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There were many other cases in the late 80s and early 90s involving software developers either putting drop-dead code in their products or remotely disabling code when they thought the other party was in breach. Thus, a Dallas medical device software developer was sued in 1989 (the case was settled) for using a phone line to deactivate software that compiled patients lab results. In 1990, during a dispute about the performance of a piece of code, the developer simply logged in and removed the code, until the licensee released the developer from any liability. The licensee claimed that the general release was signed under duress, since he was being held economic hostage. This was Art Stone Theatrical Corp. v. Technical Programming & Support Systems, Inc. 549 N.Y.S.2d 789 (App. Div. 1990).
In another case widely reported, a small software developer, Logisticon, Inc., installed malware within software delivered to cosmetic company Revlon, which paralyzed Revlon's shipping operations for three days (losses were about $ 20 million U.S.) when the developer claimed that Revlon breached the contract. Logisticon simply claimed that this was an electronic reposession. The case was settled out of court.
In the 1991, the case of Clayton X-Ray Co. v. Professional Systems Corp., 812 S.W.2d 565 (Mo. Ct. App. 1991), a company likewise involved in a payment dispute, logged into the licensees computer and disabled the software which they owned. When the licensee tried to log on to see their files, all they saw was a copy of the unpaid bill. A jury awarded the licensee damages, partly because the existence of the logic bomb was not disclosed.
Finally, in Werner, Zaroff, Slotnick, Stern & Askenazy v. Lewis 588 N.Y.S.2d 960 (Civ. Ct. 1992), a law firm contracted with a company to develop billing and insurance software. When the software reached a certain number of bills (and when the developer decided it had not been paid) it shut down, disabling access to the law firms files. The law firm successfully sued, and got punitive damages.
So what is the lesson from all of these cases? First, if you exercise self help without telling the purchasor, you may open yourself up to damages. Does the Microsoft EULA adequately tell you what will happen if you dont activate the product or if you cant establish that it is genuine? Well, not exactly. It does tell you that some parts of the product wont work - but it also ambiguously says that the product itself wont work. Moreover, it allows Microsoft, through fine print in a generally unread and non negotiable agreement, to create an opportunity for economic extortion. Remember, all the cases from the 80s and 90s involved sophisticated parties (on both sides) who negotiated individual license agreements - not mass market software.
Balancing the rights of all parties
After this series of cases, many states considered reforming the Uniform Commercial Code to specifically cover those situations when a software developer can resort to self-help. As a result of these efforts, two states, Maryland and Virginia enacted versions of the Uniform Computer Information Transactions Act (UCITA).
The Maryland version of the statute allows the software vendor to obtain a court order that allows it to disable the software, or [o]n material breach of an access contract or if the agreement so provides, [to] discontinue all contractual rights of access of the party in breach. . . In other words, the software vendor can only terminate access to the software if there has been a material breach, if doing so does not result in a breach of the peace, if there is no foreseeable risk of personal injury or significant physical damage to information or property.
The UCITA also provides a procedure for electronic self-help - that is, the termination of access or use of the software without a court order. The first thing to note is that, in Maryland at least, the law expressly notes that, electronic self-help is prohibited in mass-market transactions. Microsofts EULA is undoubtedly a mass-market transaction, and therefore Microsoft may be prohibited from exercising self-help in Maryland. Moreover, even in non mass-market transactions, before you can resort to self-help, the contract must provide notice that self help will be used, who will be told about the exercise of self help, and provide other notice. The Maryland law also provides that electronic self-help may not be used if the licensor has reason to know that its use will result in substantial injury or harm to the public health or safety or grave harm to the public interest substantially affecting third persons not involved in the dispute.
Thus, the harm to Microsoft (not getting a license fee) may be disproportionate to the harm to the licensee in having their systems completely shut down. This is particularly true if Vista is being used for a system providing medical treatment, controlling a power plant, or other such critical infrastructure. The Maryland law expressly provides that the rights or obligations under this section may not be waived or varied by an agreement. . .
Microsoft may have some trouble if it tries to enforce its EULA terms in a court in Washington State - especially if that court is running a computer using Vista. You see, all software license agreements with the courts in Washington State contains a no self-help code warranty where the vendor warrants that there is no back door, time bomb, drop dead device, or other software routine designed to disable a computer program automatically with the passage of time or under the positive control of a person other than a licensee of the Software. Thus, the Vista EULA terms would not apply to the Washington State courts!
Now Microsoft will invariably deny that what they are doing is self-help. More likely, they will claim that the disabling provisions of the software are mere features of the software. They will also argue that the licensee controls whether or not the code disables by either registering, or getting Genuine. But what the boys in Redmond are really doing is deciding that you have not followed the terms of a contract (the EULA) and punishing you unless and until you can prove that you have complied.
And what if Microsoft is wrong, and they disable your software erroneously? Well, you can keep buying and activating their software until you are successful. And that means more fees to Redmond. Or, following the movie Happy Feet, you can decide to find software with a little penguin on it.