On January 1, 2025, California’s Assembly Bill 2426 (AB 2426) will go into effect. Signed by Governor Gavin Newsom in September 2024, AB 2426 requires digital retailers to be transparent about what consumers are actually purchasing when they pay for movies, music, games, and other digital goods. If you think you own what you pay for in the digital world, you might want to read the fine print. (Or re-read it if you’re that kind of person.) For years, digital storefronts have exploited vague language and fine-print licensing terms to convince consumers they are “buying” digital games or media, when really they are just buying a license to that content – one that often can be revoked at any time.
The new law mandates that sellers in California clearly disclose when a purchase is, in fact, a limited, revocable license. Further, it bans terms like “buy” or “purchase” unless these words are accompanied by disclosures indicating that the purchase might not confer true ownership. In this way, AB 2426 enforces truth in advertising for digital products, ensuring that companies can no longer mislead consumers into thinking they “own” a digital product only to have it disappear from their libraries later.
Recently, California lawmakers and the public saw two high-profile controversies that highlighted the limitations of digital “ownership.” In one instance, Ubisoft began removing access to its online-only game, “The Crew,” from player libraries, citing server shutdowns. This left players without access to the game they thought they owned. In another instance, Sony faced backlash as well after announcing it would remove Discovery content from users’ digital libraries, only retracting this move after public outrage. These moves had a pedigree. Famously, in 2009, Amazon remotely deleted copies of George Orwell’s “1984” from customers’ Kindles without warning. Similarly, when Microsoft shut down its e-book store in 2019, customers lost access to all their purchased books, receiving refunds but no permanent copies, showing how easily digital “purchases” can be revoked.
The law addresses a misalignment between consumer expectations and the legal realities of digital goods. As shown by Aaron Perzanowski and Chris Hoofnagle, consumer confusion over digital “purchases” is widespread and economically detrimental. Consumers (certainly those my age) may have grown up with CDs, game cartridges, DVDs, and other physical media may not realize that digital products are not theirs in the same way. When a digital good can vanish at a company’s discretion, consumers are not truly owners but renters of access to their own digital media. While AB 2426 does not give consumers actual ownership rights, transparency is a good place to start.
With physical media, consumers have long enjoyed rights that follow the principle of copyright exhaustion, or the “first sale doctrine.” Once a consumer buys a physical product, sellers can no longer use copyright law to restrict the buyer’s ability to resell, lend, or even destroy it. But as Aaron Perzanowski and Jason Schultz have demonstrated, this doctrine has been eroded, and digital marketplaces and other sellers use licenses to retain control over goods even after consumers “purchase” them – limiting re-sales, repairs, modifications, or the use of third-party equipment or repair shops. When software is embedded into consumer goods, whether they are smartphones, appliances, or cars, often the rules of software copyright take over to limit what rights users have.
AB 2426 is part of a broader movement to protect ownership rights in the digital era. You may have heard that, alongside iFixit, we won the right of franchisees and independent repair shops to repair broken soft-serve machines. Right now, the Federal Communications Commission is considering a rule (with bipartisan support) to require that phones be unlocked automatically 60 days after purchase, which gives people the right to change carriers while keeping their phone, and makes more low-cost phones available to users through the secondary market.
California Assemblymember Jacqui Irwin, who championed AB 2426, stated that, “As retailers continue to pivot away from selling physical media, the need for consumer protections on the purchase of digital media has become increasingly more important,” and that “AB 2426 will ensure the false and deceptive advertising from sellers of digital media incorrectly telling consumers they own their purchases becomes a thing of the past.” It’s great to see an elected representative address this issue in such clear terms. More representatives should follow her lead, and more states should adopt laws like AB 2426 as well as other laws that protect consumer expectations around digital goods.