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Like so many taxpayers before him, Scott Leviant loaded Intuit's TurboTax onto his notebook recently in hopes of taking some of the hassle out of the annual tax chore. Then his screen went dark.

Not a problem, thought Leviant; he could just load TurboTax onto another PC. But again like so many consumers before him, Leviant ran headlong into TurboTax's new activation feature, which prevents the program from being fully functional on more than one computer.

The bad news for Intuit is that Leviant isn't just another customer. When a product doesn't work, he doesn't get mad--he writes legal briefs.

Leviant's firm of Stanbury & Fishelman has filed a class-action lawsuit against Intuit in Los Angeles Superior Court on behalf of all U.S. purchasers of TurboTax software for the 2002 tax year. The suit alleges that Intuit engaged in unfair and deceptive business practices by failing to fully disclose the mechanisms and consequences of its product-activation technology before consumers pay for the software.

Angry and Annoyed

Angry TurboTax customers have been lighting up chat rooms and e-mail servers with complaints about activation snafus since the product first shipped last fall. Leviant reports that his firm alone has received more than 250 complaints from activation-befuddled users in the past few days as word of his suit spreads across the Internet.

Now, perennial Intuit competitor H&R Block is taking up the drumbeat. Although it was itself planning to use product activation next year, Block is now making anti-product activation the centerpiece of its marketing campaign for the remainder of the tax season. Block has launched anti-activation banner ads on the Web and promotions in retail stores that read: "Switch Today. TaxCut imports from TurboTax. No product activation required."

After an initial period in which Intuit service personnel required customers with product activation problems to ante up for another full-priced copy, Intuit is now bending over backward to resolve problems.

"Early on we fumbled the ball in customer support," says Scott Gulbransen, an Intuit spokesperson. "We've changed that, and will be more accommodating in the future."

Too Little, Too Late?

Not good enough, says Leviant: "We feel that the mere fact that Intuit failed to disclose that, in the event of a hardware change, customers will have to call and reactivate should have been prominently displayed on packaging. Customers should have understood that before they bought the product."

Stanbury & Fishelman isn't challenging Intuit's right to use product activation, only the way it was implemented, and the firm is asking that a way be found to remove or disable the activation code in this year's TurboTax versions. But its primary demand is that clear notice about product-activation consequences be included in signage and on packaging in future versions.

Beyond that, the firm seeks considerable compensatory damages for consumers harmed this year under several different statutes. Depending on which applies, customers could get a refund for all or part of TurboTax's purchase price and punitive damages beyond that.

Intuit's Gulbransen declines comment on the lawsuit, saying the company has not yet received a copy. Meanwhile, Intuit is working with Macrovision (creator of the activation technology) to create a less irksome product-activation methodology for next tax season, he says.

Won't Drop Activation

"We aren't getting rid of product activation, but we will [change] it in a way that improves the customer experience and puts the concerns people have had to rest," Gulbransen says.

But the need for product activation--tied to the volume of piracy--remains open to question. Neither Intuit nor its largest competitors can document the degree of systematic illegal copying of tax software for fun or profit.

Intuit knows it sold 5.5 million copies of TurboTax software last year, and that those copies were used to prepare 12.5 million tax returns. However, like most vendors of tax programs, Intuit has always encouraged TurboTax buyers to prepare multiple returns for family members, Gulbransen acknowledges.

But unlike other piracy-fighting companies and the Business Software Alliance trade group (of which it is a member), Intuit says it has neither empirical research nor widespread anecdotal evidence that allows it to estimate how many people are either selling or giving away their copies. Intuit is concerned about the spread of peer-to-peer networking and disc copying that could lead to piracy, Gulbransen says.

Since the class-action lawsuit is in such an early stage, TurboTax customers cannot yet apply for membership in the class, says Leviant. However, he encourages consumers to share their product-activation experiences with him by e-mail.

For his part, Leviant hasn't yet filed his 2002 return or even decided on which tax-preparation product or service he might use. But it's no surprise that it won't be TurboTax.

• See more like this:
• TurboTax,
• Intuit,
• piracy,
• product activation,
• software,
• tax,
• Business Software Alliance,
• lawsuit,
• class-action,
• H&R Block,
• Scott Leviant