Have you ever paid for the digital version of a movie, video game, book, or other media and thought to yourself, “Do I actually own this?” The state of California has recently attempted to answer that question through the enactment of AB 2426, which targets transparency in digital media sales to protect consumers from misleading representations.
Starting January 1, 2025, sellers must disclose that purchasing digital goods like movies, books, or music only grants users a license, not ownership. This move addresses the growing trend of consumers losing access to digital purchases without refunds, as sellers can revoke these licenses under certain conditions. For businesses, AB 2426 establishes guidelines to avoid deceptive advertising claims and align with consumer protection standards, aiming to boost confidence in the digital marketplace.
Mandatory Disclosure
Once in effect, AB 2426 will prohibit a seller advertising or offering digital goods for sale with the terms “buy” or “purchase” or “any other term which a reasonable person would understand to confer an unrestricted ownership interest in the digital good” unless one of two measures are taken:
- The purchaser provides the seller an “affirmative acknowledgment” at the time of the transaction indicating:
- The purchaser is receiving a license for the digital good;
- The conditions and restrictions of the license;
- The access to the digital good may be unilaterally revoked by the seller if they no longer have rights to it.
- The seller provides the consumer with a clear and conspicuous statement before executing the transaction that:
- In plain language, states that “buying” or “purchasing” the digital good is a license;
- Includes a method to access the terms and conditions with the full license details (e.g. hyperlink, QR code, or similar method).
It should be noted that the bill defines “clear and conspicuous” to mean a manner that “clearly calls attention to the language”, such as by using larger type, contrasting type, color, symbols, or font than surrounding text.
By mandating transparency in digital media transactions, AB 2426 is designed to help consumers make more informed purchasing decisions and understand the limits of their digital purchases in California.
What is a “Digital Good”?
The law defines “digital goods” broadly, including:
- digital audiovisual works (e.g., motion pictures, musicals, videos, news, live events)
- digital audio works (e.g., songs, music, readings of books)
- digital books
- digital applications or games (e.g., any application or game accessed or manipulated via an electronic gaming device, including add-ons and additional downloadable content)
- digital codes (e.g., codes providing the holder the right to obtain a digital good, such as promotional cards or cards purchased for use by another consumer)
The law notably exempts digital goods that are available for permanent offline download, goods that are offered for no monetary consideration, and subscription-based services with limited access periods. It is less clear whether it applies to emerging digital assets like non-fungible tokens (“NFTs”). NFTs typically offer ownership of the token but only a limited license to the associated content, creating ambiguity regarding the law’s reach in such cases.
