N.Y. Case Calls Software License Speech Restrictions Into Question

Software vendors often rely on clauses in their software license agreements that restrict a purchaser’s rights to conduct benchmark tests or publish product reviews. The purported rationale for including such clauses is that they serve to protect consumers from flawed reviews and benchmarks. The argument is that by requiring software reviewers to obtain the vendor’s prior consent before reviewing the software, the reviewers will have access to the most-recent version of the software and documentation and, therefore, be in a better position to deliver an accurate review to consumers.

Publications and organizations that review software view such clauses with disdain as stifling their ability to conduct benchmarks and reviews. Researchers and the public alike tend to view such restrictions with contempt as overreaching and restrictive of public discourse.

The office of the New York State Attorney General successfully persuaded a New York Supreme Court last month to strike down such a clause as deceptive. The decision in People v. Network Associates, Inc., No. 400590/02 (NYSupCt Jan. 14, 2003) is novel and should, at the very least, put software vendors on notice that clauses restricting a consumer’s right to provide commentary or criticism of software may subject vendors to legal challenges and, under certain circumstances, even considerable penalties.

The ‘Network Associates’ Case

Network Associates Inc. (NAI) sold its software products — including the McAfee anti-virus and firewall software VirusScan and Gauntlet — over the Internet and at various retail locations. NAI included a form License Agreement with its software specifically providing: “This Agreement sets forth all rights for the user of the Software and is the entire agreement between the parties … This Agreement supercedes any other communications with respect to the Software and Documentation.”

In addition to the wording in the License Agreement, NAI included the following “Restrictive Clause” on the face of its software diskettes and on its download page on the Internet: Installing this software constitutes acceptance of the terms and conditions of the license agreement in the box. Please read the license agreement before installation. Other rules and regulations of installing the software are:

  • a. [* * *]
  • b. The customer shall not disclose the result of any benchmark test to any third party without Network Associates’ prior written approval.
  • c. The customer will not publish reviews of this product without prior consent from Network Associates, Inc.

The lawsuit involved NAI’s attempt to invoke the Restrictive Clause to suppress an online magazine’s comparative review of six firewall software products. Among other things, there was a claim for injunctive relief under New York’s Executive Law §63(12) for NAI’s “deceptive acts or practices in the conduct of any business” in violation of New York General Business Law §349.

Specifically, it was contended that NAI’s reference in the Restrictive Clause to “other rules and regulations” was deceptive because NAI knew that no such “rules or regulations” prohibiting benchmark tests or product reviews actually existed under federal or state law. Additionally, the Restrictive Clause was not included in the License Agreement that purported to be the “entire agreement between the parties.” Thus, according to the suit, the Restrictive Clause “fundamentally misstat[ed] consumers’ rights under the License Agreement and the law.”

New York County Supreme Court Judge Marilyn Shafer found that the Restrictive Clause was deceptive and permanently enjoined NAI from distributing, advertising and selling its software containing such language. The court also directed NAI to provide an accounting of the number of instances in which its software was sold with the Restrictive Clause, for the purposes of determining an appropriate penalty for NAI. NAI has vowed to appeal the decision.

Not the First Time

Although it may be the first time a court has addressed such issues, the Network Associates case is by no means the first time that a software vendor has attempted to enforce similar restrictive clauses against consumers or publishers. News articles have reported on independent testers succumbing to “threats” from software vendors warning them not to publish the results of benchmarks tests,1 and publications being forced to leave certain products out of product comparisons because the manufacturer refused to provide evaluation copies to them and then cited the no-benchmark clause in the customer agreement.2 It has been speculated that many individual software users have been silenced from offering their insights or views about a product for fear of the legal consequences if the vendor ascertained their identity.

Software vendors argue that clauses restricting product reviews and benchmark tests are necessary to ensure that the public gets accurate information about the latest versions of their software and to prevent misleading information from being disseminated by competitors. Consumer advocates, on the other hand, see such clauses as heavy-handed — possibly unconstitutional or otherwise illegal — attempts by vendors to keep damaging data from reaching the public.

Although the Network Associates case appears to be the first time a court has intervened in this area, the decision is somewhat narrow and leaves many questions unanswered. The office of the attorney general submitted briefs arguing that NAI’s Restrictive Clause (“Censorship Clause” according to the brief) was “by its own terms an illegal restrictive covenant … [that] restricts consumers and the media alike from reviewing the software or disclosing important design or product flaws,” but the court stopped short of declaring that the Restrictive Clause was per se unenforceable. Instead the court focused on the deceptive nature of the clause in context, prefaced by the “other rules and regulations” language and standing apart from the License Agreement purporting to be the entire agreement between the parties.

The Network Associates case is thus not a definitive ruling on the legality of clauses restricting commentary or criticism of software products, but it is a strong signal that at least one state is willing to aggressively pursue what it found to be an unjustified curtailment of free speech by a software retailer. It is also an indication that courts may take an unfavorable view toward such restrictive clauses in the future, especially where the context makes them deceptive to the consumer.

Proposed State Contract Law

Restrictive Clauses and the Uniform Computer Information Transactions Act.

The issue of clauses restricting benchmark tests and product reviews of software is, of course, part of a larger debate about the relative rights of the parties to a software transaction and the ways in which software licenses can modify this balance.

The Uniform Computer Information Transactions Act (UCITA), a proposed state contract law designed to standardize the licensing of software that has thus far been adopted only by Maryland and Virginia, had been criticized by its opponents for enabling the kind of restrictive clause utilized by NAI. In response to the criticism, the official version of UCITA now includes a provision that squarely addresses the type of clause presented in the Network Associates case. A 2002 amendment to UCITA provides:

In a transaction in which a copy of computer information in its final form is made generally available, a term of a contract is unenforceable to the extent that the term prohibits an end-user licensee from engaging in otherwise lawful public discussion relating to the computer information. However, this subsection does not preclude enforcement of a term that establishes or enforces rights under trade secret, trademark, defamation, commercial disparagement, or other laws. UCITA section 105(c).

While this seemingly pro-consumer provision appears to invalidate the type of clause presented in the Network Associates case, many believe that it does not go far enough. For example, it is questionable whether a magazine or newspaper reviewer falls under the definition of “end-user licensee” and whether software vendors in any case could simply provide media reviewers with “advance” copies of software that is not in “final form.” Moreover, some critics claim that inclusion of the term “generally available” may mean that software with negotiated site-by-site licenses still cannot be reviewed.3

The Network Associates ruling does not provide clear guidelines on the steps software vendors should take in order for restrictive clauses similar to the one in Network Associates to be effective. One approach that was adopted by NAI after it came under scrutiny was to replace the Restrictive Clause with the following less restrictive language:

Network Associates, Inc. updates its products frequently and performance data for its products change. Before conducting benchmark tests regarding this product, contact Network Associates to verify that you possess the correct product for the test and the then current version and edition of the product. Benchmark tests of former, outdated or inappropriate versions or editions of the product may yield results that are not reflective of the performance of the current version or edition of the product.

The inconsistency between NAI’s License Agreement, which purported to be the sole and exclusive agreement between NAI and the consumer, and the Restrictive Clause found on the software diskettes and the Internet, points toward another important lesson for software vendors: It is crucial to ensure that the terms of all agreements that relate to a certain product are consistent. For example, if other agreements relating to a product are contemplated, the integration clause should mention such other agreements. Alternatively, the license agreement could include a provision stating that it can be amended or supplemented by the vendor on or without notice.

As a practical matter, however, clauses that proscribe the ability of a consumer to review a product will continue to be the subject of public scrutiny regardless of whether such provisions are held enforceable. In the end, public sentiment and the market will likely determine the extent to which such clauses are used in future contracts.

(1) See Fontana, “Microsoft Gets Tough with Independent Testers,” Network World (March 5, 2001), available at www.itworld.com/AppDev/136/ NWW010312118166/
(2) See Foster, “A Censorship Test Case,” InfoWorld (March 1, 2002), available at http://www.infoworld.com/article/ 02/03/01/020304opfoster_1.html
(3) See, e.g., “Consumers STILL Oppose UCITA in 2003,” National Consumer Law Center, available at www.nclc.org/initiatives/e_commerce/ucita/index.shtml.

Richard Raysman and Peter Brown are co-authors of "Computer Law: Drafting and Negotiating Forms and Agreements" (Law Journal Press). David Crowell, an associate at the firm, assisted in the preparation of this article.

This article is reprinted with permission from the February 11, 2003 edition of the NEW YORK LAW JOURNAL. © 2003 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited. For information contact, American Lawyer Media, Reprint Department at 800-888-8300 x6111. #070-02-03-0011