The Xbox 360's new dashboard isn't all shiny new features and fun times. Buried in the new terms of service you're required to accept to install the update is a clause that restricts your ability to take legal action against the company.
There are two offending passages in the new license agreement. Here's the first:
18.1.4. BINDING ARBITRATION. IF YOU LIVE IN THE UNITED STATES, YOU AND MICROSOFT AGREE THAT IF YOU AND MICROSOFT DO NOT RESOLVE ANY DISPUTE BY INFORMAL NEGOTIATION UNDER SECTION 18.1.2 ABOVE, ANY EFFORT TO RESOLVE THE DISPUTE WILL BE CONDUCTED EXCLUSIVELY BY BINDING ARBITRATION IN ACCORDANCE WITH THE ARBITRATION PROCEDURES IN SECTION 18.1.7 BELOW. YOU UNDERSTAND AND ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION, YOU ARE GIVING UP THE RIGHT TO LITIGATE (OR PARTICIPATE IN AS A PARTY OR CLASS MEMBER) ALL DISPUTES IN COURT BEFORE A JUDGE OR JURY. INSTEAD, YOU UNDERSTAND AND AGREE THAT ALL DISPUTES WILL BE RESOLVED BEFORE A NEUTRAL ARBITRATOR, WHOSE AWARD (DECISION) WILL BE BINDING AND FINAL, EXCEPT FOR A LIMITED RIGHT OF APPEAL UNDER THE FEDERAL ARBITRATION ACT. ANY COURT WITH JURISDICTION OVER THE PARTIES MAY ENFORCE THE ARBITRATOR'S AWARD.THE ONLY DISPUTES NOT COVERED BY THE AGREEMENT IN SECTION 18.1 TO NEGOTIATE INFORMALLY AND ARBITRATE ARE DISPUTES ENFORCING, PROTECTING, OR CONCERNING THE VALIDITY OF ANY OF YOUR OR MICROSOFT'S (OR ANY OF YOUR OR MICROSOFT'S LICENSORS') INTELLECTUAL PROPERTY RIGHTS.
And the second:
18.1.6. CLASS ACTION WAIVER. YOU AND MICROSOFT AGREE THAT ANY PROCEEDINGS TO RESOLVE OR LITIGATE ANY DISPUTE, WHETHER IN ARBITRATION, IN COURT, OR OTHERWISE, WILL BE CONDUCTED SOLELY ON AN INDIVIDUAL BASIS, AND THAT NEITHER YOU NOR MICROSOFT WILL SEEK TO HAVE ANY DISPUTE HEARD AS A CLASS ACTION, A REPRESENTATIVE ACTION, A COLLECTIVE ACTION, A PRIVATE ATTORNEY-GENERAL ACTION, OR IN ANY PROCEEDING IN WHICH YOU OR MICROSOFT ACTS OR PROPOSES TO ACT IN A REPRESENTATIVE CAPACITY. YOU AND MICROSOFT FURTHER AGREE THAT NO ARBITRATION OR PROCEEDING WILL BE JOINED, CONSOLIDATED, OR COMBINED WITH ANOTHER ARBITRATION OR PROCEEDING WITHOUT THE PRIOR WRITTEN CONSENT OF YOU, MICROSOFT, AND ALL PARTIES TO ANY SUCH ARBITRATION OR PROECCEDING.
In plain English, that means any US resident who accepts the new license agreement implicitly agrees to handle any future disputes over the Xbox Live service through private arbitration, rather than taking the company to court in a lawsuit, class action or otherwise.
This move puts potential claimants at a serious disadvantage, as they'll be resolving any issues they may have on Microsoft's terms with only their individual resources to go up against a major corporation's legal team. By forcing private arbitration, Microsoft can also ensure that any decisions against them or payouts they're forced to make will be kept private or confidential, a luxury they wouldn't have in court.
Heinous though it may sound, the move isn't unprecendented. After a flurry of class action suits sprung up in response to the PSN hacking incident earlier this year, Sony updated their license agreement to include a similar cause, and EA soon followed suit.
As in those previous two instances, there is a way to opt out from this particular portion of the EULA. If you send a letter to Microsoft within 30 days of accepting the agrement, you'll be exempt and free to sue to your heart's content. It's inconvenient by design, but worth it if you're concerned about protecting your consumer rights. Here's the address you'll need to send a letter to:
Microsoft Corporation, ATTN: LCA ARBITRATION, One Microsoft Way, Redmond, WA 98052-6399
