Intuit Abandons Product Activation
Annoyed customer retains lawsuit over TurboTax function.
Peggy Watt, PCWorld.com
Intuit is dropping its controversial product activation policy, which drew criticism and suspicion from customers, who had to let the vendor note some basic information about their PC, tying it to their TurboTax package before they could use the software.
Intuit "did not get the response we had hoped" from its single tax season of product activation, said Steve Bennett, president and chief executive officer, speaking in a conference call reporting the company's quarterly earnings.
A disgruntled customer who had filed suit against the company for the way it implemented the new requirement described his reaction to Intuit's decision as "cautiously optimistic." Nevertheless, he is proceeding with the lawsuit, which also seeks compensation for users of TurboTax 2002.
Unsuccessful Effort
Intuit said it had hoped to quash piracy by forcing users to activate their copies of the tax-return TurboTax program. At one point, the company claimed that millions of people used illicit copies of TurboTax.
Under product activation, customers could still file multiple tax returns from a single PC. But they could not install the same software on more than one PC without Intuit's permission.
Intuit had hoped that the restriction would prompt additional TurboTax purchases by people who previously had borrowed a friend's copy. Though sales revenues for TurboTax were up 24 percent this tax season, the increase apparently wasn't enough. Any growth in sales because of product activation was "incremental," Bennett said, adding that Intuit "didn't get the business results we expected."
Product activation "didn't attract as many [new] customers as we had hoped," Bennett said. He also acknowledged that the customer backlash in response to the activation policy may have stalled the hoped-for growth. Bennett said that Intuit can't produce exactly how many additional copies it sold because of the antipiracy technology, but it did gather some unspecified data about how many people filed multiple returns from the same package.
Intuit will retain a form of activation technology in promotional and trial versions of TurboTax products. Users will have to contact the company to pay for and then unlock the full functions of discs distributed in marketing promotions, Bennett said. But copies of TurboTax sold in retail outlets or purchased directly from Intuit will not include product activation.
Customer Suit Continues
When the new product activation policy surfaced, Intuit fielded criticism from some TurboTax customers who felt they were being treated as suspected pirates. Others disliked the inconvenience of not being able to move the application easily to a new PC. And at least a few experienced mechanical problems when trying to activate their legal copy of the product.
Scott Leviant, an attorney with Stanbury Fishelman in Los Angeles, didn't just get annoyed--he filed suit. The longtime TurboTax user said he was challenging not Intuit's decision to implement product activation, but its method of implementing it. Primarily, Intuit should have clearly labeled its software packaging with information about the new requirement, Leviant said.
"We believe that the correctness of our position has been further vindicated by this development," Leviant said of Intuit's decision.
He said he would "wait and see what Intuit actually does." But Leviant also suggested that the lawsuit might be behind Intuit's change of heart.
"We are gratified that our efforts thus far have resulted in a substantial positive benefit for consumers of TurboTax worldwide," he said in a statement on behalf of the four plaintiffs. "However, undisclosed computer modifications, undisclosed use restrictions, and undisclosed Internet communications of personal data remain significant threats to consumer rights and privacy."
Decision: Strictly Fiscal?
Leviant recently amended his complaint, adding allegations that Intuit implemented the product activation technology for reasons other than security. He said he believes that the company intends to force customers to a direct-sales model.
Intuit has about a month to respond to the amended complaint. It has routinely declined to comment on pending legislation. However, an Intuit spokesperson says retail sales are a large part of its business and will "never go away."
Bennett acknowledged the customer complaints, although not the suit.
"For most customers it was a relatively painless experience; but for too many, it wasn't, and that's why we made the decision to discontinue it for next year," Bennett said. He also noted that Intuit had to ramp up technical support to handle product activation questions.
But not everyone was sufficiently annoyed to drop the product. In fact, Intuit did not experience a higher rate of product return than usual, according to a spokesperson.
"We got a lot of feedback from customers who got mad and switched to another product and then found that the competing product wasn't as good and came back," Bennett said.
Customer complaints weren't the deciding factor, he said: "The real reason here is we didn't get the new customers and the revenue we expected."
Other software developers have experimented with product activation for some products. Microsoft backed down from a limited activation process in Windows XP. But Intuit was the first to implement a strict scheme in a leading application.
