Evan Schuman's StorefrontBacktalk

Attorney Mark D. Rasch is the former head of the U.S. Justice Department’s computer crime unit and today serves as Director of Cybersecurity and Privacy Consulting at CSC in Virginia.

A grocery chain was not happy with the profitability of products purchased by certain customers, so it had someone slip into their homes overnight and steal their refrigerators with all of the low-profit food. Three houses away, a national sports chain suspected one of its high-school athlete customers of buying some items from a direct rival, so it activated heater-equipped active RFID tags that melted or set on fire all of the disloyal customer’s athletic gear. Sound absurd? Well, it’s apparently not, if you work for Amazon. That is, in essence, what the world’s largest e-tailer has done with one European customer.

In this age of digital content, Amazon is acting as though it has the right to deal with one dispute on one piece of content as license to steal back all of that customer’s paid-for content. With the newness of digital rights issues, it’s frighteningly possible that Amazon may be right—for now.

When Amazon decided that one of its U.K. consumers was violating its terms of service, it did not go to court to enforce its rights. Rather, the Seattle-based company simply wiped out the customer’s Kindle, banned her from the service and prevented her from ever reading an e-book with Amazon again. Ever. If she had purchased a book from a physical bookstore, Amazon’s remedies would have been much more limited. But because the customer didn’t “own” the thing she bought, merely had a license to use it (at the discretion of Amazon), the merchant moved from being a “seller” to a licenser of a service that it could terminate at will. This may give both merchants and consumers pause when they consider these new digital relationships. Merchants need to tread lightly when enforcing their “rights” and provide consumers with a means to demonstrate compliance with contracts. The “punishment” also must be commensurate with the alleged “offense.”

Online, we are quickly moving from an “ownership” society to a “rental” one or, more accurately, a “licensed” one. We used to own books, records, magazines, maps and a host of other “products.” We bought them, we paid for them, we owned them and we could resell them if we wanted to (more on this in a minute). In the online world, however, retailers no longer “sell” consumers a product. They license that product, or its embedded intellectual property, for which the consumer must not only pay (and sometimes continue to pay) but also agree to and then abide by an ever-changing series of licensing agreements.

Don’t agree? “No soup for you.” (A soup license.) Not only can the retailer refuse consumers access to future goods and services, it can wipe out all of the things those consumers have purchased in the past. It’s one thing to say that your leased car can be repossessed if you violate the terms of the lease agreement. It’s yet another to say that all of your leased cars and your house can be repossessed if you violate the terms of the agreement on even one.

Moreover, contract terms will allow the service provider to do this even if it simply “suspects” a violation of the terms of the contract. These contracts rarely provide the consumer with any remedy except to go somewhere else. “No soup for you.”

The particulars of what that U.K. customer, Linn Jordet Nygaard, heard from Amazon is illustrative. When Nygaard logged into her Amazon.co.uk account, she was unable to retrieve any of her Kindle books stored on the server. When she contacted customer service, she received the following reply: “We have found your account is directly related to another, which has been previously closed for abuse of our policies. As such, your Amazon.co.uk account has been closed and any open orders have been cancelled. Per our Conditions of Use, which state in part: Amazon.co.uk and its affiliates reserve the right to refuse service, terminate accounts, remove or edit content, or cancel orders at their sole discretion. Please know that any attempt to open a new account will meet with the same action.”

Not only were Nygaard’s orders cancelled, but her Kindle was wiped of all previously “purchased” content. In her case, Nygaard wrote to Amazon and told the company that she had no other account. Amazon didn’t seem to care, noting: “Your Amazon.co.uk account has been closed, as it has come to our attention that this account is related to a previously blocked account. While we are unable to provide detailed information on how we link related accounts, please know that we have reviewed your account on the basis of the information provided and regret to inform you that it will not be reopened. Please understand that the closure of an account is a permanent action. Any subsequent accounts that are opened will be closed as well. Thank you for your understanding of our decision.”

Nygaard had asked what account hers was “related to,” what the contact information was on that account and what the nature of the “violation” was. Amazon simply said her account was terminated and all future accounts would be terminated. What’s worse, not only did Nygaard lose all of her content, but her expensive Kindle became useful only as a Christmas ornament. She could neither retrieve paid-for content, nor get any refund for those things “purchased.”

Welcome to the wonderful world of intellectual property “licensing.”