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I just purchased a vacuum cleaner and upon opening the box, there was a loose sheet of paper with a licensing agreement. The agreement said that using the product constituted acceptance of the agreement and that if I did not accept the agreement, I had to return or destroy the product. No explicit, active action was required to accept the agreement in order to use the product. My primary question is whether an agreement presented in this format is binding in the United States.

I have a secondary question regarding this agreement. It placed restrictions on how the product could be used and on transferring the product to another party. Does the United States allow such restrictions on physical products such as vacuum cleaners or do purchasers automatically have the right to freely use and transfer products in accordance with the law?

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I can't speak for the US but in Australia this would not be binding.

You entered a contract for the vacuum cleaner the terms of conditions of which were made known to you at the time of purchase – the ticketed price, any store or website displayed terms and whatever was written on the outside of the box. Any alleged terms that were not made known when you entered the contract e.g. because they are inside the box are just that: alleged.

In addition, the manufacturer would have committed an offence under Australian Consumer Law by misleading you that such terms were binding. This could lead to a fine in the multiple millions of dollars if the breach is widespread and egregious enough.

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    That is similar to the law in many other places, such as Massachusetts, where the attempt to enforce non-included terms may be deemed an "unfair and deceptive business practice", subjecting one to possibly treble damages and attorneys' fees of the plaintiffs. – Upnorth Sep 8 '17 at 19:36
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The wedge for this is the presence of copyrighted material such as a design on a label. If I sell you a banana, it is your banana and I cannot attach conditions to what you do with it -- you can't license a banana. But add a registered copyright-registered designer label and now I can invoke copyright protection on your banana, which is the basis for a license agreement. See for example Quality King v. L'anza (shampoo, not bananas) or Costco v. Omega (watches). The general rule ("first sale doctrine") has been that if you legally buy a legal copy of a copyrighted good, it is yours to re-sell (so a license cannot restrict resale of the object), but there has been some question of whether that holds for items made outside the US. Kirtsaeng v. Wiley ended that discussion: the first sale doctrine applies to legal copies made outside the US as well. When there is no issue of copyright protection (produce, nails) then the idea of "licensing" goods makes no sense at all. It is only when you add something copyright-protected that there is any hope of controlling the item. But even then, because of Kirtsaeng, there is no hope for controlling a physical thing that has been sold.

This freedom to use and re-sell assumes that you did actually purchase the object, i.e. did not lease it.

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    I'm confused: So if something is being sold as protected by copyright, then I can resell it under first sale doctrine. (Question you opened up and didn't answer: If I remove the copyrighted label, can I sell that itself and do with the banana as I wish?) But the original question was whether something mundane can be (surreptitiously) licensed. E.g., one doesn't go to an appliance store to license appliances. One goes to purchase them. (Though it leads to another question: If an appliance is licensed, does that impose any duties on the manufacturer/licensor that retains ownership?) – feetwet Jul 30 '16 at 18:43
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    Thanks for the update. Another example to consider is "SodaStream", which asserts that when you give it money (directly, or at a retailer) and they give you a beverage carbonator, "The carbonator remains the property of SodaStream at all times in accordance with the terms and conditions stated in the User License Certificate." But the transaction is open-ended. I.e., there is no "rental" or "license" period. So is their assertion that you possess it only under "license" nothing but bluster? – feetwet Jul 31 '16 at 0:46
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    Blue Rhino tanks are a bit clearer since it's more obvious that you're buying the gas and using their container. Beer kegs are (or were) really obvious: you put down a deposit for the keg, and the deposit is less than replacement cost. I will investigate whether customers get adequate notice of the nature of the transaction – user6726 Jul 31 '16 at 1:29
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    But the only legal basis for anything like a license is if (a) there is no sale at all or (b) the object is protected by copyright. Sale means "transfer of ownership", and the owner of a thing has the right to do whatever he wants with his thing. When you buy a copyrighted book, you still have an absolute to do whatever you want with that book, though you can't copy it. – user6726 Jul 31 '16 at 4:41
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    @feetwet, I cannot find any evidence that Sodastream gas is licensed. The service contract is, but not the physical stuff. – user6726 Jul 31 '16 at 5:59

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