Expert Advice
Dec. 2, 2012
Software and the CLRA
California's Consumers Legal Remedies Act contains powerful protections. But the statute doesn't necessarily apply to computer software.
The law is even less clear for computer software, despite its dominance in today's stream of commerce. In 2010 a federal district judge in San Jose held that software is not a good or service under the CLRA, relying on the Commercial Code's definition of "general intangibles," which includes software. (Ferrington v. McAfee, Inc., 2010 WL 3910169 (N.D. Cal. 2010).) But in a more recent case security software was deemed a service, because it continuously runs, updates, and maintains the computer. (Khoday v. Symantec Corp., 2012 WL 838611 (D. Minn. 2012) (applying California's CLRA).) In yet another ruling, the court deemed software to be a tangible good because it was shipped to the plaintiff on a disk - an increasingly uncommon mode of delivery - instead of downloaded from the Internet. (Pelletier v. Pacific Webworks, Inc., 2012 WL 43281 (E.D. Cal. 2012).) These cases look at software in two different ways. On one hand, software is actually a license, an agreement allowing the user to access the seller's intellectual property for a set amount of time. As such, software is an intangible, like insurance or credit. On the other hand, when software is delivered via physical media - like music on a CD - it tends to be perceived as a good. These conflicting views mirror the public's confusion over whether digital music is owned and can be freely copied, or is licensed for individual use, making copying illegal. Software as a Service
The fact that software runs a computer does not make it a service any more than an insurance policy or a credit card. Fairbanks rejected the argument that insurance is a service allowing drivers to legally operate a vehicle; Berry followed the same reasoning. Software is different because it takes the place of a wide variety of traditional services. The question is whether the CLRA will evolve to cover all software sales and leases, and if so, whether the adaptation will come through legislative amendment or judicial interpretation. The result in a particular case may be dictated by a statute's plain language. Although it may be a historical accident that intangible goods are not covered by the CLRA, that is what the statute says. It is also what Berry, Fairbanks, and Ferrington relied on. Practitioners would be wise to pitch their claims and defenses in future cases accordingly. Daniel K. Slaughter, of counsel at Stein & Lubin in San Francisco, is a commercial litigator specializing in advertising and other consumer class actions.
Kari Santos
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