Out-Law / Your Daily Need-To-Know

PlayStation Network contract terms challenged in en masse lawsuit

Out-Law News | 22 Dec 2011 | 4:50 pm | 3 min. read

Sony faces a class action lawsuit in the US over changes to its contract terms and conditions for accessing its PlayStation Network (PSN), according to media reports.

In September Sony changed the terms and conditions for using PSN and asked its users to sign away their right to collective redress. The changes force PSN users to unfairly give up their legal rights, according to a class action lawsuit filed in California, the BBC has reported. The lawsuit has been filed on behalf of PSN users who had signed up to the service prior to the introduction of the new terms, according to the BBC's report.

PSN allows PlayStation 3 users to log in and download games, films and other media and play games against other users live.

Class action lawsuits are common in the US, where lawyers will earn large fees for organising many similarly-affected people into bringing proceedings against organisations for alleged breaches of the law. Collective redress is less common in the UK.

The software giant has prompted PSN users to sign new terms and conditions on the service. The terms include a new clause that asks users to waive their right to collective redress and requires the users to try to resolve the issue with an arbitrator in the first instance.

"Any dispute resolution proceedings, whether in arbitration or court, will be conducted only on an individual basis and not in a class or representative action or as a named or unnamed member in a class, consolidated, representative or private attorney general legal action, unless both you and the Sony entity with which you have a dispute specifically agree to do so in writing following initiation of the arbitration," a copy of the contract changes (21-page / 160KB PDF) on the Sony Online Entertainment Network website said.

The provision does not include those users who are members of a class action lawsuit that was filed prior to or before 20 August, the contract said. PSN users have to write to Sony's legal department requesting to have their rights to collective redress reinstated with 30 days of accepting the company's agreement, it said.

Sony said its new terms were legal and that it was "not obligatory" for users of its PSN to sign the agreement, according to the BBC's report. Users could opt out of the terms and conditions for using PSN by writing to its lawyers, the report said.

Sony faces a separate class action lawsuit filed earlier this year after admitting that hackers may have stolen personal data belonging to 77 million PSN account holders. The company could face a bill running into billions of dollars if the lawsuit is successful. Information stolen was users' name, address, country, email address, birthday and their username and password login for the PSN.

Electronic Arts, which manufacturers computer games, and software giant Microsoft are among the companies to have made similar changes to their contract terms and conditions as imposed by Sony.

Raini Zambelli, a contract law expert at Pinsent Masons, the law firm behind Out-Law.com, has previously said that the changes Sony has made to its contract clause may not be upheld in a UK court.

Under the Unfair Contract Terms Act a term will be unfair if it unreasonably seeks to limit the supplier’s liability for the consequences arising from having themselves breached the contract. If a term is found to be unfair then it will not be binding on the consumer. So, a supplier seeking to rely on a clause that excludes their exposure to a representative action would have to convince the court that clause was reasonable.

Under the Civil Procedure Rules (CPRs) of England and Wales, a person can bring a representative claim against an organisation on behalf of others if those others share "the same interest in a claim" as the representative. The CPRs set out the framework for litigation in England and Wales.

Under English contract law companies that want to form the basis of a contract must provide notice of their terms and conditions to those who they wish to enter into agreements with. A contract is only formed if an offer is said to have been made and accepted along with 'consideration'. Consideration refers to legal bargaining whereby there is an exchange of something of value, usually a fee, for what is being offered.