Legally Speaking — To Buy or To Rent? Does the Court have the Answer?

LEGAL ISSUES

Section Editors: Bruce Strauch (The Citadel, Emeritus) <bruce.strauch@gmail.com> Jack Montgomery (Western Kentucky University) <jack.montgomery@wku.edu>

Legally speaking — to Buy or to rent? Does the Court have the Answer?

Column Editor: Anthony Paganelli (Western Kentucky University) <Anthony.Paganelli@wku.edu>

Imagine, you purchase a rare signed Beatles album from Apple Records and a year later Paul McCartney arrives at your house and takes it from you, because the contract between McCartney and Apple Records expired. While this is an extreme example of a recent class action suit filed against Apple, Inc. on August 13, 2020 in the U.S. District Court for the Eastern District of California, the suit filed by David Andino claimed that he purchased digital content through various Apple platforms, which Apple eventually revoked access to the purchased digital content.

The lawsuit noted that consumers have two options to either “rent” or “buy” digital content from the various platforms available that includes, computers, tablets, smartphones, or other electronic devices that can operate the “Apps” that provide the digital content. In general, the cost for renting a digital movie from Apple TV is approximately $5.99 according to the lawsuit. The terms for the rental allows the consumer 30 days to view the content. Once, the consumer begins to watch the content, the consumer has 48 hours to watch the content before the agreement is terminated.

The lawsuit also explained the approximate cost to purchase a movie is $19.99, which the suit mentioned the ability for consumers to “buy” a television episode for $3.99 or entire television series for $29.99. These options to “buy” digital content also includes musical compositions from either one composition or an entire album at various costs.

The class action compliant argues that the Apple option to “buy” is misleading, because Apple can revoke access to the content “at any time and for any reason.” The document provided examples of other instances where Apple revoked access to the content. In addition, the plaintiffs noted the major differences in prices regarding the “rent” and “buy” options. The suit claims that Apple made an excessive profit selling content at the “buy” price rather than the “rent” option, which consumers would have purchased at the cheaper price if they had known the digital content would later be revoked.

Support for the argument included examples of previous instances where Apple revoked digital content from consumers, which was later reinstated following customer complaints in 2018. According to Archer (2018), Apple claims the agreement between Apple and the movie companies allows the movie companies to withdraw digital content from iTunes. Based on this agreement, the Plaintiff claims that Apple knew that the digital content could not be purchased entirely, therefore Apple should not have provided the option to “buy.”

Apple continued this business practice model knowing that the consumer could not actually own the digital content, because the movie company owns the content. Apple eventually changed the Terms of Sale to include the clause “no refund” following several complaints about revoked digital content, which Apple contended that the reason for revoked material was based on the region the consumer lived. For example, a person in Canada may have a different agreement based on the movie studio’s policy for the region, which Apple claimed as the reason for revoked digital content.

Apple’s Motion to Dismiss

Based on the transaction options for either renting or buying digital content through Apple’s various platforms, the plaintiff claimed the business practice is unfair and deceptive, which Apple filed a motion to dismiss on December 16, 2020. According to Apple’s motion to dismiss, they claimed that the defendant “lacks Article III standing to assert the claims in the Complaint or to seek injunctive relief because he has not alleged any concrete, particularized, and actual or imminent injury,” “the plaintiff fails to state a claim because he does not plausibly allege that he purchased any good or service or suffered an injury as the result of any misrepresentation or omission by Apple, much less plead with the specificity required to assert these claims,” “The plaintiff’s claims for equitable relief must be dismissed because the plaintiff fails to allege that the legal remedy under CLRA (Consumers Legal Remedies Act) is inadequate,” and “The plaintiff fails to plausibly allege that Apple was unjustly enriched.” In regards to the first argument, the motion for dismissal claimed that the plaintiff had not purchased any digital content and therefore did not suffer any injuries. The defendants noted that the plaintiff relied on the Forbes article to determine the possibilities of losing purchased digital content, which also

the defendant claimed the plaintiff never purchased any digital content and therefore was never mislead. Based on this motion, Apple has stated that they are not responsible for injuries since the defendant never provided documentation that he purchased any digital content.

Apple did comment on the Forbes article with the statement, “confirms that users can download purchased digital content to ‘maintain ownership’ of the content ‘in perpetuity,’ consistent with the Complaint’s preffered interpretation of the ‘Buy’ and ‘Purchased’ language on the iTunes Store.” They also added, “The allegations that users are deprived of their purchased digital content are based on an inapt analogy that fails to consider common sense and the everyday experience of buying digital content.”

Judge’s Order

Following Apple’s motion to dismiss, Judge John A. Mendez denied Apples’ motion to dismiss on April 19, 2021. In the order, Judge Mendez noted that there was enough information for the case to move forward. The Judge noted that there is reason for misrepresentation by Apple regarding the options to either “buy” or “rent.”

He stated, “Apple argues that Plaintiff has failed to state a claim because he mischaracterizes the ‘Buy’ and ‘Purchased’ language and views it in an unreasonable manner… Apple contends that ‘no reasonable consumer would believe that purchased content would remain on the iTunes platform indefinitely.’” The Judge also noted, “But in common usage, the term ‘buy’ means to acquire possession over something. Buy Definition, It seems plausible at least at the motion to dismiss stage, that reasonable consumers would expect their access couldn’t be revoked.”

The order allowed Apple 20 days to reply to the Judge’s decision regarding the First Amended Complaint. The reply was extended to 60 days after Apple’s attorneys had trial commitment issues, which both parties had met and agreed to the extension. The Judge set the deadline for Apple’s reply for July 9th.

Other issues

As Masnick (2021) noted, the issue of removing digital content has been introduced into the court systems for several years that he called the “Schrodinger’s Download, which was the concept that the big companies in the music industry would refer to digital downloads as a sale or a license in varying ways depending on which benefitted them the most.” In other words, consumers could download a MP3 file that was considered a sale by the record companies, but a license if the consumer tried to sell the MP3, which meant that the consumer could not resell the MP3 file even though it was considered a sale.

In addition, Masnick (2021) observed that a similar lawsuit was filed against Amazon three months prior to Apple’s lawsuit and is still ongoing. The Amazon lawsuit cited that Amazon offered consumers the option to purchase digital content, such as movies, which the plaintiff in the lawsuit noted that the information provided in the purchase agreement was not for an actual exchange of ownership of the digital content, which appeared to be misleading for the consumer that clicks the option to “buy.”

Libraries and eBooks

While consumers enjoy the easy access to digital content, the issue is becoming clear that consumers are actually purchasing licensing agreements and not the actually digital content. This has been an issue between publishers and libraries for several years, as libraries contend with the “First Sale Doctrine” in providing their patrons with electronic resources, such as eBooks. The most recent legal issue between publishers and libraries is the case involving the Internet Archives during the Coronavirus Pandemic in 2020, as millions of students, teachers, and libraries scrambled to access electronic resources.

Of course, prior to the publishers’ lawsuit against Internet Archive, providing access to digital content has been a challenge for both publishers and libraries. Through Digital Rights Management, publishers have the ability to prevent the resell or transfer of copyright of eBooks, which is a partial issue regarding the purchase of digital content. As libraries increase their spending on eBooks and other digital content, their purchases do not include complete transfer of ownership like a physical copy. This business model is similar to the current lawsuits of Apple and Amazon, which is becoming more apparent that libraries and consumers are not purchasing digital content, rather they are purchasing temporary licensing agreements.

references

20-1628 – Andino v. Apple, Inc. (2021). Document in context. Govinfo.gov. Retrieved from https://www.govinfo.gov/app/ details/USCOURTS-caed-2_20-cv-01628/USCOURTS-caed-2_20cv-01628-2/context.

Archer, J. (2018). Apple is deleting bought films from iTunes accounts: And don’t expect a refund. Forbes. Retrieved from https://www.forbes.com/sites/johnarcher/2018/09/13/apple-isdeleting-bought-films-from-itunes-accounts-and-dont-expect-arefund/?sh=21b7a7185f74.

David Avino v. Apple, Inc. (2020). casefilingsalert. Retrieved from Class Action http://casefilingsalert.com/wp-content/uploads/2020/09/Apple-Video-Content.pdf.

Gardner, E. (2021). Apple must face lawsuit for telling consumers they can “buy” movies, TV shows. Hollywood Reporter. Retrieved from https://www.hollywoodreporter.com/thr-esq/ apple-must-face-lawsuit-for-telling-consumers-they-can-buymovies-tv-shows.

Masnick, M. (2021). Judge lets false advertising case against Apple over “Buying” music you didn’t buy move forward. Newstex Blogs Techdirt. Retrieved from https://advance-lexis-com.libsrv. wku.edu/api/document?collection=news&id=urn:contentItem:62H C-RBC1-F03R-N147-00000-00&context=1516831.