Do You Own Your Digital Library? California Says You Have a Right to Know

California’s Assembly Bill (AB 2426), which took effect January 1, 2025, requires companies that sell or advertise licenses to digital goods (e.g., movies, videos, e-books, apps, games) in California to explicitly disclose when consumers are purchasing a revocable license, rather than full ownership, for such digital goods.

The bill gained traction following instances where consumers lost access to digital products they believed they owned. In 2023, a popular game developer shut off its servers supporting one of its games, rendering it unplayable including by consumers who believed they had purchased the game. Around the same time, a media company announced it would remove certain television episodes from its platform, again affecting consumers who believed they had purchased access to those episodes.

How to Comply

Companies that are advertising or offering digital goods for sale in California must clearly disclose when consumers are obtaining a revocable license to digital goods rather than full ownership. Specifically, sellers cannot use terms like “buy” or “purchase” when advertising or offering such products unless the seller:

1. at the time of the purchase, gathers an affirmative acknowledgment from the consumer which includes (i) a statement that the consumer is receiving a license to access the digital good, (ii) a complete list of restrictions and conditions of the license, and (iii) a statement that access to the digital good may be unilaterally revoked by the seller if the seller no longer holds a right to the digital good. This acknowledgement step should be distinct and separate from any other terms and conditions of the transaction; or
2. in advance of the purchase, provides the consumer with a “clear and conspicuous” statement that the purchased digital good is a license, along with a link to the full terms and conditions of such license.

This law does not apply to subscription-based services where access to digital goods is limited to the duration of the subscription, free digital content, or non-revocable digital goods (i.e., digital goods that a buyer actually owns).

Non-compliance could result in penalties under California’s False Advertising and Unfair Competition Laws, including fines up to $2,500 per violation, misdemeanor charges (e.g., up to six months imprisonment and/or fines), or costly consumer claims.

Next Steps

Companies that sell or advertise digital goods to consumers in California should revisit their online selling practices to ensure that phrases like “buy” and sell” are being used in the appropriate context and, if applicable, accompanied by appropriate disclosures. Companies may also want to review their existing licensing agreements for purposes of understanding and articulating to consumers the terms and conditions of such arrangements.

A copy of the law is available here. If you have questions about this new law and the potential implications for your business, please contact one of the authors of this alert.