James R. Molen

Effective January 1, 2025, California law AB 2426 will require companies offering online-only digital goods to disclose that consumers are purchasing a limited-duration license, not outright ownership. This applies to a broad range of digital media, including games, video, audio, e-books, and other digital assets. Companies must conspicuously display this disclosure and provide the license terms separately. Violations may result in misdemeanor charges and civil penalties. Key Provisions The law aims to ensure transparency by prohibiting the use of terms like “buy” or “purchase” unless accompanied by clear disclosures. Key requirements include: Acknowledgment at Purchase: Sellers must obtain consumer acknowledgment that: The transaction grants a limited license to access the content. License restrictions and conditions are provided. Access may be revoked if the seller loses rights to the content. Clear Statements: Sellers must provide a clear, conspicuous disclosure before each transaction, including: A plain-language statement that the purchase is a license. A link, QR code, or similar method to access the full license terms. These disclosures must be distinct from other transaction terms and conditions. Definitions and Exemptions “Digital goods” are broadly defined to include digital audiovisual works, digital audio content, digital books, digital codes, and digital applications and games. Notably, the law does not apply to: Subscription-based services. Freemium content offered without monetary exchange. Digital goods provided for permanent offline use. Implications for Sellers Sellers of non-exempt digital goods must update purchase flows to ensure compliance with disclosure and acknowledgment requirements. NFTs and Blockchain Assets: The application to NFTs is ambiguous. While NFTs are often considered irrevocable, associated digital assets (e.g., linked audiovisual files) may still be subject to the law. Freemium Games: The law requires disclosures for each in-game purchase, potentially introducing friction into the user experience. Platforms and Creators: The broad definition of “digital goods” may extend compliance obligations to both platforms and individual content creators. As the law’s implementation date is now upon us, companies should review and update their licensing terms, purchase flows, and customer communication strategies to meet the new standards. For more information or to ensure compliance with AB 2426, contact James Molen at jmolen@ggfirm.com.

Litigation Partner James Molen authored "Dough you know? Unpacking recent claims of false advertising against Kroger’s Carbmaster bread" in the Daily Journal.  Excerpt:  If it sounds too good to be true, it probably is. This is the message of a recent lawsuit filed by the district attorneys of Santa Barbara and Ventura counties against Kroger, the parent company of such popular supermarket chains as Ralphs and Food 4 Less, alleging claims of false advertising and violations of California’s unfair competition laws.