This morning, it was revealed that Sony had changed its End User License Agreement for the PlayStation Network, adding a mandatory arbitration clause to the contract gamers enter into when they click "accept" after they download an update. Basically, the new clause says that larger disputes between gamers and Sony won't be handled in court, but instead will be decided by an outside agency. While small claims are excluded, class-action lawsuits are not, and class-action suits, like the ones filed over the PlayStation Outage of a few months ago, can be a big problem for companies. Check out the EULA here.

Arbitration is a way of settling legal disputes outside of court, usually through an independent organization. It can be a good option when two same-sized companies have beef, but many regard arbitration as a bad deal for consumers in dispute with corporations.

According to Sony, the language in the new TOS is "common and similar to that of many other service related Terms of Service Agreements. It is designed to benefit both the consumer and the company by ensuring that there is adequate time and procedures to resolve disputes."

Obviously Sony wouldn't have written the new clause if it didn't benefit them, but is it fair to you and the rest of your gaming brethren?

While arbitrating a dispute is usually faster and less expensive for everyone compared to taking a case to court, an arbitrator (basically the judge) in a case like Anonymous Gamer Vs. Sony would be paid by Sony and the consumer equally, which seems fair, until you consider that an individual consumer is unlikely to ever arbitrate more than one case over time, where Sony is likely to arbitrate a bunch of them, giving arbitrators an incentive to rule in favor of the company as opposed to the consumer. An arbitrator who consistently rules against a corporation would most likely be out of a job pretty quickly. A "real" judge, on the other hand, is ideally impartial, and gets paid no matter who he/she rules in favor of.

Whether adding an arbitration clause to a EULA is legally binding is ultimately decided on a case-by-case basis. Different U.S. courts have ruled different ways on this issue. The enforcibility depends on the specific wording of the clause, the circumstances under which is "agreed to," and the laws that govern that particular quasi-contract.

The argument companies generally make is that by clicking "yes," you agree to the terms, and enter a contract with them. Feel free to not agree, and use a different product, but if you want to play on their playground, you have to agree to the rules. 

On the other hand, many people have argued that clicking "accept" after a download is not the same thing as entering into a contract at all, as the consumer and the company are on different legal footing. In 2008, a California appeals court struck down a mandatory arbitration clause in T-Mobile's EULA because, basically, the agreement was written by a party with superior bargaining strength (T-Mobile) and the customer was given no ability to negotiate. This could explain the opt-out clause in Sony's EULA. It's your opportunity to negotiate.

I spoke to TheFeed's legal adviser and consigliere, Wesley E. Johnson, Esq. about the meaning of the clause and he explained it like this, "The opt-out provision is a strategic move so they can argue, 'Hey, they could have opted out, so don't allow the class certification, and send it to arbitration.' The counter-argument, of course, is that they are offering an 'instant acceptance,' coupled with a cumbersome and difficult opt out provision. So it's still not a fair transaction."

Whether that argument would hold up in court remains to be seen, but it can't hurt to opt-out of the arbitration altogether now that you're aware of its existence.

All of the best people are following Stephen Johnson's twitter feed. Also, email me if you wanna.