Posts Tagged ‘Software’

Conditions, Covenants, Copyrights, and Contracts

Thursday, May 26th, 2011

More weapons for licensors, my pet!

Whether you are doing battle in a virtual world with mythical beasts or in a real courtroom with rebellious licensees, it’s all about the weapons.

In MDY Industries LLC vs. Blizzard Entertainment, Inc., the federal Ninth Circuit Court of Appeals explained under what circumstances a licensee’s violation of a non-exclusive software license agreement would not only be a breach of contract, but also an infringement of copyright, giving the licensor many more powerful legal weapons with which to do battle.

World of Warcraft (“WoW”) is a popular multiplayer fantasy computer game in which weapons feature prominently. Players must advance through 70 different levels by fighting battles, slaying beasts, and buying or trading for weapons and armor. WoW has an end user desktop software component subject to an end user license agreement, and an Internet server component subject to terms of use. Michael Donnelly invented a software bot called Glider that automatically plays the game and advances players through the lower levels of WoW without their participation. Glider quickly became popular, eventually earning Donnelly $3.5 million.

When Blizzard became aware of Glider, it changed the end-user license agreements and the terms of use to prohibit use of game-playing bots, and implemented an anti-bot component called Warden to intercept Glider. Donnelly added an anti-detection module to Glider, and bragged in the press that Blizzard would never be able to completely shut down Glider.

After Donnelly received a threatening visit from Blizzard’s legal counsel, his company, MDY, filed suit. Blizzard countersued, claiming: 1) end-users’ use of Glider in violation of the license agreement and terms of use was an infringement of Blizzard’s copyright in the WoW software; and 2) although MDY did not directly infringe Blizzard’s copyrights, it either encouraged or permitted Glider users to do so, which made MDY liable under theories of either contributory or vicarious copyright infringement. (Blizzard also raised claims under the Digital Millennium Copyright Act and tortious interference with contract.)

Blizzard claimed copyright infringement in part out of necessity – MDY was not a licensee of WoW, so Blizzard could not sue MDY for breach of contract – and in part out of preference. As we saw in Jacobsen vs. Katzer, copyright infringement actions give the plaintiff powerful legal remedies. Not only the right to seek the licensor’s actual damages as in a breach of contract action, but also to seek the infringer’s profits, statutory damages of up to $150,000 per work, injunctive relief, attorney’s fees, as well as enforcement against downstream infringers.

The trial court found in favor of Blizzard on the copyright claims, assessed a judgment of $6.5 million against MDY, and permanently prohibited MDY from distributing Glider.

The Ninth Circuit started from the premise that a copyright licensor normally waives the right to claim copyright infringement against a non-exclusive licensee, and is therefore limited to its contractual remedies for breach of the license agreement.

The exception to this rule occurs when the licensee breaches a condition of the license, that is, a contractual term on which the licensor conditioned his permission for the licensee to access the copyrighted material. And not just any condition, but one that has a close nexus to the licensor’s exclusive copyright rights.

This was in accord with the Federal Circuit in Jacobsen vs. Katzer and other courts that have ruled that breach of garden variety contractual promises (covenants) in a license agreement condition would not constitute copyright infringement, but that breach of conditions might. According to the WoW court, state law will normally define these terms, but generally speaking, a covenant is a promise to act or not act in a particular way (“Licensee agrees that it will not X”), while a condition is a precondition that must be fulfilled before a party delivers a benefit (“Provided that Licensee does not A, then Licensor will allow Licensee to B”).

Furthermore, the breached condition must have a nexus to the licensor’s exclusive copyright rights such as copying, selling, and creation of derivative works. If not, wrote the court, all licensors would draft every license provision to say that it is an essential condition of the license, to access more powerful copyright remedies against breaches. In a footnote, the court ruled that a licensee’s failure to pay the license fee would always be deemed to have the required nexus to permit the licensor to bring a copyright infringement action.

Turning to the facts of the Glider bot, the court found MDY was not liable for either contributory or vicarious copyright infringement, because: 1) the Blizzard license prohibitions against using bots were phrased as covenants (“You agree that you will not…create or use cheats, bots, ‘mods,’ and/or hacks….”), not as conditions to using WoW; and (2) Glider users’ violations of the license terms did not implicate any exclusive copyright rights, for example copying WoW or creating altered versions of it.

Takeaway: Although Blizzard lost its copyright claim, in a larger sense licenses and licensors won in yet another Ninth Circuit case. Expect licensors to draft software and other copyright licenses in which many of the licensee’s obligations are styled not as covenants, but as conditions to the licensor’s provision of the license, by inserting language such as, “Provided that Licensee…” or “Subject to and conditioned on Licensee’s…” With the increased legal weapons that a copyright infringement action makes available to licensors, there could be an increase in litigation not only against licensees, but also against third parties who may have encouraged or permitted infringement by licensees.

Cloud Services and SAAS Agreements: Clickwrap vs. Custom

Monday, March 28th, 2011

Photo Courtesy NASA

Many businesses are attracted by the economic advantages of cloud computing, yet at the same time wary of the risks of putting their data and business in the hands of a stranger.

The advantages of cloud computing include: eliminating the need for a major upfront investment in equipment that is then utilized only part-time; ability to ramp up quickly (scalability); ability to add functions quickly (modularity); paying only for what you use on a “utility model.” On other hand, the worst case scenario is that a cloud vendor could lose all of the customer’s data, as happened to many users of Sidekick mobile phones, who were notified in late 2009 that their e-mails, photographs, contacts, and other data stored in the cloud had been lost due to an equipment failure.

A well-drafted contract, that defines and allocates the risks between the parties, is therefore essential.

But most newcomers go the clickwrap route. Let’s take a look at a representative clickwrap cloud services agreement– the Amazon Elastic Cloud Compute (EC2) agreement, which is actually somewhat more customer-friendly than most– and how it could be improved from a customer’s point of view.

Uptime: Amazon’s goes further than most clickwrap agreements, offering concrete service levels that guarantee 99.95% uptime. Sounds good, right? But what happens if Amazon flunks its SLAs? The customer gets a service credit of 10% per month against future invoices, but note that Section 11 says that Amazon has no responsibility to pay for violation of SLAs, and in any event, total damages from all causes are limited to fees paid, not much comfort if your e-commerce site is down Christmas season. As a customer, you would want contractual provisions allowing you to receive more than token damages, and to require the vendor to insure you against loss. If the vendor is providing applications or services in addition to raw computing power, then service levels should be crafted that define and quantify the vendor’s success—uptime alone is not a sufficient metric.

Data Protection and Data Loss: major concerns for a cloud customer are loss of data security or integrity due to equipment failure or malicious third party actions such as hacking. Section 3.1 of the agreement says only that Amazon will implement reasonable measures to prevent loss, and puts the burden on the customer to back up data and to secure it against hacking. As a customer, you would want: contractual provisions guaranteeing that the vendor will implement certain safeguards and comply with certain security protocols; provide backup against data loss; allow customer audits; require vendor reporting, especially in case of security breaches, in which case you would also want a defined incident response, including requiring the vendor to provide any third party notifications required by law. And if all else fails, you would want the ability to recoup damages against the vendor, especially if a third party is making claims against you arising from actions of the vendor.

Regulatory Issues: location of the vendor’s equipment could impact what regulations a customer is subject to. In Section 3.2, Amazon allows customers to choose the physical location where their data is stored and used, and offers safe harbor programs to ensure compliance with the regulations of the relevant jurisdictions. That’s a good start, but Amazon puts the burden on customers to determine whether data will ever be stored or transmitted outside the requested location. Customers should review the provisions of the myriad state, federal, and foreign data privacy and security laws, to assess which might apply and how to the customer’s business model, then negotiate appropriate provisions with the vendor to ensure compliance. For example, the EU has a strict regulatory scheme to protect personally identifiable information of its residents, and has determined that US standards generally are non-compliant. So if there is any chance that such data will flow through the US, the agreement should require the vendor to comply with the EU-US Safe Harbor program of the US Department of Commerce.

Data Portability: clickwrap cloud services agreements are often silent about what happens to the customer’s data and content at the end of the contract. In the Amazon agreement, for 30 days after voluntary termination, Amazon promises not to erase data, and to offer reasonable assistance to transfer data back to the customer. That’s pretty good by clickwrap standards, but the agreement should also address other common scenarios where data access is a concern: if the vendor becomes insolvent, or is acquired by another vendor, or in a disaster recovery scenario.

Update, 4/25/11: This just in from our I Don’t Want To Say I Told You So Dept.: Amazon’s EC2 service went down last Thursday, and did not return to normal until Sunday, knocking out or seriously impairing thousands of websites, including Reddit and Foursquare, and resulting in permanent data loss for a small number of EC2 customers. But surely the 10% credit against next month’s bill will make up for the downtime…

Licenses 2, Sales 0 in Eminem and Autodesk 9th Circuit Rulings

Wednesday, September 22nd, 2010

The growing popularity of licensing as a strategic business and legal tool is likely to grow even greater as a result of a pair of cases decided one week apart in the federal Ninth Circuit Court of Appeals that broadened the scope of and increased the powers of licenses.

The first Ninth Circuit decision, F.B.T. Productions vs. Aftermath Records, involved a dispute between rap artist Eminem and his record label Aftermath about whether Aftermath’s provision of Eminem’s songs to iTunes was a “sale” or “license” for purposes of a contract drafted in the pre-digital age. The difference was significant, because the agreement provided that the label would pay Eminem royalties of between 12% and 20% of the adjusted retail price of all “full price records sold in the United States… through normal retail channels,” but would pay 50% of its net receipts “[o]n Masters licensed by us… to others for the manufacture and sale of records or for any other uses.” The agreement was signed in 1998, before iTunes was established, and did not further define either “sale” or “license.”

The record label argued among other things that the custom in the recording industry was that the “masters licensed” provision applied only to “compilation records and incorporation into movies, TV shows, and commercials,” and furthermore, that the iTunes download was functionally no different than a purchase of a vinyl record or CD at a record store.

The court rejected that argument, and held that under copyright law, a license is, “an authorization by the copyright owner to enable another party to engage in behavior that would otherwise be the exclusive right of the copyright owner, but without transferring title in those rights.” Because the record label retained ownership of the copyrights for the Eminem songs as well as title to the digital music files that it made available to iTunes in exchange for periodic payments based on the volume of downloads, the transaction was a license, and the higher 50% royalty rate applied.

One week later, in the case of Vernor vs. Autodesk, Inc., the court ruled that most written license agreements will preserve the licensor’s right to prohibit resales not only under the license agreement, but also under the Copyright Act. There the issue was whether Timothy Vernor could sell on eBay outdated copies of Autodesk’s AutoCAD software for a few hundred dollars that normally sell for several thousand dollars per copy when new.

Copyright law confers several exclusive rights on copyright owners, including the exclusive right to reproduce their works and to distribute their works by sale or rental. An important exception to this exclusive right is the so-called “first sale doctrine” codified at Section 109 of the Copyright Act, which says that the, “owner of a particular copy or phonorecord… is entitled without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.” So for example if a publisher sells a book to a bookstore, the bookstore is free to resell it to anyone, and the purchaser is in turn free to sell the same book to anyone on eBay.

Vernor had purchased the AutoCAD software from an architectural firm that had licensed it from Autodesk. The AutoCAD license agreement contained standard provisions prohibiting transfer to or use by any party other than the original licensee, however, it did not require the licensee to return old installation disks. Vernor argued that under prior case law in the Ninth Circuit, since the license did not require the architectural firm to return its copies of the install discs, the firm was an “owner of a particular copy,” which kicked in the first sale doctrine which exempted the firm and any of its purchasers from a copyright infringement claim arising out of resale of the discs. Although the architectural firm had violated its license agreement by reselling the discs, Vernor argued that he had not, because he had neither installed the software nor agreed to any online license agreement before the eBay sales.

After an extensive review of prior case law the appeals court disagreed with Vernor, and held that a software user is a licensee rather than an “owner of a copy” where the copyright owner: 1) specifies that the user is granted a license; 2) significantly restricts the user’s ability to transfer software; and 3) imposes notable use restrictions. Like most well-drafted software license agreements, the Autodesk agreement passed with flying colors, despite the absence of a requirement to return old install discs. Thus, because the architectural firm was a licensee, not an “owner,” then the first sale doctrine did not apply, and Vernor had infringed Autodesk’s exclusive distribution rights in violation of copyright law.

Takeaway: the Eminem case is not expected to have much of a practical impact on the recording industry, because since the time of that agreement, almost all record label agreements deem that provision of songs to iTunes will be treated as a “sale” at a 12% to 25% royalty rate. But when the nature of a copyright transaction is unclear, the Ninth Circuit will presume it is a license rather than a sale where the copyright owner retains control of the copyright, retains title to the media on which the content is delivered (CD, mp3 file, etc.), and receives periodic payments after the original transaction. Vernor says that when a standard license agreement is in place during the original transaction, the copyright owner can use both the license agreement and copyright law to prohibit later resale or disposition of the content. This will encourage copyright owners to cast transactions as licenses rather than sales, and with the proliferation of digital content that can be made easily subject to clickwrap license agreements even after the original point of sale, they will likely succeed in their efforts. So the purchaser of a hard copy of The Girl With the Dragon Tattoo will be able to resell it, because she (and the bookstore before her) took title to the media (book) on which the content was delivered. But she might not be able to resell her e-book version, if she purchases it subject to a standard license agreement at the time of download. One practical effect is that copyright owners will now be able to easily assert that resale of software, digital games, and many other kinds of digital content is a copyright infringement. Please note that these rulings only apply in the Ninth Circuit (California, Oregon, Washington, Nevada, Arizona, Idaho, Montana, Alaska, Hawaii, and Guam), and that other circuits may not follow them.

5 Minute FAQ: License Agreements vs. SaaS Agreements

Thursday, August 26th, 2010


Photo Courtesy NASA

Q: Computing used to be based on the model of the end user running another party’s software on its local computer through a client-server or fat client architecture. Now the business model is moving increasingly towards cloud computing and software as a service. If the end-user no longer has someone else’s software on his computer, does that mean the license agreements are no longer necessary?

First, let’s start off with some definitions. Cloud computing means computing where data is input and stored on a remote third party’s computer, on the Internet or “cloud.” Think Facebook. Software as a service or “SaaS” is a subset of cloud computing where not just data is stored, but also processed via a specific application in the cloud, which is often being used concurrently by many other users. Think Salesforce.com and Google Apps. The end user of SaaS pays a fee over the time of usage, using a subscription or utility model, in contrast to local software where the cost is usually paid all upfront. Also, since the SaaS user does not possess SaaS intellectual property, but accesses it remotely through a Web browser, it pays for access to, rather than use of, the IP.

Q: Well, that was my question. If there is no license of third-party IP, then is a license agreement even necessary?

I was not ignoring your question. You are correct– although there is technically no license involved in an SaaS business model, a user agreement most definitely is necessary, call it what you will. At the end of the day, the difference between an SaaS agreement and a typical end user software license agreement is more a matter of degree than kind. The meta-theme of a software end user license agreement is, “We allow you to use our intellectual property as long as ____ .” The meta-theme of an SaaS agreement is, “We allow you to access our service as long as ____ .” Despite the difference business models, large chunks of both kinds of agreements are interchangeable, because the software licensor and the SaaS service offeror are addressing many of the same business risks. Also, note that some SaaS offerings require installation of software on the local client in combination with access through a web browser, in which case the agreement would be a hybrid even closer to a traditional software end user license agreement.

Q: In what ways is an SaaS agreement different from an EULA?

Obviously, the SaaS agreement would not contain license grant language, except if it were a hybrid, as noted above. Also, an SaaS agreement needs to address business risks that are specific to a cloud environment, such as:

  • Performance and uptime guarantees and/or SLA’s
  • Data privacy and security
  • Data backups and disaster contingency
  • Data portability, especially in case of nonrenewal of the SaaS agreement
  • Term, termination, and renewal provisions, given the periodic nature of the SaaS subscription model

Besides the license grant provision, a typical SaaS agreement also often omits common EULA provisions relating to maintenance, support, and updates, because it is usually done behind the scenes by the service offeror, on a multi-user basis.

5 Minute FAQ: Open Source Licenses

Thursday, May 13th, 2010

Q: What is an open source license, and why is it important?

There are many kinds of open source licenses with a great variety of terms and conditions – Creative Commons License, GNU General Public License, Sun Community Source License, and many others. Open source licensing is becoming an increasingly important business model to distribute creative works (below). As explained in the Licensing Glossary, generally speaking an open source license is one that allows broad rights to use, modify, and distribute copyrighted material without payment of a royalty, so long as the user does not place proprietary restrictions on later users of his content. For example, the Terms of Use of popular online encyclopedia Wikipedia state that, “you can use content from Wikipedia projects freely,” as long as users make their own contributions freely available to others. In the context of software, an open source license is one that complies with the ten requirements of the Open Source Initiative, including: 1) “free” redistribution (“free” as in no downstream proprietary restrictions, and “free” as in no royalties on the original or revised code); 2) inclusion of or easy access to detailed source code; 3) the right to create and distribute modifications and derivative works; and 4) no inclusion of “downstream” license restrictions that reduce or undercut the other open source terms, i.e. once open source, always open source, no matter who adds what later on in time. Although open source software is often called “free software,” that is not quite accurate. One of the best known examples of an open source software license, the GNU General Public License, does prohibit royalties, but also permits licensors to charge a small fee for the physical act of transferring the software, as well as service fees for warranties and maintenance. In the context of licensing of text and images, the GNU Free Documentation License and various Creative Commons licenses are guided by similar open source concepts.

Q: Why would anyone just give away their creative work under an open source license?

Why indeed. The success of the open source licensing model is one of the most fascinating phenomena of the digital age. Sophisticated products with major market impact are available for free under open source licenses: the Firefox Internet browser; the Wikipedia online encyclopedia; and Apache server software. Although traditional forms of intellectual property protection are based on the assumption that the profit motive (self interest) is the greatest driver of innovation, open source licensing is based on the assumption that unrestricted sharing of knowledge and innovation (collaboration) best begets further knowledge and innovation. There is also a hybrid business model, based on the “give away the razor for free to make money selling the razor blades” concept. In some cases, for-profit businesses contribute to open source software so they can sell associated databases, or maintenance, or hardware—several distributors of the open source Linux operating system sell warranties and maintenance to go with their version of Linux, while several sellers of smartphones “give away” the open source Android software that runs them. (Smartphones running Android outsold Apple’s popular iPhone during the first quarter of 2010.)

Q: What happens if the user ignores the requirements of an open source license, for example by charging a license fee for its altered version of the open source material?

Until recently, it was not clear if there was any penalty to ignoring the requirements of an open source license. Opponents of open source licensing had previously argued that if licensors gave their product away for free, then even if licensees ignored the terms of the license, there were no damages. But in Jacobsen v. Katzer, the Court Of Appeals for the Federal Circuit put legal teeth in the open source licensing model, by ruling that violation of an open source license was not just a breach of the license, but might also be a copyright infringement. The case involved software developed by physics professor and model train enthusiast Robert Jacobsen to program decoder chips that control model trains. Jacobsen made the software available under the open source Artistic License. Matthew Katzer and Kamind Associates copied several of Jacobsen’s files into their own commercial software, but in violation of the license terms, did not include a notice of attribution to Jacobsen. While Katzer and Kamind conceded that Jacobsen’s software was copyrighted, they argued that since the Artistic License permitted them to copy the files, there was no copyright infringement, at worst only a breach of the license terms. The CAFC disagreed, ruling that since the attribution requirement was drafted as a condition under which the license was granted, copying in violation of a condition was not excused by the license, and was therefore a copyright infringement. The case is significant not only because it is the first major case validating the concept of open source licensing, but also gives open source licensors a much more effective means to enforce the license. Although contract damages are normally calculated on economic harm suffered by the injured party (and therefore difficult to prove when a product is given away for free), under copyright law, creators can collect damages and attorneys fees based on the infringer’s profit, or under a fixed formula called statutory damages. Furthermore, copyright law allows the licensor to pursue licensees of the licensee, while contract law normally does not. Thus, the Jacobsen case gives real teeth to open source licensing—however, at this time it is limited to cases under the jurisdiction of the Federal Circuit. Although the Jacobsen case makes it much easier for open source licensors to get damages to enforce license terms, an important open question is how easily they can get injunctions to enforce open source license terms, for example an injunction ordering a licensee to disclose its source code to the public, or even shutting down all further distribution of the licensee’s software.

Software & Web Licensing Corner: Enforceability of Clickwrap and Browsewrap Agreements

Wednesday, February 24th, 2010

Clicking the "I Accept" Button-- No, Not THAT Button!

Three great unanswered questions of our times: 1) did multiple gunmen shoot President Kennedy in Dallas? 2) are government authorities hiding proof that UFOs are piloted by extraterrestrials? 3) can Facebook really change my Terms of Service and privacy settings just by posting an online notice?

Sorry, can’t help you with the first two questions, but for an answer to the third question, you have come to the right place.

As detailed in a recent Five Minute FAQ, it is possible to form a legally binding contract even in the absence of a physical piece of paper signed by both parties, as long as there are an effective offer, acceptance, and consideration.

Usually, the main issue in determining whether a website user is legally bound to the site’s terms of service (“TOS”) will focus on the validity of the acceptance, specifically whether the user clearly understood the TOS offered by the website owner, and clearly manifested his intent to accept those terms.

One of the first definitive answers came in a case from the federal Second Circuit Court of Appeals, Specht vs. Netscape. Visitors to the Netscape website were allowed to download free software by clicking on a download button. Netscape claimed that downloaders were subject to the terms of its software license, but the terms of the license were not on the same page as the download button. Instead, there was a link at the bottom of the download page, visible only after scrolling down from the download button, then users had to click on more links to reach the actual terms of the license agreement. The court ruled that the license was not binding on the software user, because he did not have a chance to manifest his acceptance– the terms of the offer (license agreement) were not plainly visible to the user, and the user was not required to click an “I Accept” button linked to those terms as a precondition to downloading and using the software.

Okay, fine Mr. Wizard, but how does that play out in the Real World?

Clickwrap Agreements
Clickwrap agreements are contractual terms presented with “I Accept/I Decline” buttons. Clicking “I Accept” could be a precondition to downloading software (in other words, what Netscape should have done), or to becoming a member of or subscriber to a website. Steps to ensure that the license/TOS are legally binding include: 1) full and clear presentation of the terms prior to the user’s gaining access to the software or service, via a scroll box or (preferably) full presentation of the terms on the webpage; 2) an opportunity for the user to clearly manifest his acceptance of the terms as a precondition to gaining access to the software or service, via “I Accept/I Decline” buttons or similar mechanisms; 3) an opportunity for the user to further review the terms of the agreement, via a “Print” button or similar mechanism.

Browsewrap Agreements
On much shakier legal ground are so-called “browsewrap agreements,” that is, terms or links to terms that are prominently posted on the homepage of the website with a notice to users that they accept those terms merely by browsing deeper into the site. Obviously, in light of the Specht decision, there are serious questions whether users are aware of and clearly manifest their acceptance of the TOS just by browsing beyond the landing page. However, if the site owner is not offering membership or access to restricted portions of the website, then it may not have the opportunity to require the browser to click an “I Accept” button, even though it still has a critical need to protect its rights and restrict its liabilities. Steps to increase the likelihood that browsewrap terms are legally binding include: 1) placement of the terms or a link to the terms that is so prominent that users are guaranteed to see them upon first entering the website; and 2) prominent placement of a message that taking further action (browsing, clicking, etc.) is an acceptance of such terms. It also helps if the terms are geared towards commercial users rather than consumers. For example, in a case involving Tickets.com deep-linking to pages in the Ticketmaster.com website in violation of the browsewrap terms on Ticketmaster’s home page, the court ruled it would not dismiss the breach of contract claim solely because the Ticketmaster.com TOS lacked an “I Accept” button. Its decision appears based in part on a belief that Tickets.com was a sophisticated user that would expect its activity to be subject to online terms and conditions.

Amendments
What if a website user agreed via a valid clickwrap contract that the website owner could amend the TOS or license in significant ways just by the owner’s posting of the amendment on its website, without special notice to or agreement by the user? This very question was at the root of a recent controversy involving Facebook, which needed to amend its TOS, but with millions of users, found it impractical to notify and gather evidence of each user’s acceptance. Since the users agreed in the original TOS that Facebook could amend the TOS merely by posting the new terms, shouldn’t that be okay?

Several courts have held in similar factual scenarios that the amendment by posting procedure would not be legally binding. One used the rationale of ineffective acceptance (see Douglas v. Talk America Inc.), another used the rationale of ineffective consideration (see Harris v. Blockbuster Inc.), but both were clearly uncomfortable with the idea that users’ rights could be significantly altered without their knowledge, even if they had agreed in advance. However, both courts hinted at procedures that would more likely make online amendments effective: 1) giving users clear notice of the revised terms, via an e-mail to the user or a pop-up notice when the user next logs on to the site; 2) providing a meaningful grace period (e.g. 30 days) before the amended TOS go into effect; 3) not attempting to make the amendment retroactively effective, but only going forward; and 4) allowing the user the ability to opt out of the new TOS, for example by unsubscribing from the site.

Takeaway: providing full, prominent disclosure to users of offered terms, and opportunities for users to clearly manifest their acceptance of those terms, will result in legally binding licenses, terms of service, and other online agreements.