A joint article by Adv.Omer Luboshitz, Partner and Head of the Consumer Law Practice, and Adv. Ron Klagsbald, Head of the Intellectual Property Practice at ABADI & CO.
The renewed controversy surrounding the purchase of digital games is not limited to gamers, nor does it concern only the narrow question of whether a consumer is an “owner” of the game they paid for. It raises a much broader legal issue that affects almost every business operating in the digital environment: the sale sounds like ownership,with buttons like “Buy Now,” “My Library,” and “Purchase Completed.” But legally, the transaction is often just a limited license to use the product.That license is subject to the platform, terms of service, and sometimes even whether the digital infrastructure remains online at all.
This is not merely asemantic dispute. For rights holders, the licensing model is a central tool for protecting digital assets, preventing unauthorized copying, enabling ongoing updates to the service, and managing a content-based business model. For consumers,however, the same transaction may be perceived as an out right purchase. This gap, between the legal model and the customer experience, is at the heart of the debate.
Accordingly, this article examines the issue from two complementary perspectives, which are not competing with one another: the perspective of intellectual property law, which explains why a license may be the appropriate legal and commercial basis for digital transactions; and the perspective of consumer protection law, which examines whether the way the transaction is presented, the purchasing journey, and the disclosures provided to the customer fairly and clearly reflect what the customer is actually receiving and what they are not.
The Shift from Ownership to Access and the Gap That Has Become a Legal Risk
For centuries, the model was straight forward: a consumer paid for a product and acquired ownership of it. A book, disc, movie, or game was a tangible asset that could be possessed,lent, or resold. A fundamental principle of copyright law is that a purchaser of a physical, three-dimensional product does not there by acquire the intellectual property rights embodied in it copyright, trademark, patent rights, and so forth. The question in the present context is whether the digital world has changed the rules of the game. In most cases, the user does not purchase the product itself, but rather receives a limited license to use it.
Have companies such as Sony and Microsoft actually changed the rules? In the past, when users purchased software stored on physical media or downloaded it from a provider’s website after payment, they generally did not receive “ownership,” but rather a license to use the software. So what is new when it comes to gamers?
From the perspective of copyright holders, the model makes sense. It enables control over the work,prevention of unauthorized copying, ongoing updates, and protection of digital assets. From the consumer’s perspective, however, the experience may be entirely different: they paid the full price and therefore assume that they received full ownership. Assumptions aside, the reality is different in the best-case scenario, gamers and purchasers of digital media have “full” ownership of the physical medium through which the content is accessed (a computer, tablet, or smartphone), while the intellectual property rights, including copyright,remain owned by the provider the seller of the media. An equally important question, which shifts the discussion toward consumer law, is whether granting a license to use or access a game or other media has changed the userexperience. The answer would appear to be clearly no.
This is where the tension between intellectual property law and consumer protection law arises.
From a legal perspective,this gap may manifest itself on three different levels: the contractual level what is stated in the terms of use and the agreement between the parties; the proprietary level the scope of the rights transferred, or not transferred, to the user; and the consumer protection level whether the transaction was presented to the consumer in a manner that is misleading asto its nature, terms, and limitations. Properly managing a digital transactionrequires alignment between all three levels, rather than relying solely on alengthy terms-of-service document that the customer is unlikely to read.
The Property Perspective: Why Licenses Are an Integral Part of the Digital Economy
The digital economy isbuilt on intellectual property: software, games, musical works, e-books, and artificial intelligence systems are assets whose value derives, among otherthings, from the ability to prevent unauthorized copying, distribution, and use.
Without licensing models,many companies would be unable to protect their products or develop innovative business models. Streaming services, cloud platforms, and subscription-basedsoftware exist precisely because intellectual property rights enable providersto grant rights of use rather than transfer ownership. In fact, from the user’s perspective, where there is no intention to infringe rights through copying or distribution, there may be no practical advantage in transferring ownership rather than granting a right of use.
Nevertheless, the use ofa licensing model does not exempt a business from the need to define the scope and boundaries of the license precisely. The more a digital product is perceived by customers as something they are “buying,” the more important it becomes to ensure legal and commercial clarity from the very out set of the offer to thepublic.
The Consumer Perspective: It Is Not Enough for the License to Appear in the Terms and Conditions—the Consumer Must Understand It
The consumer protection question is not whether a business is permitted to grant a license, but whether the customer understands that they are receiving a limited license to use the product rather than full proprietary rights.
When the purchase button says “Buy Now,” when the content is added to “My Library,” and when the consumer pays the full price, a natural sense of ownership is created. The greater the gap between that perception and the actual legal position, thegreater the risk of claims involving misleading practices, inadequate disclosure, and information asymmetry.
From a consumer protection perspective, the key risk does not necessarily lie in the existenceof a license itself, but rather in the gap between the representation andr eality. Consumer protection laws seek to reduce information and power imbalances between businesses and consumers, particularly by ensuring that material information is provided clearly, prominently, and at a time when it may influence the consumer’s decision to purchase. Accordingly, disclosure that appears only deep within lengthy terms of use, after the consumer has already formed an expectation of an out right purchase, may be insufficient in practice and potentially in law as well.
The Current Test Case: Digital Games and the Language of “Buy Now”
The renewed debate surrounding the purchase of digital games illustrates this point of friction particularly well. On the one hand, digital platforms seek to clarify that users do not receive full ownership of the code, the game, or the underlying copyrights, but rather a right to use the content subject to the applicable terms of service. On the other hand, the purchasing process uses terms associated with an out right purchase, such as “Buy Now,” “Confirm Purchase,” or“Add to Library.” This raises the question of whether consumers may reasonably develop the expectation that they are entering into an ordinary purchase transaction.
From a legal perspective,the question is not merely whether the terms of service contain a contractual provision stating that the transaction involves a license. The practical and consumer protection question is whether the business disclosed, rather than concealed, material information to the consumer at the appropriate time before the purchase, in the right place, and in language sufficiently clear for the consumer to understand. Where the answer is no, the risk of claims involving misleading practices, inadequate disclosure, or representations that do not accurately reflect the nature of the transaction increases.
Not Just Games: E-Books, Streaming, Software, and SaaS Solutions
The issue is not limited to computer games. A Kindle user does not generally acquire traditional ownership of a digital book. A Spotify subscriber pays for access to music, not ownership of it. Organizations purchasing a SaaS system rely on software thatthey do not own, but rather receive under a license as part of the service. As the economy becomes increasingly access-based, the boundaries between purchase,subscription, licensing, and service become increasingly blurred.
Artificial Intelligence Changes the Rules of the Game Once Again
The AI revolution adds another layer of complexity. Whereas the traditional discussion focused on ownership of an existing work, new questions are emerging regarding who owns out puts generated using AI, the scope of rights to use those outputs, and the obligations owed to users.
Businesses using AI tools must understand not only the quality of the out put, but also the applicable licensing terms, restrictions on use, and whether the content may commercialized or rights in it granted to third parties.
The Regulatory Trend: Greater Transparency, Fewer Surprises
At the same time,regulators and courts around the world are paying increasing attention to digital transactions and online purchasing interfaces. The trend is clear: less reliance on legal language buried in the fine print, and greater emphasis on transparency, clear disclosure, and the presentation of material information ina manner that consumers can understand before entering into a transaction. For businesses, this means that legal compliance does not end with drafting the terms of use; it begins with the design of the user experience itself.
The message for businesses is not to avoid licensing, subscription, or limited-access models.On the contrary, these models are a central part of the digital economy.However, the more complex the model, the greater the need for broader, clearer,and more comprehensive disclosure.
Conclusion
The question of who owns a digital product is, in fact, part of a broader question: how do we build trust in a world where ownership is being replaced by access, and purchases are increasingly being replaced by licenses?
Businesses are notrequired to abandon licensing, subscription, or ongoing-access models. They are, however, required to disclose to consumers the material information relating to the transaction they are about to enter into, before the sale, in language that is clear, visible, and comprehensive.
In a world where almost every product is becoming a service and every service relies on intellectual property, transparency is not merely a legal obligation; it is a fundamental condition for sustainable business.
Legal Disclaimer
The information contained in this article is provided in summary form for general informational purposes only and does not constitute legal advice, a legal opinion, or a substitute for professional advice tailored to the specific circumstances of any particular case. In any situation involving a legal question or a decision with legal implications, professional legal advice should be sought from qualified counsel.
