As more and more purchases of digital content happen online, without delivery of any physical media to the purchaser, consumers may not be able to access their purchased content in situations where vendors have removed such content from their online libraries, platforms, or apps unilaterally as the result of the expiration or revocation of the content rights. In response to numerous consumer complaints about this occurred or threatened loss of access rights to content purchased online, California Governor Gavin Newsom signed AB-2426 into law on September 24, 2024. The bill will come into effect on January 1, 2025.
The new legislation is aimed at ensuring that consumers clearly understand the nature of the rights they are acquiring in each transaction. AB-2426 bans the use of the terms “buy,” “purchase,” or similar terms, which are generally understood to confer an unrestricted ownership right, to the offering or advertising of limited license rights to digital goods, including by way of time-limited “rental,” unless with a proper disclosure at the time of each such transaction. The ban covers a variety of digital goods, including online movies, games, books, and songs delivered and accessed electronically or digitally (but excluding broadcasting via satellite, cable, or radio).
The required disclosure may take one of two forms:
- The vendor must receive an affirmative acknowledgment from the consumer that must include an indication that the underlying transaction is a grant of license to access the applicable digital good, all restrictions and conditions of the license, and that the access to the digital good may be unilaterally revoked by the vendor if the vendor no longer holds the corresponding license rights, if applicable.
- The vendor must provide to the consumer, before the execution of the transaction, a clear and conspicuous statement that states in plain language that “buying” or “purchasing” of the digital good is a license; and includes a hyperlink, QR code, or similar method to access the terms and conditions that provide full details of the license.
AB-2426 specifically mandates that the acknowledgement or statement above must be distinct and separate from any other terms and conditions of the transaction that the purchaser acknowledges or agrees to, such as general terms and conditions of subscription to an app or platform.
The bill makes exemption from the above rules for the following instances:
- Any subscription-based service that advertises or offers for sale access to any digital good solely for the duration of the subscription
- Any digital good that is advertised or offered to a person for no monetary consideration
- Any digital good that is advertised or offered to a consumer that the seller cannot revoke access to after the transaction, which includes making the digital good available at the time of purchase for permanent offline download to an external storage source to be used without a connection to the internet