Legal and Business Implications of Shrink-Wrap Agreements: Look Before You Click

August 2011

Abstract

Shrink-wrap and click-wrap agreements are the fine print you see, among other things, when you click through terms and conditions in accessing an online service (e.g., in connection with a cloud computing service) or as part of the installation of a piece of software. They may also be encountered as part of the documentation provided with new software or a hardware component. They may even be found, with some searching, in a file entitled “license.txt” or similar name on the installation CD on which a new piece of software is delivered. Businesses seldom read these terms in any detail, generally view them as non-negotiable, and accept them as a necessary evil. The fact is, these types of agreements can present significant legal and business issues. They can place a business’ sensitive data at risk, expose the business to liability, compromise the business’ ownership of its own intellectual property, and cause the business to pay additional, unforeseen fees. This article discusses some of the key risks inherent in these types of transactions.

Authors

Michael Overly

Partner, Foley & Lardner, USA

Michael R. Overly is a partner and intellectual property lawyer with Foley & Lardner LLP where he focuses on drafting and negotiating technology related agreements, software licenses, hardware acquisition, development, disaster recovery, outsourcing agreements, information security agreements, e-commerce agreements, and technology use policies. He counsels clients in the areas of technology acquisition, information security, electronic commerce, and on-line law. Mr. Overly is a member of the Technology Transactions & Outsourcing and Privacy, Security & Information Management Practices. Mr. Overly is one of the few practicing lawyers who has satisfied the rigorous requirements necessary to obtain the Certified Information System Auditor (CISA), Certified Information Privacy Professional (CIPP), Certified Information Systems Security Professional (CISSP), Information Systems Security Management Professional (ISSMP), Certified Risk and Information System Controls (CRISC) and Certified Outsourcing Professional (COP) certifications.

Yusuf Cassim

Vice President, Intellectual Property, Licensing and Contracts, The Charles Schwab Corporation, USA

Yusuf Cassim was appointed Vice President, Intellectual Property, Licensing and Contracts in February 1998. His practice focuses on counseling clients regarding technology licensing, outsourcing, information security, electronic commerce, intellectual property, and real estate. He is also responsible for Schwab's patent and open source programs and developed Schwab's formal patent risk assessment program, including enhancing Schwab's proactive approach to monitoring potential areas of IP risk. Mr. Cassim writes and speaks frequently on legal issues of doing business on the Internet, technology in the workplace and Open Source. Mr. Cassim also participates in technology industry groups in the financial services industry. Mr. Cassim is admitted to practice law in South Africa and California. He has a JSM (LLM) from Stanford University, School of Law and a JD from UCLA School of Law.

Companies

Foley & Lardner

With offices throughout the United States and across the globe, Foley combines powerful national resources with a local focus to deliver seamless — and award- winning — business and legal insight. Our exceptional client service, value, and innovation are continually recognized by our clients and the legal industry.

The Charles Schwab Corporation

The Charles Schwab Corporation (NYSE: SCHW) has been a leader in financial services for more than three decades. Through advocacy and innovation, the company has worked to make investing more affordable, more accessible and more understandable to all. Today, Schwab meets the needs of individual and institutional clients through two operating segments: Investor Services provides retail brokerage and banking operations to millions of individuals. Institutional Services meets "business-to-business" needs through Advisor Services, Retirement Plan Services, Corporate Brokerage Services and Retirement Business Services.

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