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Step-Saver Data Sys., Inc. v. Wyse Tech.
File:3rd Circuit seal.jpg
Court	United States Court of Appeals for the Third Circuit
Full case name	Step-Saver Data Systems, Inc. v. Wyse Technology and The Software Link, Inc.
Decided	July 29, 1991
Citation	939 F.2d 91; 1991 U.S. App. LEXIS 16526; 15 U.C.C. Rep. Serv. 2d (Callaghan) 1
Case history
Prior actions	1989 U.S. Dist. LEXIS 11320 (E.D. Pa. Sept. 25, 1989); affirmed in part, reversed in part, 912 F.2d 643 (3rd Cir. 1990); plaintiff's motion for a new trial denied, 752 F. Supp. 181 (E.D. Pa. 1990); dismissed, 1990 U.S. Dist. LEXIS 17381 (E.D. Pa. Dec. 21, 1990)
Subsequent action	none
Court membership
Judges sitting	Dolores K. Sloviter (Chief), Robert E. Cowen, John M. Wisdom (U.S. Court of Appeals for the Fifth Circuit, sitting by designation)
Case opinions
A written license and warranty disclaimer on the box-top of a software package did not become part of a binding contract when the software was purchased. Judgment of U.S. District Court for the Eastern District of Pennsylvania affirmed in part, reversed in part, and remanded.

Step-Saver Data Systems, Inc. v. Wyse Technology was a case primarily concerned with the enforceability of box-top licenses and their place in contract law. The enforceability of these licenses, also known as shrink wrap contracts, has been an issue of controversy as demonstrated in a few notable cases, Vernor v. Autodesk and ProCD, Inc. v. Zeidenberg both of which cited the Step-Saver case.

The final verdict in Step-Saver v. Wyse found that box-top licenses are legally non-binding, with the Pennsylvania court citing U.C.C. 2-207, and U.C.C. 2-206. The case was first heard at the United States District Court for the Eastern District of Pennsylvania. The plaintiffs later appealed to the United States Court of Appeals for the Third Circuit where the district decision was affirmed in part and remanded for further proceedings.

Background

Step-Saver Data Systems, Inc. marketed 'single-user' computer systems, known as micro-computers at the time, that consolidated software into packages tailored to suit the needs of various professionals. In an effort to expand its market horizons, Step-Saver sought to move to multi-user computer systems. Step-Saver purchased a multi-user operating system from the Software Link, Inc (TSL) known as "Multi-Link Advanced". Step-Saver purchased the required hardware from Wyse Technology, computer terminals said to be compatible with the Multi-Link Advanced system. Soon after, Step-Saver began selling its multi-user systems, complaints were received by customers regarding the improper functioning of the system. Step-Saver notified TSL and Wyse of the complaints, but after some effort the customers' problems remained largely unresolved. As a result, 12 of Step-Saver's customers filed lawsuits against Step-Saver. As sellers of key components of the system, Step-Saver contended that TSL and Wyse were liable, arguing that the same implied warranties Step-Saver made to the consumer were made to Step-Saver by TSL and Wyse.

TSL argued that the box-top license on the software delivered to Step-Saver was the only valid agreement made between the two companies. Step-Saver challenged this argument, indicating that the box-top license should be non-binding since Step-Saver never agreed to its terms.

Relevant Court Opinions

Step-Saver initiated this case in an effort to hold Wyse and TSL liable in Step-Saver's customer lawsuits. Step-Saver argued, that any liability that it had to its customers should be shared by both Wyse and TSL since they provided the so-called defective software and hardware. Step-Saver indicated that an implied contract existed between Step-Saver and the merchants in question at the time of purchase. Step-Saver argued that the implied contract would impose the merchants with an obligation to defend in the customer lawsuits. TSL argued that the implied contract was not enforceable, but rather, the Limited Use License Agreement (LULA) written on the software package was. Step-Saver sought a declaratory judgement on the matter. Step-Saver also complained that it incurred more than $75,000.00 in direct damages as a result of incompatibility issues between terminals bought from Wyse and software purchased from TSL. Five court cases and three years later the case was decided on the 29th of July 1991. A history and summary of each case is provided in the subsequent paragraphs.

District Case: Motion for Declaratory Judgment (1989)

The plaintiff, Step-Saver, sought contribution and compensation from the defendants, seeking declaratory judgment, that is, a ruling which would declare the rights, duties and obligations of defendants towards Step-Saver's predicament. In turn, the defendants, Wyse and TSL, moved for summary judgment, the granting of which would indicate that all available evidence would result in a ruling in their favor.

The defendants' motion for summary judgment was granted, while Step-Saver's motion for a declaratory judgment was denied on the grounds of misuse of the Declaratory Judgment Act, specifically U.S.C. 2201, and lack of evidence demonstrating that the defendant was liable. Specifically, the court held that Step-Saver's motion for a declaratory judgment was 'unripe', on the grounds that the cases involving customer suits had not been decided. The errors in the Step-Saver system that initiated the suits had not been identified and thus could not be designated to be faults of the hardware or software, in which case TSL and Wyse could be liable.

1st Appeal to Third Circuit (1990)

Step-Saver called for a review of the district case, specifically a review of the court's decision to dismiss Step-Saver's complaint for a declaratory judgment. In order to reestablish that Step-Saver's motion could not be affirmed the court cited Aetna Life Co. v. Haworth , which supported the dismissal of motions for declaratory judgment if the motioning party provided insufficient concrete evidence. In addition, the court indicated that "making a law without finding the necessary facts constitutes advisory opinion writing, and that is constitutionally forbidden"

In this appeal, the court also considered a direct damages claim brought forth by Step-Saver. The claim was defined as independent of declaratory judgment and it was found that the consequential damages could be recovered U.C.C. 2-714(2).

The court affirmed in part and reversed in part. The declaratory judgment motion made by Step-Saver was still considered to be unripe. However, the portion of the claim associated with direct damages was reversed, now in favor of Step-saver. The case was then remanded for further proceedings.

District Case: Motion for Retrial (1990)

Dissatisfied with the verdict of previous proceedings, the plaintiff motioned for a retrial. The defendants had been granted summary judgment on many of the issues presented by Step-Saver. In consideration of a retrial, the court examined the previous court's holdings. The district court found that the previous court's holding to be true. Under contract law, ill defined contracts are treated under U.C.C. 2-207, the previous court decision found that this would render the Step-Saver/TSL implied license as moot and instead the box-top license would be upheld. The court agreed that in the previous proceedings "LULA effectively disclaimed alleged express warranties".

The court found that Step-Saver's allegations of error were unfounded and denied the motion for a new trial.

District Case: Dismissal of Vendor Suit (1990)

Wyse technology and TSL sought to dismiss plaintiff's initial suit seeking compensation or indemnification for damages done to Step-Saver's business due to customer lawsuits.

The court granted this motion on the basis that the first district case associated with Step Saver v. Wyse, was no longer relevant in light of Step-Saver's motion for a second appeal to the 3rd Circuit.

2nd Appeal to Third Circuit (1991)

The court reversed holdings of the district court on the grounds that the box-top license is a non-enforceable contract, since Step-Saver did not explicitly agree to its terms . In addition the box-top license itself violated the original contract terms between Step and TSL which had given Step-Saver the right to freely distribute copies of TSL Multi-Link Advanced. The court remanded for further consideration of the Step-Saver initial contract consisting of implied warranty. The court affirmed in all other respects.

Importance of Verdict

There are two cases in particular, other than those initially cited, that represent the extent to which this verdict affected future cases.

External links

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