Department
MicroLaw
Richard H. Stern
Law Offices of Richard H. Stern
2101 L Street NW, Suite 800
Washington, DC 20037
Manufacturers' disclaimers of liability
A major US chip manufacturer put
these notices on some of its
application notes:
Life support applications
Alpha [a fictitious name] products are not
designed for use in life support appliances,
devices, or systems where malfunction of an
Alpha product can reasonably be expected
to result in a personal injury. Alpha's
customers using or selling Alpha products
for use in such applications do so at their
own risk and agree to fully indemnify Alpha
for any damages resulting in [sic, from?]
such improper use or sale.
Life support policy
Alpha products are not for use as critical
components in life support devices or
systems without express written approval of
an officer of Alpha Corp. As used herein:
1. Life support devices or systems are
devices or systems which (a) are intended for
surgical implant into the body or (b)
support or sustain life and whose failure to
perform, when properly used in accordance
with instructions for use provided in the
labeling, can reasonably be expected to
result in a significant injury to the user.
2. A critical component is any component
of a life support device or system whose
failure to perform can reasonably be
expected to cause the failure of the life
support device or system, or to affect its
safety or effectiveness [sic, adversely?].
What is this all about? Does it work?
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Probably, chip manufacturer Alpha
is concerned that systems designer
Beta will design pacemakers, drug
pumps, and the like (maybe body
function monitors) that use operational
amplifiers, microprocessors, or gate
arrays; that Beta's system will then fail in
use, leaving the user dead; and that the
Between totally innocent
John and unknowing
Alpha, who should bear
the cost of the loss?
user's heirs and/or Beta will sue Alpha
for damages. At least, the second notice
addresses that possibility. The first notice
might be intended to cover a little more
ground. Since it does not define "life
support systems," Alpha might claim
that airplane or automobile navigation,
brake, fuel, or anticollision devices are
included in the disclaimer. However, the
courts usually interpret any ambiguous
language in such notices against the
interests of the manufacturer who wrote
the notice.
Alpha has a legitimate problem, but
the notice probably will not offer much
protection. The problem is that Alpha
does not have the least idea what systems
houses will do with its chips. Alpha sets
a price for its chips on the assumption
that it is marketing a commodity that
will go into ordinary electronic devices
whose failure, while definitely a nuisance, is not fatal. Alpha is not in the
insurance business, whether to guarantee
the business success of its customers or
that of their mutual end users. Even if it
somehow were willing to go into the
insurance business, Alpha would not
know how to set appropriate premiums.
If Alpha tried to raise its chip prices to
establish a contingency fund for
lawsuits, it would have two major
problems: (a) Alpha would not know
how much of a fund to set up (and thus
how much to raise its chip prices); and
(b) if Alpha raised its chip prices, rival
chip manufacturers Gamma, Delta, and
Epsilon would mop up the floor with
Alpha. Incidentally, some of Alpha's
rivals are either offshore, judgmentproof, or unsuable. The free market will
not sort things out neatly for Alpha.
On the other hand, John Q. Public is
out there innocently buying the Beta
pacemaker that fails, or buying a ticket
on Flight 006 that strays into Russian
IEEE MICRO
good merchantable quality and be reasonably
fit for its intended purpose (whatever that is).
Other states might even allow a general
disclaimer of any responsibility for bad chips
beyond replacement cost of the chips, but
again perhaps only between businessmen.
airspace and is shot down. In either case,
the system failure may be attributed to a
badly designed Alpha operator amplifier.
John's heirs point out that it's not his
fault that Alpha made bad op amps,
adding that John had received no notice
from Alpha that its defective products
could risk his life. Between totally
innocent John and unknowing Alpha
(who does not specifically foresee the
exact harm to John when an imperfect
op amp fails), who should bear the cost
of the loss? Especially when Alpha has
the deeper pockets? In fact, John's heirs
might argue that the "life support"
notice is evidence that Alpha knew its
product might kill John; yet, Alpha went
ahead and sold the product anyway.
Readers will figure out for themselves
how courts and juries are likely to work
that one out.
erhaps the systems house, Beta
Corp., is in a different position. It
was actually warned, if it ever saw
the application note. 1 Because Alpha
gave notice to Beta that it specifically
disclaims liability for life support
systems, a court would probably say that
Alpha is not liable for consequential
damages resulting from chip malfunction. 2 In contracts between
businessmen-rather than between a
businessman and a consumer-courts
usually let the parties allocate the
economic risks of a sale by bargaining,
at least in the absence of some type of
oppression. Moreover, in the sale of
goods between businessmen, the assumption is that the seller will not be liable for
consequential damages resulting from
risks of a type or magnitude that the
seller cannot foresee. By using the
disclaimer, Alpha is trying to avoid a
factual controversy with Beta over what
Alpha should have foreseen.
What about the provision that customers like Beta "agree to fully
indemnify Alpha for any damages" from
sale or use? In theory, this means that
Beta agrees to reimburse Alpha for any
damages that John Q. Public or his heirs
collect from Alpha for pacemaker
failure. Probably, such a disclaimer is no
more than a lawyer's theory, or whistling
in the dark. A notice on an application
note is not a contract, even if Beta
admits to reading it. In some states, a
manufacturer might be able to get away
with such a disclaimer by putting it on
the back of the invoice for the chips, but
a disclaimer on an application note is
probably ineffective in any state.
g,sI
n In
P
December 1987
A
ll of the foregoing discussion has
Abeen
directed
to
a
chip
manu-
facturer's notice. Readers no doubt
have seen similar notices, and more
sweeping ones, on documentation
accompanying software. 3
limited qualification, the
Sulbject to
samne principles
apply to software and hardware alike.
Software marketers may argue that
principles like implied warranties of
fitness that apply to goods do not apply
to software, which is a "service" or an
"sintangible," but coulrts do not put too
stockc in that argument anymore.
much
Whether the software or the chip sends
the pacemaker haywire or dispatches the
airplane to Siberia, the legal problem will
probably be the same.
3. Provisions of this kind are typical in
"shrink-wrap licenses," which are printed
provisions accompanying disks, wrapped
inside shrink-wrap plastic. Typically, they
state that tearing open the plastic to get at the
disk constitutes user "agreement" to the
terms of the license.
A recent decision in Louisiana held a
shrink-wrap licensing clause unenforceable.
The State of Louisiana passed a law making
shrink-wrap licenses enforceable. Vault (the
proprietor of the Prolok copy-protection
system) sued Quaid (the proprietor of the
CopyWrite program) for defeating copy
protection. Quaid allegedly aided consumers
to unprotect third parties' programs protected
with Prolok, in violation of the third parties'
shrink-wrap licenses forbidding consumers to
copy the programs. Quaid also disassembled
Vault's Prolok to analyze it and by reverse
engineering developed a part of CopyWrite to
overcome Prolok. In so doing, Quaid
allegedly violated a provision in Vault's
Prolok shrink-wrap license that forbade disassembly. The Louisiana shrink-wrap
licensing law expressly authorized shrink-wrap
licensing that prohibited "translating, reverse
engineering, decompiling, [and]
disassembling" computer programs.
The court held that the allegedly illegal
copies of third-party software were none of
Vault's business: Any complaints about
violation of rights in such programs should be
asserted by the proprietors of the programs,
not Vault. The court then turned to the
Prolok shrink-wrap license. First, the contract
would be unenforceable as a "contract of
adhesion" (overbearing contract), were it not
for the Louisiana law favoring it. It was
therefore necessary to decide whether the
Louisiana law was valid. The court then held
that the Louisiana law was not valid because
it interfered with the operation of the federal
copyright law. Accordingly, Vault was free to
disassemble Prolok without liability despite
the prohibitions in the shrink-wrap license.
References
1. Beta's personnel will probably deny
seeing the notice. It might have been a better
idea to put the notice on all of Alpha's
invoices, which Beta would find harder to
deny having seen (unless Beta buys indirectly
from a distributor or a jobber). Certainly,
Alpha cannot fit either of those notices on the
chip itself.
2. A more general disclaimer might be
ineffective in some states, where courts would
take the position that the chip should possess
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