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Barracuda Sneakwrap has a Nasty Bite

By Ed Foster, Section The Gripelog
Posted on Tue Jun 03, 2008 at 12:05:29 AM PDT

Can hardware be licensed? More specifically, can a hardware vendor validly bury usage restrictions like resale prohibitions deep in hidden sneakwrap licenses? And what if that hardware comes with a hefty helping of open source software - do the transfer prohibitions apply to that too? I don't know, but Barracuda Networks thinks it does, because that's what it doing with its anti-spam firewall products.


A reader was recently evaluating a batch of second-hand networking equipment available from a local dealer, most of it he believes from a now-defunct mortgage institution that sold off its data center inventory. "He had a Barracuda Model 300 antispam firewall that he wanted $600 for," the reader wrote about a device that Barracuda sells for $2,000 new, plus a very necessary "Energize Update" subscription at $500 per year. "I chatted with Barracuda about it online and they told me that the subscription on that serial number had expired in March. Barracuda would not support it, he told me - that is their policy. I told him I thought this is dishonest and sleazy. What do they expect their customers to do, buy an extra plot at Forest Lawn and have their equipment buried with them when they go?"

The reader understood that the Barracuda antispam appliance is pretty much useless without the Energize Update service, and Barracuda wouldn't let him subscribe unless he bought a new machine. "The value is in their service," the reader wrote. "The device is a doodad, really -- just a 1U computer with Linux and Spam Assassin, it proxies your mail server with mostly Open Source software they wrote a Perl front-end for. So I found their attitude about refusing to support it interesting, and probably illegal."

Well, I'm not sure if it's illegal, although certainly hardware manufacturers are held to a higher standard in regards to offering long-term warranty support than has so far been required of software vendors. I searched the Barracuda website diligently - including going as far as I could to buy from them directly online short of giving them a credit card number -- but could not find even a whisper about a resale prohibition. But when I contacted Barracuda PR, I was told that - yes, indeed - all resale of their equipment is prohibited. Section 15 of the Barracuda ToS says this:

"Not For Resale. Customer agrees and represents that it is buying for its own internal use only and not for resale unless Customer is a legal and authorized reseller of Barracuda Products as demonstrable by a contract executed by both parties stating Customer is a Reseller or Partner. Customer agrees and understands that the License for the software included in the Products is non-transferable and may not be sold or transferred in any way except by an authorized reseller or partner."

OK, but I think that raises more questions than it answers. What are customers supposed to do with a Barracuda spam appliance they no longer want? Does the company always enforce this prohibition, or can a spam appliance be sold if it's still under warranty and has time remaining on the Energize Update subscription?

"No, our resale policy is very clear -- the license on the hardware and the software is non-transferable," the Barracuda spokesperson told me. "Customers that require assistance in disposing of any Barracuda Networks products or materials that are no longer in use are welcome to contact us directly." As for how and why the company enforces the policy, the spokesperson sent me this sample of a letter sent by Barracuda sales executives whenever they are made aware of a seller on eBay elsewhere offering used device for sale:

"Please know that any resale of used Barracuda Networks equipment is unauthorized and your customer will be unable to receive Energize Updates or even use the products. Further, because the unit may contain sensitive information from individuals, companies, organizations or other entities, you/your company may be liable for any issues regarding improper use and transfer of information."

Frankly, I find using this "may contain sensitive information" threat as a justification for this policy to be rather ludicrous. Any used computer equipment could possibly contain sensitive information that the original owner failed to remove - does that mean HP or Dell could start prohibiting resale of their computers?

For his part, our reader has decided that his company will find other ways of fighting spam. "My feeling is that equipment, even software, are often expensive company assets and should have residual value," the reader wrote. "So I would never recommend we buy something where the company is trying to eliminate that residual value by refusing to support subsequent owners. In wanting to force everyone to buy new boxes, Barracuda is treating its former customers as if they are pariahs."

There is one more issue I have to raise here, particularly since Barracuda is presenting itself as the defender of Open Source against stupid software patents in a legal tussle with Trend Micro. Barracuda may well be on the right side in that case, but take another look at that ToS where it talks about "the software included in the products" not being transferable. Much of that software is Open Source. I don't know if that's a violation of the letter of the GPL, but it sure is a violation of the spirit.

I'll leave it up to those who know a lot more about the GPL, warranties, and the law to parse Barracuda's position here. But in my less-than-humble opinion, Barracuda is biting the hand of the free software movement to which it owes its existence. And in hiding the true value of what's it offering deep in the sneakwrap, Barracuda is definitely guilty of treating its paying customers with the baddest of faith.

Post your comments about this story below or write Ed Foster at Foster@gripe2ed.com.

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Barracuda Sneakwrap has a Nasty Bite | 31 comments (31 topical) | Post A Comment
Unless the agreement is to RENT the hardware...[ Reply to This ] (none / 0) (#1)
by Reziac on Tue Jun 03, 2008 at 09:38:32 AM PDT

...explain to me how this is not in violation of the Doctrine of First Sale??
~REZ~
[ Reply to This ]


Now Dell has me wondering too...[ Reply to This ] (none / 0) (#2)
by Anonymous User on Tue Jun 03, 2008 at 09:46:25 AM PDT

The last couple of times I've looked at buying via Dell's web site, one of the questions the form asks you is if the unit is for resale. For me I always answer no, but now I'm wondering why Dell is even asking that...

[ Reply to This ]


Resale[ Parent | Reply to This ] (none / 0) (#12)
by tscoff on Tue Jun 03, 2008 at 07:01:24 PM PDT

Because I have bought Dell equipment for resale in the past and they keep track of the owner of the equipment for their warranty/support services.

[ Parent | Reply to This ]


So... If This Is A License...[ Reply to This ] (none / 0) (#3)
by Anonymous User on Tue Jun 03, 2008 at 10:00:34 AM PDT

... then the argument is that you don't actually own it -- they still do. In that case, two questions: One is the old standby from software: Do they collect sales tax on it? And the second is, since they claim the doodad is and always was theirs, why don't they want the hardware back when your license expires? They should provide a way to return it on their dime, since it is their property, after all.

[ Reply to This ]


You Do Own It[ Parent | Reply to This ] (none / 0) (#5)
by srynas on Tue Jun 03, 2008 at 10:34:35 AM PDT

Companies will claim whatever to deprive you of ownership rights. That does not make it "legal". The assertion that they somehow retain "ownership" is a legal fiction that needs to be squelched. See Ed's post You Can Book a Victory for Resale Rights

[ Parent | Reply to This ]


re: You Do Own It[ Parent | Reply to This ] (none / 0) (#16)
by Spaulding on Wed Jun 04, 2008 at 10:12:55 AM PDT

Unfortunately, someone on a blog claiming that it isn't legal doesn't make it illegal either. We're not going to find out until someone challenges it in court. This is kind of a pet peeve of mine. People keep claiming that these "Sneakwrap Agreements" and EULAs are blatantly illegal and would never stand up in court. If this was as obvious as they claim you'd think it would have been challenged by now. I certainly don't like or agree with what these companies do. I just wish the courts would clear up the situation one way or the other.

[ Parent | Reply to This ]


either or[ Parent | Reply to This ] (none / 0) (#11)
by Anonymous User on Tue Jun 03, 2008 at 05:29:43 PM PDT

Either they sold it to you and you can do as you wish or it is still theirs. I say let companies like this keep their equipment. Report it as leased from XYZ on your property taxes. At the very least we know the value is zero for yours !

I need to ask the CPA about it sometime. i think our accounting program is on the books as depreciating in x number of years. However it will self destruct without the non-transferable license payments quarterly thus is worthless without the continuous extortion^C^C^C^C^C^C licenses fees.

In any case:

User agreements should NOT have a section 15!! in the first place....  :(

[ Parent | Reply to This ]



You'd think they would desire 2nd level customers[ Reply to This ] (none / 0) (#4)
by Anonymous User on Tue Jun 03, 2008 at 10:03:13 AM PDT

No warranty or sales support required on the machine but sell the service at full price.

[ Reply to This ]


Just stop selling them.[ Parent | Reply to This ] (none / 0) (#15)
by Anonymous User on Tue Jun 03, 2008 at 07:28:55 PM PDT

The solution to all this is for barracuda to stop selling those boxes. They should just give them out free with their service. That way they can retain control over "their property". Except they couldn't afford to do that in the beginning. Maybe they can now.

[ Parent | Reply to This ]


Foot bullet[ Parent | Reply to This ] (none / 0) (#25)
by Anonymous User on Fri Jun 06, 2008 at 08:56:34 AM PDT

It seems to me that Barracuda is in danger of receiving a self-inflicted gunshot wound to the foot here.

They make the bulk of their money off the Energize Update service, right? Then they should actually give the hardware away for free. Give away the razor and sell the blades -- it works for Gillette.

[ Parent | Reply to This ]



Short sighted idiot marketing[ Reply to This ] (none / 0) (#6)
by Anonymous User on Tue Jun 03, 2008 at 10:36:59 AM PDT

Lets see, we have a used unit at a bargain price that would allow those that could not afford the brand spanking new high priced unit. At $500 per year for support, etc., wouldn't they be way ahead by supporting the used unit. After three years they would have made the same amount as a new unit plus they would have a new customer. Now they have permanently lost a customer and I'll bet he tells everyone he knows about it i.e. even more lost customers. The Peter Principle is definitely alive and well.

[ Reply to This ]


Uh-oh...[ Reply to This ] (none / 0) (#7)
by Anonymous User on Tue Jun 03, 2008 at 11:36:43 AM PDT

I'm surprised GM hasn't tried this yet.

[ Reply to This ]


Who owns what - Barracuda's attiiude[ Parent | Reply to This ] (none / 0) (#8)
by Anonymous User on Tue Jun 03, 2008 at 01:24:20 PM PDT

What if the auto industry took this stance or any industry (I guess except software vendors). Would they clothing manufactures be suing Goodwill and the Salvation army for reselling their product? This kind of information needs widespread publicity, then once people stop buying their product maybe they will learn to play fair and square. I guess the company is aptly named.

[ Parent | Reply to This ]


Uh-oh[ Parent | Reply to This ] (none / 0) (#10)
by Anonymous User on Tue Jun 03, 2008 at 03:29:12 PM PDT

All they have to do is find a way to make the onboard computer stop working, about the same as Barracuda's approach.

[ Parent | Reply to This ]


Auto Industry[ Parent | Reply to This ] (none / 0) (#13)
by tscoff on Tue Jun 03, 2008 at 07:10:00 PM PDT

The auto industry can't do something like that.  Their distribution network, the dealerships, don't earn enough money to stay in business without the resale market.  If GM tried something like that they'd lose their dealers because their dealers would go bankrupt.

They'd like to do something like that in order to sell more new cars instead of people like me buying used cars.  However they'd go out of business if they did that because they'd lose their dealers.

[ Parent | Reply to This ]



Read the U.S. Constitution[ Reply to This ] (none / 0) (#9)
by Anonymous User on Tue Jun 03, 2008 at 02:01:52 PM PDT

All you liberals, like Ed Foster, just don't go away. Every time you turn around, you people are attacking the free market system, our Constitution, and the rule of law.

Here we have willing buyers and willing sellers entering into a freely made agreement.  The agreement is clear.  The buyer gave up the right to sell the equipment.

The buyer doesn't like the deal so he and others don't want to abide by it.  They rationalize that they should be able to ignore it and hope that some liberal judges, like the extremists on the California Supreme Court, will not follow the law but make it up and agree with them.

But that is not what the U.S. Constitution says.  Article I section 10, clause 1 states, "No State shall . . .pass any. . .Law impairing the Obligation of Contracts "  http://www.usconstitution.net/xconst_A1Sec10.html

Liberals don't want to recognize that our founding fathers recognized that political philosophers like Bill O'Reilly and Shawn Hannity and Rush Limbaugh were right on this point and wrote the free market into our Constitution.  Liberals just continue to ignore the rule of law.

[ Reply to This ]



What Contract?[ Parent | Reply to This ] (none / 0) (#17)
by partan on Wed Jun 04, 2008 at 11:09:59 AM PDT

I'm just wondering, what contract?  Are you talking about the ToS or EULA?  Well, contract law does state that a contract is agreed upon by both parties.  Tos and EULAs are one sided.  If you want the product, then you must agree to the terms.  No negotiation.  That's not a contract.  That's where your argument breaks down.  Especially in the case of "Sneakwrap" terms where the EULA or ToS is hidden from you until you buy the product/service.  Yes, if this was a properly negotiated contract, I would agree with you.  But I just don't see it.

[ Parent | Reply to This ]


constitution?[ Parent | Reply to This ] (none / 0) (#18)
by Anonymous User on Wed Jun 04, 2008 at 01:03:15 PM PDT

You and all your right wing fat cat religous zealots like that doper Limbaugh wrap yourselves in the flag repeating the same self rightous rhetoric.

[ Parent | Reply to This ]


OK, you've proved your point[ Parent | Reply to This ] (none / 0) (#20)
by Anonymous User on Wed Jun 04, 2008 at 04:07:16 PM PDT

You've proved your point, your a flaming idiot with no ideas, only ad hominem and left-wing talking points scribbled on your hand somewhere so you can remember them. Would you like to perhaps re-post and perhaps add some substance to your rant, or is hot air all you've got?

[ Parent | Reply to This ]


Has nothing to do with political affiliations[ Parent | Reply to This ] (none / 0) (#19)
by mklange on Wed Jun 04, 2008 at 04:04:14 PM PDT

I'm probably so conservative I make you look like a New Dealer, so don't try to lay the liberal label at the feet of people who see abuse on the part of companies attempting to leverage superior power over their customers.

Part of the problem here is the issue of where the inability to re-sell the hardware is disclosed. A free market requires the ability of both buyer and seller to understand all aspects of a transaction prior to completion of the sale. This is one of the problems with shrinkwrap and EULA's, full disclosure is often not made before the transaction is complete. As others have pointed out, this also violates the long-standing doctrine of first sale in which that which you purchase is considered your property to be used and disposed of as you see fit (that's a pretty free-market capitalist doctrine). What this example and other examples, pointed out in some of GripeLine's other articles, do is abrogate that right of first sale doctrine (often, as in this case, not disclosed until after the transaction) and leave the buyer with a piece of hardware and/or software that prevents them from enjoying the full use and disposal of that property. That is just plain wrong and even more wrong from the standpoint of a free-market capitalist. This kind of behavior actually harms the free market because it erodes the underpinnings of trust between buyer and seller.

[ Parent | Reply to This ]



Problem with your arguement is...[ Parent | Reply to This ] (none / 0) (#22)
by Anonymous User on Thu Jun 05, 2008 at 09:59:52 AM PDT

"Here we have willing buyers and willing sellers entering into a freely made agreement. The agreement is clear. The buyer gave up the right to sell the equipment." "Liberals don't want to recognize that our founding fathers ... and wrote the free market into our Constitution." ...that it doesn't hold up when a BUSINESS wants to break a contract with the consumer or wants to regulate consumer action for the benefit of the BUSINESS- (i.e.- The Bankruptcy reform act, pushing away state regulation of interest rates, limiting court action via pro-business arbitration requirements, etc).

[ Parent | Reply to This ]


No Contract[ Parent | Reply to This ] (none / 0) (#23)
by srynas on Thu Jun 05, 2008 at 02:39:10 PM PDT

Here is a quote from Barracuda. "Barracuda Networks reserves the right to modify its warranty retroactively at any time, at its sole discretion. All software is provided subject to license agreement that is available on Barracuda Networks website and included in the product. Customer agrees that it will be bound by the license agreement." (emphasis added)

I find it incredulous that some people continue to believe that and even defend these so-called "agreements" are somehow legal when one-side (the company) can change the terms at-will. I wonder what they have been smoking?

[ Parent | Reply to This ]


Read this and weep[ Parent | Reply to This ] (none / 0) (#26)
by Anonymous User on Fri Jun 06, 2008 at 09:13:44 AM PDT

"All you liberals, like Ed Foster, just don't go away. Every time you turn around, you people are attacking the free market system, our Constitution, and the rule of law."

This looks like a case of the pot calling the kettle pink.

We're the free market advocates here.

You're the one advocating the undermining of property rights, i.e. our right to use and resell things we bought as we see fit, and you have the gall to suggest we are the socialists?

Hypocrite.

"Here we have willing buyers and willing sellers entering into a freely made agreement."

The buyer in the store bought a chunk of machinery. The agreement they entered with the proprietor was they give two thousand bucks, they take the chunk of machinery. Then they get it to wherever they're going to use it, plug it in, and have to subscribe to these updates. Maybe at that point they're told they have to give up resale rights to the hardware, but at that point they're down $2000 if they don't...and it's buried somewhere in the fine print, to boot.

Allowing unconscionable contract terms to be enforceable, and allowing contracts to be dense and difficult to parse so most people entering one aren't aware of some of its contents, seems to me to undermine rather than support the rule of law and the free market.

At minimum contract law needs to be rewritten to require initialing each clause in a contract when signing it. That will get people to pay attention to each clause, and it will be tedious enough with ridiculously long contracts that it will pressure those who write the darn thinks to keep things simple. The added scrutiny to each clause will pressure them to keep things reasonable, too.

(This is consumer contracts, rather than anything big negotiated by two sides both represented by legal counsel.)

"But that is not what the U.S. Constitution says."

Really? So, do you support the ability to sell yourself into slavery?

If the answers are "yes" and "no", respectively, then it obviously needs amending again. :P

"Our founding fathers recognized that political philosophers like ... Rush Limbaugh were right on this point"

Ridiculous, unless there's been some time travel going on that I don't know about.

"Liberals just continue to ignore the rule of law."

Oh, so George Bush is a liberal now? I had not heard. :P

P.S. to site operators: the first time I went to post this it was rejected with the erroneous claim that I hadn't entered a subject or answered the "security question". I had in fact done both.

DO NOT REJECT A POST FROM ME EVER AGAIN. NONE OF MY SUBMISSIONS ARE EVER ERRONEOUS. EACH TIME YOU, OR MACHINES ACTING ON YOUR BEHALF, FALSELY ACCUSE ME OF MAKING AN ERROR I WILL MAKE A POINT OF PUBLICLY REPORTING THOSE MACHINES TO BE IN ERROR, UNTIL THEY ARE FIXED. I FIND THEIR BEHAVIOR BOTH TEDIOUS AND INSULTING -- THEY SHOULD "JUST WORK", DAMMIT, AND THEY SHOULD NOT BOTHER COMMENT POSTERS THAT WERE ACTING IN GOOD FAITH WITH INSULTS OR FALSE ACCUSATIONS OF ANY SORT.


[ Parent | Reply to This ]



Cisco[ Reply to This ] (none / 0) (#14)
by tscoff on Tue Jun 03, 2008 at 07:12:34 PM PDT

Cisco does the exact same thing.  Their attitude is that they aren't going to lose any customers by doing this.  Their attitude is that they'll earn more money by not allowing resale of their products than they'll earn by allowing the resale and selling support contracts to the people who buy their products second hand.

[ Reply to This ]


Re: Barracuda Sneakwrap has a Nasty Bite[ Reply to This ] (none / 0) (#21)
by Anonymous User on Wed Jun 04, 2008 at 07:14:52 PM PDT

I think there is some confusion here. People that buy a Barracuda appliance are not just buying a piece of hardware they are buying a software service. While I agree that they can sell the device to whomever they want they can't resell the service. I'm sure the Barracuda device will still work after the sale but none of the update services will. I really don't see a problem with this. If you bought a copy of some anti-virus software on EBay would you assume it includes software updates? Also, as far as Ed's GPL issues are, GPL doesn't say anything about services. Barracuda is just adding value to whatever GPL code they use and there is nothing in the GPL that says you always have to support what you sell. I do agree that their ToS is without merit. If they include GPL code they are required to provide it. Still this has nothing to do with the services they provide. I agree with most of Ed's posting but I have to disagree on this one. Keep up the great work Ed. Tom

[ Reply to This ]


Not what the original story indicated[ Parent | Reply to This ] (none / 0) (#24)
by Anonymous User on Thu Jun 05, 2008 at 03:26:26 PM PDT

The issue here is that the potential purchaser of the appliance did not expect to receive the software updates after buying the appliance as part of the second-hand transaction. The issue is that Barracuda refused to SELL him those software services because he had not purchased the hardware from them but had purchased the hardware second-hand. That is what is wrong. There is no issue here about getting the software service with the hardware (although one would think that one could purchase the appliance and the remaining months of service, but that's a different gripe).

[ Parent | Reply to This ]


Hmm[ Parent | Reply to This ] (none / 0) (#27)
by Anonymous User on Fri Jun 06, 2008 at 09:21:59 AM PDT

Interestingly, in theory Barracuda has the right to sell or not sell its service to whoever they choose.

However, choosing in a discriminatory pattern, based on whether the prospective customer bought something else (e.g. hardware) from them or instead bought from a third party, smells like an antitrust violation to me...

[ Parent | Reply to This ]



How many times did they expect to sell their [ Parent | Reply to This ] (none / 0) (#28)
by Anonymous User on Fri Jun 06, 2008 at 04:27:06 PM PDT

How many times did they expect to sell their hardware? Only once, I would guess.
The idea is that a manufacturer essentially demands an expensive corporate asset be destroyed lest it unhook one of their potential sales.
Well, that's something *some* companies have tried over the years. Sometimes by withholding necessary parts and service.
The solution of course is for them to never ever sell their hardware, but provide it with their service. Then there would be no problems.
But they did sell it and now it's *someone's* expensive asset. They can't take it back. Unless they want to buy the box back, that is.
FWIW, I am the customer who contacted Ed after the chat about the used unit with Barracuda.

[ Parent | Reply to This ]


Private Property and Environmental Violations[ Parent | Reply to This ] (none / 0) (#29)
by Anonymous User on Sat Jun 07, 2008 at 07:45:21 PM PDT

A chunk of hardware with all kinds of great for the environment lead, mercury, arsenic, and other heavy metals going straight into the dump. Following Barracuda's logic, it can't even be recycled!

[ Parent | Reply to This ]


wow gold[ Reply to This ] (none / 0) (#30)
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[ Reply to This ]


Great Article[ Reply to This ] (none / 0) (#31)
by Anonymous User on Tue Aug 26, 2008 at 09:45:27 PM PDT

Great Article, i agreee with youInternet Marketing 迷你倉 護膚 .

[ Reply to This ]


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