apart my software and learn from it. In return, I expect the same treatment.

Don't get me wrong; I'm not looking to steal ideas wholesale. Disassembling software is a gargantuan undertaking, and I can better spend my time inventing new things. But every so often, I see a thing I want to learn more about, and take the thing apart to see how it works. I've been doing this since I was old enough to walk (much to my parents' dismay). If it was interesting and mechanical, it eventually had a screwdriver applied to it. I even put everything back together properly.

This has been true for as long as I can remember. Now that I'm old enough to buy my own gadgets (with credit cards yet), I see no reason why anything should have changed. I can (and have been known to) take apart my stereo, my telephone, my clock radio, even my computer. So where do these guys get off telling me I can't take apart my software?

I own books, music CD's, and videotapes. I can read my books, studying them for sentence structure, creative use of vocabulary, frequency of word usage, or simply absorb the printed message. I can listen to my CD's, noting chord progressions and rhythm patterns; or I can statistically analyze the digital signal, discovering how noisy the signal is, or finding how many soft errors are on the disc. I can watch my videotapes, noting camera angles, use of lighting, pacing of editing, use of background music; or I can advance frame-by-frame and discover exact timings for scenes or the precise velocities of objects, or look for subliminal messages. I can do all these things, and use the knowledge gained from these activities to my advantage in the future, within the confines of applicable law.

So why the hell do these guys think their software is any different?

It's my view that, in the future, computer literacy will include the very necessary component of understanding what software is, what it does, and how it works (or, more often than not, doesn't work). Most computer literacy courses these days simply teach basic operating skills without providing any underlying understanding. Many would argue that this is sufficient, observing that millions of people successfully operate cars every day without understanding how they work. This sufficiency falls down, of course, when the car malfunctions. Those with an underlying understanding stand a much better chance of repairing or temporarily patching the problem on their own. Others will wait patiently for a helpful motorist to stop, or call for help.

The point I'm trying to make is that people today are free to learn as much or as little about their car as they want, and car manufacturers don't seem to have any problem with this. On the other hand, by writing these "licenses," software companies seek to preclude any and all possibility of you learning how their software works. What purpose does this serve? Protection of intellectual properties? People are free to fiddle with their cars, and the auto industry shows no sign of imminent demise. Similarly, people are free to use their books, music CD's, and videotapes any way they wish, and their respective industries continue to grow at a healthy rate. Conversely, the presence of these "agreements" has not abated software piracy to any measurable degree, a practice to which the computer industry claims to lose billions of dollars a year (and still manages to grow at a healthy rate).

So what the hell is this clause for?

It gets worse:



"In no event shall the Company's liability to the Hapless Sucker exceed the amount paid by the Hapless Sucker for the Software (less taxes, restocking fees, handling surcharges, postage/shipping, and dealer's prep.)"

Delightful. They expect me to convey all sorts of covenants and guarantees and promises to protect their intellectual property rights unto perpetuity. But when it comes time for them to make some promises to me, they hold up their hands and back away and swear up and down (always in all caps, it seems) that they can't be held responsible for... well, anything. This, putting it kindly, strikes me as inequitable.

"This License is effective until terminated. The Hapless Sucker may terminate this License by destroying all copies of the Software and related documentation in his/her possession. This License will terminate immediately without notice if the Hapless Sucker fails to comply with any portion of this agreement. The Company may also terminate this license upon delivering written notice to the Hapless Sucker. Upon termination, the Hapless Sucker agrees to destroy all copies of the Software and related documentation in his/her possession. In no event shall any termination entitle the Hapless Sucker to a refund of any amounts paid for the Software. The Company also reserves the right to sue the Hapless Sucker's butt off for damages if the Hapless Sucker breaches this agreement. No act or failure to act on the part of the Company, including those arising out of negligence and/or malice, shall be construed to be a breach of this agreement on the part of the Company."

This basically means that, were the agreement valid, the vendor could legally force you to delete all copies of your software at their whim.

Consider this for a moment. Assume for the moment that all the "licenses" that came with your software were valid. Have you violated any of them? Even a little bit? It doesn't matter what you think; what would a lawyer think? How much of your software could be taken from you on such a basis, without one penny in compensation? Do you begin to see how dangerous these things could be if we were to even begin to regard these "agreements" as valid?

"This License constitutes the complete agreement between the Company and the Hapless Sucker governing the use of the Software, manual, and accompanying materials, and supersedes any and all prior such agreements, written, oral, or inhaled. No modification or amendment to this License shall be binding unless in writing and signed in blood by a duly authorized representative of the Company."

Again, the vendor seeks to alter the terms of your purchase after the fact. Further, while the vendor grants themself the freedom to impose terms and conditions upon you unilaterally, you are prohibited from enjoying the same freedom. (Note also that, as worded, a signature from the Company's representative is all that is required for an amendment to be valid; your signature is not required.)

Imbalance of Risk

If you read the hypothetical agreement above, you'll notice a couple more curious things. While you are expected to agree to many restrictions and obligations, the vendor labors under virtually none. You are expected to offer to the vendor your oath that you will do this, you will not do that, etc.; whereas the vendor is obliged to provide you with nothing but a "right to use" the software (which can be revoked at any time).

Such agreements specify a wide array of covenants which are possible for you to transgress (some all too easily), and the "license" stipulates the remedies at hand for the vendor. However, the converse is not true. There is virtually no way the vendor could violate the agreement, since the vendor warrants or provides nothing, except the "right to use." Further, there are no stated remedies available to you if the vendor should somehow violate the agreement.

What's more, if the vendor is indeed found liable to you, the liability is typically limited to the amount you paid for the software. However, if you are found to have breached the "agreement," no such limitations apply to you. The vendor can theoretically go after as much as they want.

The risks to the parties is grossly out of balance. The customer risks everything (their money, their liberty, their exposure to obscenely expensive legal proceedings); the vendor risks nothing. This, again, strikes me as highly inequitable.

Boneheaded Moves

There are some "license agreements" that are so poorly thought out that, were the agreement to be taken seriously, it would be impossible to use the accompanying software in a normal fashion.

One particular example is an "agreement" from Apple Computer that accompanies their Newton PDA and all software published for it. In it is the clause, "You may not electronically transmit the Apple Software from one device to another or over a network."

No more than a second's thought is required to discover how ludicrous this clause is. Much of the software published for the Newton is shipped on floppy disks and installed on the Newton using a "connection kit" that runs on a Mac or a PC. The Mac/PC is a device. The Newton is a device. The installation process involves the electronic transmission of the software (usually over a serial cable) from one device (the Mac/PC) to another (the Newton). (If you're installing from a Mac, you have the option of doing it over AppleTalk, which is a network.) Ta da! You've just violated the "agreement," and are now expected to destroy all copies of the software.

Yeah, right.

Software shipped on PCMCIA cards still doesn't save you, as a PCMCIA card is still a device. It doesn't matter that installation of the software is a perfectly normal, fair use; the above clause is an absolute statement, permitting no exceptions either explicitly or implicitly.

Contracts are very precisely worded documents that explicitly describe the intentions and obligations of the bound parties in excruciating detail. Such a flagrantly ridiculous clause as the one above would have been tossed out in the first round of negotiations. This is but one reason why binding contracts, particularly ones that seek to severely curtail your freedoms, are and should continue to be mutually negotiated instruments so as to prevent precisely this sort of thoughtless error.

Evasive Maneuvers

If you're not happy with this state of affairs, there are several things you may be able to do to avoid these "agreements." Note that all these methods are theoretical, and haven't actually been tested (rather like the shrinkwrap "agreements" themselves).

1: Renegotiate

If you support the existence of shrinkwrap "agreements" and their validity, and you encounter one you don't like, call up the vendor's legal department and request a renegotiation. Don't be surprised, however, if they won't talk to you. Some companies explicitly refuse to negotiate license terms with individual users. (It might be possible to interpret this as a refusal to negotiate in good faith.) If you can't get them to negotiate, or you can't agree to terms, then you might care to consider some of the remaining options.

2: Have a minor purchase/open/install the software

Minors, of course, cannot be bound to written contracts without the consent of a parent or guardian, usually evidenced by a co-signature. If the parent or guardian refuses to grant consent, then no agreement exists. Check with your state's definition of the ages which constitute minority.

3: Don't sign/return the registration card

Without evidence (e.g. your signature) that you, in fact, purchased or installed the software, no proof can be offered that any contract was agreed to.

Some packages ask you to enter your name and company when first installing the software, which then appear in the welcome dialog. You may similarly wish to enter a bogus name, or just random characters, to thwart attempts to prove it was you who actually opened/installed the software.

4: Modify the executable

If yours is one of those packages that insist you click on a gadget to indicate acceptance of the "license," and you have some skill with low-level tools, you may care to explore the possibility of modifying the program such that the dialog never appears, or that the dialog text is changed to something with which you have no objection. You should perform such modifications before running the program for the first time, so that no evidence of a "pre-existing agreement" can be brought forth.

This is, of course, a dangerous practice, as any modification of the program may cause it to fail. If you're fortunate, such failure will be obvious. If not, the failure could be subtle and hard to detect. Further, depending on how hard the vendor has dug in their heels on this issue, the executable may be protected from modification by techniques similar to those that used to be employed for copy protection (a practice which, thankfully, is in diminishing use).

If you do manage to successfully modify the program, understand that you no longer have a copy of the software shipped by the vendor, but something different. In this light you can't, in fairness, expect them to continue to provide support (kind of like voiding the warranty on your TV).

5: Modify the agreement

Of all the available options, this one is by far the most troublesome and complicated. It does have the potential, however, of yielding the best results.

Before opening the envelope with the floppies, take the "agreement", get a pen, and draw a line through all the bits you don't like. Write your initials next to any and all changes you make. DO NOT strike out the phrase that reads, "By using the software, you indicate that you have read, understand, and agree to be bound by the terms of this agreement." If there's a clause forbidding changes unless signed by an authorized company representative, strike it out and initial it.

This process of striking out words and phrases and initialling them is in fact the actual, legally-approved method of making amendments to a contract (for such changes to be binding, the other party would be expected to also initial your amendments to indicate agreement, or offer a counter-proposal. This is all part of the negotiating process).

Now, take the modified agreement to a notary public and have it notarized. Have the notary also sign a testament to the effect that they witnessed the envelope containing the disks to be sealed when the amended agreement was notarized.

Then, open the disks.

By opening the disks, you have (in theory, mind) put the amended agreement in force between you and the vendor. This is predicated on the supposition that, if the vendor has the ability to unilaterally impose terms and conditions on your purchase after the fact, you therefore enjoy that same privilege.

Realistically, no such amended agreement would ever be tested in a court. However, if it were, the likely outcomes would be:

I don't think it likely that the original, unmodified agreement would be upheld for the simple reason that such a decision would carry incalculably staggering implications. Yes, dumber things have happened in this country, but courts are, on the whole, very conservative. The more case law they have to work with, the more conservative they are with decisions. The idea that a court would, in a single decision, cast aside centuries of contract case law seems so completely improbable that I don't regard it as a realistic outcome.

As for the other possible outcomes, the most likely appears to be an order to enter a formal negotiation process. This isn't as bad as it may first seem. Such a decision would indicate that, if any user is unhappy with a "license," they can demand to negotiate and, by virtue of the court's decision, the vendor would be required to oblige them all. Not even Microsoft could withstand the financial drain resulting from hundreds of thousands of users demanding to negotiate individually. The economic reality of such an environment would likely force the vendor to drop the "agreement" entirely.

6: Return the software

This is the least pleasant option, but voting with your dollars has helped stimulate a vast amount of change through history.

Return the software to the place you purchased it. Inform them why you're doing so. If enough people were to inconvenience enough retailers by doing this, the message would be loudly and clearly delivered to the vendors.

What's It To You?

I have no doubt that some well-educated lawyer will accost me or this publication and explain at length in impenetrable detail why shrinkwrap "licenses" are valid, why they're enforceable, and why they're necessary.

This is not what this article is about. I am not, nor do I profess to be, a lawyer. I'm a software engineer. (Which profession is the more steeped in obscure arcana is left as an exercise for the reader.) This is about what's fair. This is about the kind of world in which I want to live.

I've been using and programming computers for 18 years, and have come to admire and respect many of the people who participate in the industry. Among many of my colleagues is an implicit understanding that what we do is supposed to benefit everyone, not just ourselves. Yes, it's nice that we make money doing this work, but we do our work with an eye toward how it can enrich the lives of everyone around us, either by entertaining them, educating them, or making their lives easier. We don't always agree on how this may best be accomplished, which is why we all work for different organizations. Nevertheless, to these ends, we give our best work, our best energy, for if we're fortunate, our work will survive us, and it had better be a damn good testament to who we were, and encourage others to follow the same path we chose.

Our path is one of openness, of sharing, of encouraging others to learn what we've learned so they can go forth and do amazing things, showing us new ideas and concepts we never thought of before, and that we can, in turn, return the favor; we help each other climb the tree, rather than step on one another.

On this path, in this world, there is little place for license agreements, and certainly no place for inequitable, un-negotiated, after-the-fact agreements. They do not help us move forward; they keep us where we are. They do not encourage us to learn; they smite us if we try. They do not give us leave to explore freely our knowledge and imagination; they indenture them. They abscond with our fortunes and our freedoms, and leave us only with a piece of buggy software.

Sorry. I won't buy into that. It's not the world I want to live in, and definitely not one I'm going to help build. Unfortunately, the legal profession, in conjunction with the courts, have given themselves leave to dictate our behaviors to us, and they are taking this stuff seriously.

This is why, through this article, I'm calling this to the attention of the community. It's an old issue, to be sure. Most people I know have handled the issue the same way I have; by ignoring it. But the lawyers I know take these things, as with all legal documents, quite seriously (they have to; it's their job), and without any counter-example or evidence of opposition, they will presume a document to be valid.

This, if for no other reason, should be cause to openly discuss and settle this issue once and for all. Ignoring it any longer can only damage our position and the future we hope to inhabit.