High court upholds 'shrink-wrap' license

Friday, May 5, 2000

By HUNTER T. GEORGE
THE ASSOCIATED PRESS

OLYMPIA -- Ever wonder if the "shrink-wrap license" that comes wrapped around new computer software really means anything?

The Washington Supreme Court says it does.

In a 7-2 decision yesterday, the high court rejected a construction company's claim that a software maker should be liable for $1.95 million in losses the company alleges were caused by a bad program.

The court said the license agreement enclosed in the packaging protected the software firm from liability, even if the user never read it.

At issue was whether the license agreement that came with the software was part of the "contract" between M.A. Mortenson Co., a Minnesota-based construction contractor with a regional office in Bellevue, and two computer firms -- Timberline Software Corp. of Beaverton, Ore., which makes the software, and Softworks Data Systems of Kirkland, which sells and installs the software.

In 1993, Mortenson placed an order through Softworks for Bid Analysis, a Timberline program designed for use by general contractors preparing construction bids.

Later that year, Mortenson submitted a bid generated by the software for a project at Harborview Medical Center in Seattle. After Mortenson was awarded the project, the company discovered its bid was $1.95 million lower than intended.

Mortenson sued Timberline and Softworks in King County Superior Court.

Timberline acknowledged that it had found a bug in its software, but it asked the court to dismiss the claim because the license agreement that came with the software barred recovery of such losses. The trial court agreed and dismissed the case.

Mortenson lost an appeal to the state Court of Appeals. The company lost again yesterday when the state Supreme Court endorsed the previous decisions.

Mortenson argued that the only contract that existed was the purchase order that set prices and fees for purchase and installation, and that the license agreement that came with the software was not enforceable.

The high court, in a majority opinion written by Justice Charles Johnson, noted that other courts have upheld the use of "shrink-wrap" software licenses as part of the original contracts.

The terms of the license agreements should not have been a surprise, Johnson said, since they followed industry practice and were included within the shrink-wrap packaging, software manuals and even on the introductory screen.

Justices Richard Sanders and Gerry Alexander disagreed in a dissent written by Sanders, who complained that the court's majority relied on previous cases with blind deference to software manufacturers' preferred method of business.