Law of the Game on Joystiq brought to my attention a new case pending in CA that could have far reaching implications to gamers.

Mark Methenitis, a TX lawyer, does an excellent job of outlining the main issues in the article, which can be found [URL=http://http://www.joystiq.com/2008/04/16/law-of-the-game-on-joystiq-rip-consumer-rights/#comments]here[/URL].

I would like to draw out his point on EULAs and the first-sale doctrine in software. Go look at your game manuals. Some of them have EULAs in them, some don't. I think console game companies are trending to accepting that they are selling a product. I haven't seen a EULA in a Microsoft published game since the 360 came out, though I think Capcom still puts them in the manuals. If you have a PS3, look at what you are agreeing to anytime you have an install. This is what we are talking about here.

The courts in the US are absolutley split on this issue, with some (and I think what will prevail as the majority rule) using a reasonable user test. If it seems to the consumer that they are buying a product, then the court will view it as such. However, some courts view EULAs as binding contracts. It is a major issue. Hal Halpin has called for a working group on standardizing EULAs, and we need to get behind that call.

Back to the case. I think there is a distinction to be drawn in the UMG case. The promo CDs are not retail product. The artists are not getting paid royalties for the promo CDs given to the channels. They are known as "free goods" and are outside the normal scope of commerce. Now, the record labels have always claimed to have the right to reclaim the promo CDs, and have never really pressed the issue. These CDs have found their way into the stream of commerce, generally through used CD stores. I think what has UMG mad in this instance is the accumulation of these promo CDs and their centralized distribution by a single individual. It is an issue of administrative costs. It isn't worth it to go after a DJ in Tallahassee, Fl for selling a couple of promo CDs getting $100 bucks, but when one person is doing it with hundreds of CDs, the economies of scale increase.

The issue is does UMG have a right to control, or does it giving out the free goods count as a first sale. I think there is an important distinction between promo CDs and a retail product, but it is a close issue that we need to watch.