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Clicking 'Add to ArcGIS' on a layer package that is shared to a group that you belong to from the ArcGIS Online Sharing Application results in the following error message:
The error message can also be generated when clicking 'Add to ArcGIS' on a corrupt or invalid layer package from the ArcGIS Online Sharing Application.
This is a known issue for ArcGIS 9.3.1 products.
Download the patch in the Related Information section below to fix the issue.