Austin Technology Law Blog : Texas Technology Lawyers & Attorneys for Copyright, Trademarks & Software Licensing in Houston, Dallas & Austin TX

I'm pretty sure that activists didn't occupy the State Capitol building in response to this bill, but it could have some ramifications for companies that enlist language that purports to let contracts automatically renew, unless one of the parties takes some affirmative action.

There is a pretty common provision in a lot of contracts, including those that provide for technology consulting and services that goes something like this:

"This Agreement has a one year initial term, beginning on the Effective Date ("Initial Term"). The Agreement will automatically renew on each anniversary of the Effective Date for subsequent one year terms (each a "Renewal Term") unless either party gives written notice to the other at least thirty (30) days prior to the expiration of the Initial Term or the Renewal Term that the Agreement will terminate at the end of the present term."

Nothing sinister here.  It is designed to take some administrative work out of renewals and vendors like them because of the inertia that induces customers to not think about nor terminate an agreement.

The Wisconsin legislature, having solved all of the harder problems, turned its attention to agreements like this in the present session.

They have decreed that after May 1, 2011, agreements between businesses to lease equipment or provide business services (supposedly technology services would qualify) can not have an enforceable automatic renewal clause unless adequate notice was given and the customer's initials appeared in a certain place on the contract. 

There are several exceptions to this of course.  Lobbyists are good at their jobs.  However, anybody that does business in Wisconsin and leases equipment or provides services should look at this statute and determine if they would profit from adjusting their forms.  There is also a provision that provides for a right of private action for failure to comply.  The amount of recovery provided for in an individual contract is relatively minor and repair is simple but one could envision class actions under this statute that would be a real nuisance.

And just when you thought it was safe to go back into Wisconsin.

• Email This
• Print
• Comments
• Trackbacks

UMG sends unsolicited, promotional CDs to potential reviewers, music critics and radio programmers to try to promote the sale, play and mention of such CDs. UMG does not charge for the CDs but it does put notices on the CDs.
One such notice reads:
"This CD is the property of the record company and is licensed to the intended recipient for personal use only. Acceptance of this CD shall constitute an agreement to comply with the terms of the license. Resale or transfer of possession is not allowed and may be punishable under federal and state laws."
Another, more terse notice reads:
“Promotional Use Only—Not for Sale.”

Defendant, Augusto, bought some of these CDs from the recipients and attempted to sell them on eBay. UMG sought to stop this by claiming copyright infringement and claiming that the language above and the acceptance by the recipient constituted a license rather than a sale under the provisions of Vernor v. Autodesk, which we discussed in length here. Therefore, the recipients could not sell the CDs without violating the copyright holder’s right of exclusive distribution.

Mr. Augusto claimed that the unsolicited delivery of the CDs constituted a “sale” for the purposes of our old friend the “First Sale Doctrine”. See our earlier discussions of this doctrine here, here and here.

The Court agreed with Mr. Augusto and stated that the mere receipt of the CDs without some other kind of action did not constitute an assent to the terms of the “license” and therefore, it had to be a sale. In addition, the Court also relied on the “Unordered Merchandise Statute” 39 U.S.C. § 3009(a), (b) (2006), which states that unsolicited merchandise may be treated as a gift. Hence, First Sale Doctrine applies and subsequent sales can be made without claims by the copyright holder. The Court’s opinion can be found here.

Lessons to be learned here are that in order to come under the license standards set out in Vernor v. Autodesk, the right kind of language has to be present and some overt act of acceptance of such language has to be displayed.

You are now free to buy those promotional Lady Gaga CDs you’ve had your eye on.
 

• Email This
• Print
• Comments
• Trackbacks

Many people would be surprised to learn that they are bound by contracts several times throughout the day and they don’t even know it. Every time you visit a website you are generally bound by its terms and conditions even if you never actually see them.

A recent case out of Missouri highlighted the trend towards enforcing these types of agreements. In, Major v. McAllister, the court upheld a browsewrap agreement. A browsewrap agreement is one in which the user is never actually required to consent to the terms and conditions, but is usually behind a hyperlink at the bottom of the homepage. In that case, the user was presented with the browsewrap agreement at every page, and when she submitted her contact information to complete a purchase she was given the notice that by clicking through, she agreed to the terms and conditions. She never actually clicked through to read the terms and conditions of the website, and it happened to contain a forum selection clause that she would later dispute.

• Email This
• Print
• Comments
• Trackbacks