Tuesday, March 24, 2009

Kotaku and the Technicolor Contract Clause

Okay, I did a little digging, found a copy of the terms, and section 6.3 of the contract does, indeed, provide a mechanism for refunds. I don't want to post the terms because I don't know if I legally can and I don't want to get on Apple's bad side, but let me give you my take on this: Kotaku is blowing things way out of proportion. This article is unnecessarily incendiary, contains factual errors, and was poorly researched at best (it took me less than an hour to track down a copy of the actual contract). That's not journalism, it's tabloid sensationalism designed to garner page-hits and advertising revenue.

Let me break it down:

First of all, this is not a new term. It has been in the store agreement for some time, probably since the beginning.

Second of all, the contract term discusses specific reasons for the refund. Basically, you have to breach your own warranty or some other legal obligation for this clause to come into effect. In other words, if you screw up and Apple has to issue a refund as a result, then you're out the 30%. This is not a precursor to out-and-out, uninhibited refunds on the App Store at your expense. Kotaku says this:
If customers can claim refunds hassle-free (and there is a 90 day refund window) this means developers could actually face the prospect of going into debt as people download and play the game to completion and then claim a refund for whatever reason. Obviously good for consumers but not for developers.
But that's not what the contract clause says. If Apple offers a no-hassle refund, then the conditions of this clause are not met. If the reason for the refund is that the user doesn't like the program or changed his or her mind, then there are no contract terms that specifically address the situation, and equity would dictate that you refund 70%, and Apple refunds 30%. The ninety-day window is actually generous because most jurisdictions have a much longer statute of limitations than 90 days on breach of contract.

So, it's not a rumor. It's not new. It's not patently unfair. It's a standard contract clause that's been there all along and which is designed to protect Apple from developers who break contractual obligations or legal obligations.

Unless we see changes to 6.3 (and the version I read is from the contract update this week), then I'm calling bullshit on this "rumor". Return to your lives, people. There's nothing to see here.

Disclaimer: I am not your lawyer, so if you have any doubts, have your lawyer review the contract.

Update: Some people dispute my reading of this contract clause. That's fine, and that's exactly why I suggest you get a lawyer rather than rely on my word. However, I believe those interpretations are wrong because they are based on the lay definition of the terms "claim" and "notice". Legally speaking, a claim isn't just somebody saying "give me my money back". Here's what a claim is:

To demand or assert as a right. Facts that combine to give rise to a legally enforceable right or judicial action.

To demand or assert a right. Rights are established by law or by other obligation, such as those established in a contract or warranty. You simply can't read legal documents based on the common usage of terms. That's why you should have a lawyer read any contract you sign. And even that's not foolproof. Not all lawyers will interpret this the same, nor will all judges.

So, don't take my word for it, but don't take Kotaku's, and if you haven't had legal training, don't take your own advice either.


Jesse said...
This comment has been removed by the author.
VesperDEM said...

I'm trying to locate the "developer contract" to look it over before I devote much more time to learning the API. Not actually having a lot of luck.

Could someone post a link to the location of the contract so that I can download it?

I thought it would be in the PDF that goes with signing up for the $99 developer program. However, that document is not the same as the one you are talking about. It doesn't have a section 6.3.

Thanks in advance!

Jesse said...

(updated comment)

We did just get this update that changes this clause to state that the developer bears the full weight of the refund and Apple gets to keep their share, effectively putting us at a loss every time a user refunds their product. It seems like this update may not have gone out to all the developers (yet?).

And it's not just for some warranty breach; if EITHER the user requests a refund, OR you are in breach of warranty, you will reimburse Apple the full amount - see the first part of 6.3. Unfortunately I think the Kotaku article is correct.

Jeff LaMarche said...


It's not new a new clause. The clause that went out this week is exactly the same clause that's been there all along.

Further, Apple has not instituted a policy allowing users to get refunds without cause, in fact, they don't make it easy to get a refund.

Perhaps the confusion is the difference between the legal and lay definitions of "notice" and "claim". A claim isn't just somebody saying "I want my money back". Legally speaking, a claim is:

"To demand or assert as a right. Facts that combine to give rise to a legally enforceable right or judicial action."

So, if you read the contract clause using the legal definition of terms (as you should), then IF Apple gets legal notice of a claim - a claim based on a legal right - then they have the right to keep their commission.

Contracts are legal documents so you must use the legal definition of terms, not the lay definition. Which is exactly why you should get a lawyer. Don't trust my word, but don't trust Kotaku's either.


Jesse said...

Hey Jeff,

You're right actually. I dug up the old contract and it's been there from day one. I think that Apple rushing out a new contract set everyone's paranoia meter on high.

What this clause means for the developer is probably still a matter worth understanding, but maybe we can tone it down and figure out (with a helpful lawyer?) how screwed we have always been, rather than how screwed we're about to be. :)

PB said...

Is grok law still around?