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The Box Top Wars
BY Joel I. Rosenblatt

It was great marketing. The dry cereal people, as in Wheaties and Cheerios, made their products distinctive by clever trademarks and marketing, designed to plant their products in our immature minds, something like the way automobiles are
marketed to adults. I remember Cheerios was touted as the perfect dish for a campfire meal that the Lone Ranger might have shared with Tonto, while Wheaties was the breakfast of all and any champions, at the then current time.

To make the product buyable, as it would have to be for millions of children who would have preferred a chocolate bar for breakfast, there were the marketing promotions. These were made from time to time at what appeared to be random intervals, probably when market share was in decline. The promotion was a box top connected offer of a cheap novelty item for a price that perhaps covered the postage and handling, the cost of the novelty item being absorbed in the cost of the promotion. The novelty item was always connected with a radio hero, like the Lone Ranger or the Green Hornet. For a small amount, say $.010 and a box top from the promoted cereal, a special Green Hornet Magic Decoder Ring was offered. All I can remember about the Lone Ranger was a silver bullet with an inside compass.

While I haven’t kept up with the old cereal style box tops, I have advanced to the new style box tops, as with computer programs. The products and the objects are different, but the concept has common origins: the box top. The commonality is in use of the box top to associate a legal commitment by the purchaser with the opening of the box top, as in accessing and use of the product. In the cereal wars, the box top was proof of eligibility for the Green Hornet secret decoder ring. In the current box top wars, the box top becomes proof of a legal commitment, the same as the traditional signature on the dotted line.

As we are dealing with the common law, progressing case by case, from incremental appellate decisions, changes in technology are only slowly adapting to the law instead of the other way around. Of course, statues may be changed to accommodate new technology, just as the Copyright Law was changed in 1978 to apply copyright to computer programs.

A bit of computer law history first. The first computer programs were written for main frame and later mini computers. The model was the main frame example, pioneered by Burroughs and IBM, each with a history of business machine manufacture, and which continues unabated. Facing introduction of computers to do the work, (that was until then done by hand calculation on manually operated machines and by hand-machine recorded entries) IBM and the other main frame operators did the obvious. The main frame was programmed to take the same information as used in hand processing, duplicating the machine manual information process by the new computer. The result was a “print out,” of whatever a bank or insurance company did. The natural tasks for banks were compute loan payments, flag overdue accounts and compute interest. For insurance companies, the calculations were similar.

Every computer related contract IBM or Burroughs made was carefully orchestrated to specify what was expected in the final computer product, in particular, the processes stated in terms of operations and performance with milestone test specifications. A completed contract required authorized signatures on the dotted line.

Things change. Canned software becomes the commercial norm. Anyone wanting a copy of a commercial generic word processing, accounting, or data base, program, could buy it “over the counter,” meaning the box with the software on disk or CD, was handed to the customer over the counter with a sales receipt.
“Fine,” you might say, “the sales receipt shows the sale and the terms and conditions are on the box.” In lawyer’s parlance, the product was purchased with full knowledge of the terms on the box. “Wrong,” says the judge. What happened, according to that one court decision, was acceptance of the program was limited to the terms on the store receipt which was validated as a contract by the act of the customer, exchanging the purchase price for the software product and receiving in turn, the receipt. The license on the box was a prior written agreement merged into and superseded by the sales receipt.

I often wondered about that decision because after the 30-day big box store guarantee of unconditional satisfaction expires, the limited warranty printed on the manufacturer’s box becomes the contract. I can understand the common law reasoning behind that rule and we can get into that another time.

The lawyers’ response to this new law was to concentrate on the word act. If all that was needed was an act to verify the terms of a contract as applicable to the over the counter sale of a software program, then as a necessary prerequisite to using the software, the act of opening the box top would be used as the act, making a legally binding contract. However, that presentation of the contract to the customer on the box and that a valid contract would be formed by opening the box top, would have to be made conspicuous. “Easy,” says the lawyer. “Just place a conspicuous notice on the box top that opening the box top or the CD envelope, will create a valid binding agreement between the software program provider and the customer.”

That was good enough to make the box top as legally significant as the box top offer for the Green Hornet magic decoder ring (with a secret compartment). However, as we all know, technology advances, and with each advance, a new legal challenge is presented, namely, how to form a valid enforceable agreement where there is not a box top or seal on the CD envelop, as in a software sale by download over the Internet.

I’ll take the bet everyone reading this column has downloaded software and as part of the download, clicked on a radio button, indicating “I accept the terms of this license agreement,” in those exact terms. By asking the customer to click on the “I accept” button, a new and some would say, “sneaky” way has been found of obligating the customer to an (and I will choose my words carefully), absurd, overreaching, unfair, unintended, and overly burdensome, agreement. I would agree but I would state my objection in a more lawyer like prose as objecting to an unconscionable agreement, procedurally in its formation and substantively in its application. Even so, the significance of the “I accept the terms... ,” types of agreements has not been lost on sellers of “boxed” products and it has opened new opportunities for more onerous terms in the box top sale.

Just to show how wide spread these abuses have become, Lexmark, a seller of patented toner cartridges, conditioned its “box top,”agreement on the return of the used cartridge to Lexmark for refill. Back in the old days, it was settled law that once a patented product was sold, the patent right was exhausted and could not be used to restrict the use or sale of a respective patented product. The law now is that a box top notice and agreement can be used to restrict by license terms, customer use of a patented product.

To be truthful, the old law was restricted to the outright sale of a patented product without any licensing restrictions. My own opinion is that I could do anything with a license agreement (short of an antitrust violation), whether the product was patented or not. Now, it appears, this new unconscionable use of license agreements could be applied to opening anything, for example a new home, obligating the homeowner to purchase replacement parts and services only from the builder. While that may sound far fetched, taking a lesson from the forced acceptance of the condominium builder’s own management company on the condo owners and that residential developers have forced the developer’s own telephone, cable, and Internet services on the homeowners, unconscionable agreements are no longer the law of the impossible.

While my mind reels with the possibilities, a tactile example, meaning one that everyone can touch and feel, would be a brand new automobile with the tape across the front door reading, “On breaking this tape, customer agrees this auto is not to be driven over 55 miles per hour.” Of course, no one would buy an automobile with that kind of restriction, provided the buyer wasn’t temporarily blinded by the chrome hubcaps.

Mr. Rosenblatt, a Registered Patent Attorney with the U.S. Patent and Trademark Office, practices in the e commercial law of technology and the Internet and the law of patents, trademarks, and copyrights. He is a Florida Supreme Court Certified Mediator, a Florida Bar Certified Approved Mediator for Computer Law Disputes, and is admitted to the Northern, Middle, and Southern, U.S. District Courts for Florida. Any questions or comments may be directed to Mr. Rosenblatt at (321) 727-7626; FAX: (321) 821-1922 or by email to jirosenblatt@earthlink.net. Past articles may be viewed at http://www.joelirosenblatt.com