Step-Saver Data Systems, Inc. v. Wyse Technology
752 F. Supp. 181, 1990 U.S. Dist. LEXIS 13806, 13 U.C.C. Rep. Serv. 2d (West) 700 (1990)
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Rule of Law:
Clear and conspicuous warranty disclaimers and integration clauses within 'shrinkwrap' software license agreements are generally enforceable under the Uniform Commercial Code, precluding contradictory extrinsic evidence, and claims of intentional misrepresentation require 'clear, precise, and convincing evidence' of justifiable reliance, especially from sophisticated buyers who perform their own product testing.
Facts:
- Step-Saver Data Systems, Inc. purchased Multi-Link Advanced software from The Software Link, Inc. and Wyse-60 terminals from Wyse Technology.
- Step-Saver integrated the Multi-Link Advanced software and Wyse-60 terminals into its own multi-user system product, which it then sold to its customers.
- The Multi-Link Advanced software was packaged in a box with a 'Limited Use License Agreement' prominently printed on one side.
- This license agreement contained large, boldface print clauses disclaiming express and implied warranties (including merchantability and fitness for a particular purpose) and limiting remedies, along with an integration clause stating it was the 'complete and exclusive agreement'.
- Step-Saver's president, Barry Greebel, testified that Step-Saver never entered into a separate dealer agreement with Software Link and specifically refused to do so.
- Step-Saver's technically knowledgeable employees extensively tested all components of its multi-user system, including the Multi-Link Advanced software and its compatibility with other hardware and software, prior to selling the systems to customers.
- The Wyse-60 terminals were widely sold (over a million units) and exceeded other terminals in their class, passing Step-Saver's own comparison and bench testing without indication of problems, other than alleged incompatibility with specific software programs chosen by Step-Saver.
Procedural Posture:
- Step-Saver Data Systems, Inc. commenced a diversity action against Wyse Technology and The Software Link, Inc. in federal district court, alleging six causes of action, including intentional misrepresentation, breach of express warranties, and breach of implied warranties.
- Prior to trial, the district court granted summary judgment in favor of Wyse and against Step-Saver on claims of negligent misrepresentation, negligence, and intentional misrepresentation.
- Prior to trial, the district court granted summary judgment in favor of Software Link and against Step-Saver on claims of negligent misrepresentation, negligence, and implied warranty.
- During a ten-day bifurcated trial, after Step-Saver presented its case, the district court granted a directed verdict in favor of Software Link on claims of intentional misrepresentation, breach of contract, and breach of express warranty.
- The jury returned a verdict in favor of defendant Wyse on the issue of liability for Step-Saver’s claims of breach of express warranty and breach of implied warranty, answering “NO” to specific interrogatories.
- Step-Saver filed a post-trial motion for a new trial, and oral arguments were heard before the District Judge.
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Issue:
Did the trial court err in denying Step-Saver's motion for a new trial by correctly applying the parol evidence rule to exclude evidence contradicting a software license's express terms, finding insufficient evidence for intentional misrepresentation and breach of implied warranty of merchantability, and making other procedural and evidentiary rulings?
Opinions:
Majority - Raymond J. Broderick
No, the trial court did not err in denying Step-Saver's motion for a new trial, as it correctly applied the parol evidence rule, found insufficient evidence for intentional misrepresentation and breach of implied warranty of merchantability, and made proper evidentiary and procedural rulings. The court properly excluded extrinsic evidence that contradicted the 'Limited Use License Agreement' under UCC § 2-202. This was because the agreement, conspicuously printed on the Multi-Link Advanced product box, clearly stated it was a waiver of warranties and a limitation of remedies, and included an integration clause making it the 'complete and exclusive agreement' between the parties. The court found the agreement unambiguous and thus not susceptible to alternative interpretations that would warrant the admission of contradictory evidence. This holding applied despite Step-Saver's argument that it was a 'dealer' rather than a 'user,' given its refusal to sign a dealer agreement and its practice of integrating the software into its own products. The court also correctly granted a directed verdict on the intentional misrepresentation claim against Software Link, as Step-Saver failed to present the 'clear, precise, and convincing evidence' required under Pennsylvania law. Step-Saver could not demonstrate 'justifiable reliance' given its own technical expertise and extensive pre-sale testing, nor could it sufficiently prove the falsity of alleged misrepresentations or that Software Link's salespeople knew they were false, especially when those representations were often subjective opinions rather than facts. Regarding Wyse Technology, the court properly refused to instruct the jury on an implied warranty of merchantability because Step-Saver produced no evidence of a breach. The Wyse-60 terminals were widely accepted in the trade, highly successful, and passed Step-Saver's own rigorous testing. Their alleged incompatibility with Step-Saver's chosen software was not shown to be a failure of 'ordinary purpose' or a criterion of merchantability in the trade. The jury instruction for the implied warranty of fitness for a particular purpose was also found correct, and Step-Saver's failure to object to it at trial precluded a later challenge. Finally, the trial court properly excluded an unsigned, unsent letter from direct verbatim introduction into evidence, balancing its lack of probative value as a communication against potential prejudice and confusion, while still allowing counsel to question its author about its contents and purpose. The court also acted within its discretion by denying Step-Saver's request for rebuttal testimony that merely sought to reemphasize points from its case-in-chief.
Analysis:
This case significantly reinforces the enforceability of 'shrinkwrap' license agreements under the Uniform Commercial Code, particularly regarding conspicuous warranty disclaimers and integration clauses. It provides a strong precedent for software manufacturers to limit liability through well-drafted and clearly presented end-user license agreements. Furthermore, the opinion underscores the high evidentiary standard for intentional misrepresentation claims, making it challenging for sophisticated commercial buyers to claim fraud when they have the capacity and opportunity to conduct independent verification. The case also clarifies the distinction between implied warranties of merchantability and fitness for a particular purpose, emphasizing that mere incompatibility with a buyer's specific application does not automatically breach the former, absent evidence of a failure for ordinary purposes or trade usage.
