No. 42: Implied Warranties for Digital Products? The Interplay of Intellectual Property and Sales Law in the EU and US

Details

Author(s):
  • Katharina Erler
Publish Date:
February 12, 2019
Publication Title:
TTLF Working Papers
Publisher:
Stanford Law School
Format:
Working Paper
Citation(s):
  • Katharina Erler, Implied Warranties for Digital Products? The Interplay of Intellectual Property and Sales Law in the EU and US, TTLF Working Papers No. 42, Stanford-Vienna Transatlantic Technology Law Forum (2019).
Related Organization(s):

Abstract

Digital products such as software, apps, digital music, and electronic books are supplied to and used by consumers at an ever-increasing rate. Given that technology is developing faster than the legal world has been able to respond, there are many new areas of legal uncertainty, especially when consumers are not satisfied with the quality of the digital product. For example, what legal issues arise when an e-book supplied to a consumer is readable at a far slower pace than the consumer reasonably expects. Or when an app turns out to be incompatible with the consumer’s other devices? Or when music files are supplied in a certain format which the consumer’s device cannot process? In such cases, several legal issues arise which touch on classical questions in contract law: What are the applicable standards of quality? Which remedies are available and/or adequate for consumers?

This paper investigates the influence of IP law on the application of sales law with respect to digital products in the United States and the European Union. Applying rules related to the sale of goods can possibly help to resolve some of the new questions that have arisen concerning contracts involving digital products. When it comes to software transactions, courts and legal scholars in both the EU and the US have discussed the application of sales law extensively. However, what might appear as an easy solution at first glance turns out to be quite complex. Due to the specific information-centric character of digital products, IP law also plays a leading role in analyzing digital products contracts. Thus, in the digital products context, contract law and IP law mutually influence each other, while their general policy goals and technical details conflict. By analyzing US and EU case law and legislation, this paper investigates and compares the US and EU approaches to warranty liability in the context of digital products and, more specifically, software. The paper also answers the question of how IP law and the granting of rights through licenses influence the application of sales law in the US and EU.

The paper begins by examining US case law concerning the applicability of sales law warranty provisions to digital products such as software. The paper analyzes the cases chronologically and through the following categories: software-hardware cases, software-only cases, and download cases. The paper presents and summarizes the judicial considerations regarding digital products in those cases and illustrates the arguments and methods used by US courts. Second, the paper provides a synthesis of the main criteria that are considered in courts’ decisions with regard to whether sales law warranty provisions apply to software. Third, the paper examines the criteria established in US jurisprudence and analyzes the importance of these criteria under EU legislation and jurisprudence. Finally, this paper compares the EU and US approaches to warranty liability in the case of digital products, as well as the proposed legislative approach in the EU, by using the established criteria.