By: Sam Schroeder

Earlier this year, consumers were reminded of the bad sides of digital media when game developer Ubisoft revoked licenses to a game that players thought they owned outright.[1]  Many players understand that a company can shut down servers for a game and stop supporting its development, but some were shocked to find that companies can abruptly remove their existence from a player’s library.[2]  A similar situation occurred when Sony announced it would remove any purchased Discovery Channel content from users’ accounts, even if they “owned” it.[3] Public backlash to these actions inspired California to legislate more open disclosure of licensing in digital media.[4] These problems happen because of a difference between what consumers understand they are buying and what they are actually purchasing.

What You are Actually Buying

When you go to watch a movie on Amazon Prime, you often have two options: rent the movie for forty-eight hours or purchase the movie and be able to watch it whenever. Unfortunately, what Amazon does not make clear is that when you purchase the movie and “own” it, you are only buying a license to access the content as long as it is on Amazon Prime.[5] The same goes for other digital media services such as Steam, iTunes, YouTube, and other similar platforms.[6]  If Amazon ever loses the licensing agreement from the studio owners, your precious copy of the movie The Holdovers, that you purchased to own, could be quickly ripped away.

Licensed digital media also comes with other significant downsides compared to traditional physical media.[7]  If you own a digital copy of your favorite book and want to loan it to a friend to read, you will not be able to because the licenses are not transferable.  This lack of transferability becomes more troubling when you find that licensed content cannot be passed down like actual property would when you pass away.[8] Back when physical media was the only way of accessing content, it was near impossible for content owners and distributors to take back their IP after purchase.[9]  Now, with the switch to digital media, sellers have unprecedented access to how and when you can use the content post-sale.

 

         Solutions

In response to Ubisoft and Sony removing content from users that they believed they owned, the California legislature passed AB2426, which goes into effect next year.[10]  This law requires that digital media sellers provide a “clear and conspicuous” message that consumers are actually licensing content and not being provided with what a reasonable person would believe to confer ownership interest.[11]  Steam has already updated its purchasing screen to clarify that “a purchase of a digital product grants a license for the product on Steam.”[12]

On a national level, tools for protecting consumers from misrepresentations already exist in the FTC Act.  The act provides for the Federal Trade Commission (“FTC”) to prevent “… unfair and deceptive acts or practices in or affecting commerce.”[13]  The FTC’s policy statements and court decisions on deceptive practices set forth three key elements: “(1) there was a representation or omission, (2) the representation or omission was likely to mislead consumers acting reasonably under the circumstances, and (3) the representation or omission was material.”[14]  The materiality of a practice is determined by whether the deceptive practice or omission is the kind that is relied upon by the reasonable consumer.[15]

Looking at the instant issue, the flashing “Buy Now” buttons are misleading to consumers as they invoke a perception of ownership and say nothing about licensing except through legalese in terms of service, which companies know consumers do not read. Courts have consistently analyzed the deception of consumers under a net impression standard.[16]  Under this standard, a company is still liable even if their terms of service contain truthful disclosures, so long as the net impression of purchase is misleading.[17]  Courts have also held that there is no requirement that the deception is made in bad faith or with intent to deceive.[18]  Under these standards, the practice of selling licenses under the guise of ownership would meet the elements of misleading representations to a reasonable consumer.  This is particularly true when you consider the study, What We Buy When We Buy Now, that found over 83% of consumers believed they owned content when provided with a “Buy Now” button.[19]   While considering the question of materiality, a court in a recent case on the issue said, “Or suppose someone whose favorite movie is “A Christmas Story” chooses to buy—not rent—that movie one December because he plans to watch it every holiday season… but when he tries to watch the movie the very next year, he learns that Apple has lost the rights to it and that it is no longer his to watch.  Had he known that would happen, he could have saved a few bucks by having rented it the December before.  Oh Fudge!”[20]  The reliance on ownership is material to the consumer and meets the last prong.

It is not just speculation that the FTC can police this practice, as the FTC itself has investigated issues like this in the past.[21]  In 2008 and 2010, the commission investigated three major platforms for wrongdoing and did not initiate enforcement action as the companies backed out of any attempts to remove content.[22]  Mid last year, the FTC issued a warning about falsely advertising ownership, though they did not initiate any enforcement actions.[23]  Though the FTC does not seem interested in initiating enforcement actions on companies unless they follow through with plans to remove content, I believe the FTC can and should enforce this practice before the harm is done, not after. Consumers should be able to openly weigh the risk of license revocation with the extra few dollars to “own” without having to scrub through terms of service to figure it out.

 

Conclusion

With the arrival of Bill AB2426 in California, companies will have to shift their policies to be more transparent with their consumers, but for companies that do not do business in California, the FTC should step in and enforce the law against the misleading practices that hurt consumers. That way, customers know exactly what they are purchasing when they click buy now.

[1] See Mollie Taylor, Ubisoft is Stripping People’s Licenses for The Crew Weeks After Its Shutdown, PC Gamer (Apr. 12, 2024), https://www.pcgamer.com/games/racing/ubisoft-is-stripping-peoples-licences-for-the-crew-weeks-after-its-shutdown-nearly-squandering-hopes-of-private-servers-and-acting-as-a-stark-reminder-of-how-volatile-digital-ownership-is/.

[2] See id.

[3] Sophie McEvoy, Sony Removing Purchased Discovery TV Shows from PlayStation Store, GamesIndustry.biz (Dc. 4, 2023), https://www.gamesindustry.biz/sony-removing-purchased-discovery-tv-shows-from-playstation-store.

[4] See Emma Roth, California’s New Law Forces Digital Stores To Admit You’re Just Licensing Content, Not Buying It, The Verge (Sept. 26, 2024, 9:53 AM), https://www.theverge.com/2024/9/26/24254922/california-digital-purchase-disclosure-law-ab-2426.

[5] Amazon Prime Video Terms of Use, Prime Video (Oct. 19, 2023), https://www.primevideo.com/help/ref=atv_nb_lcl_en_US?_encoding=UTF8&nodeId=202095490.

[6] See Steam Subscriber Agreement, Steam, https://store.steampowered.com/subscriber_agreement/#2 (last visited Oct. 10, 2024); Apple Media Services Terms and Conditions, Apple, https://www.apple.com/legal/internet-services/itunes/ (last visited Oct. 10, 2024). See generally Geoffrey Morrison, You Don’t Really Own the Digital Movies You Buy, N.Y. Times Wirecutter (Aug. 4, 2021) https://www.nytimes.com/wirecutter/blog/you-dont-own-your-digital-movies/.

[7] See generally Aaron Perzanowski & Chris Jay Hoofnagle, What We Buy When We Buy Now, 165 U. Pa. L. Rev. 315, 318 (2017).

[8] Ariel Bogle, Who Owns Your iTunes Library After Death?, Slate (Aug. 22, 2014, 3:07 PM), https://slate.com/technology/2014/08/digital-assets-and-death-who-owns-music-video-e-books-after-you-die.html.

[9] Perzanowski & Hoofnagle, supra note 7, at 316 (“When we buy a book, we own it; it is our property.  And one right traditionally associated with personal property is the ability to keep the things you own for as long as you choose.”).

[10] See Roth, supra note 4.

[11] Cal. Bus. & Prof. Code § 17500.6(b) (Deering 2024).

[12] Andy Chalk, Steam’s New Disclaimer Reminds Everyone That You Don’t Actually Own Your Games, PC Gamer (Oct. 11, 2024), https://www.pcgamer.com/gaming-industry/steams-new-disclaimer-reminds-everyone-that-you-dont-actually-own-your-games-gog-moves-in-for-the-killshot-its-offline-installers-cannot-be-taken-away-from-you/.

[13] 15 U.S.C. § 45(a)(1).

[14] FTC v. RCA Credit Servs., LLC, 727 F. Supp. 2d 1320, 1329 (M.D. Fla. 2010).

[15] See id.

[16] See FTC v. Cyberspace.com, LLC, 453 F.3d 1196, 1200 (9th Cir. 2006).

[17] See id.

[18] FTC v. Med. Billers Network, Inc., 543 F. Supp. 2d 283, 304 (S.D.N.Y. 2008).

[19] Perzanowski & Hoofnagle, supra note 7, at 337.

[20] McTyere v. Apple, Inc., 663 F. Supp. 3d 247, 254 (W.D.N.Y. 2023).

[21] Perzanowski & Hoofnagle, supra note 7, at 369 (“In a series of investigations and enforcement actions over the past decade, the FTC has indicated that when retailers deprive consumers of the right to make reasonably expected use of digital media, those retailers may be engaged in deceptive behavior.”).

[22] See id. at 370 (“But the three retailers that were investigated–Microsoft, Walmart, and Major League Baseball –all backed down from their publicly announced plans in the face of FTC scrutiny.”)

[23] Michael Atleson, Can’t Lose What You Never Had: Claims About Digital Ownership and Creation in the Age of Generative AI, Fed. Trade Comm’n (Aug. 16, 2023), https://www.ftc.gov/business-guidance/blog/2023/08/cant-lose-what-you-never-had-claims-about-digital-ownership-creation-age-generative-ai.

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