United States Court of Appeals,
Seventh Circuit.
ProCD, INCORPORATED, Plaintiff-Appellant,
v.
Matthew ZEIDENBERG and Silken Mountain Web Services, Inc., Defendants-
Appellees.
No. 96-1139.
Argued May 23, 1996.
Decided June 20, 1996.
Producer of computer software brought action
against users, alleging claims under Copyright Act, Wisconsin Computer Crimes
Act, and Wisconsin contract and tort law after users downloaded telephone
listings stored on software and made listings available on Internet. The United States District Court for the
Western District of Wisconsin, Barbara B. Crabb, Chief Judge, entered judgment in favor of users, 908 F.Supp. 640, and producer appealed. The Court of Appeals, Easterbrook, Circuit Judge, held that: (1) shrinkwrap license included with
software was binding on buyer under Uniform Commercial Code, and (2)
enforcement of shrinkwrap license under state law
did not create rights equivalent to exclusive rights within general scope of
copyright, and was not preempted by Copyright Act.
Reversed and remanded.
West Headnotes
[1] Copyrights and Intellectual Property 
107
Computer
software shrinkwrap licenses are enforceable unless their terms are
objectionable
on grounds applicable to contracts in general.
[2] Contracts 15
In
Wisconsin, contract includes only terms on which parties have agreed.
[3] Statutes 230
To propose
change in law's text is not necessarily to propose change in law's effect; new words may be designed to fortify
current rule with more precise text that curtails uncertainty.
[4] Sales 22(.5)
[4] Sales 22(3)
Vendor, as
master of the offer, may invite acceptance by conduct, and may propose
limitations on kind of conduct that constitutes acceptance; buyer may accept by
performing acts vendor proposes to treat as acceptance. U.C.C.
§ 2-204(1).
[5] Sales 69
Shrinkwrap
license included with computer software was binding on buyer under Uniform
Commercial Code; seller proposed contract that buyer could accept by using
software after having opportunity to read license at his leisure, and buyer
could have prevented formation of contract by returning software. U.C.C.
§ 2-204(1).
[6] Copyrights and Intellectual Property 107
[6] States 18.87
Enforcement
of shrinkwrap license included with computer software under state law did not
create rights equivalent to exclusive rights within general scope of copyright,
and was thus not preempted by Copyright Act.
17
U.S.C.A. § 301(a).
[7] Copyrights and Intellectual Property 107
[7] States 18.87
Provision of
Copyright Act preempting any rights under state law that are equivalent to any
of exclusive rights within general scope of copyright does not interfere with private transactions in
intellectual property, and does not prevent states from respecting those
transactions. 17
U.S.C.A. § 301(a).
*1448
Michael J. Lawton, Kenneth
B. Axe, Lathrop & Clark, Madison, WI, Thomas
N. O'Connor (argued), John
T. Gutkoski, Lauren
C. Panora, Hale & Dorr, Boston, MA, for
ProCD, Inc.
Keith
Napolitano, Madison, WI, David
A. Austin (argued), Madison, WI, for Matthew
Zeidenberg and Silken Mountain Web Services, Inc.
June M. Besek, Morton
D. Goldberg, Jesse
M. Feder, Schwab, Goldberg, Price & Dannay,
New York City, for Information Industry Ass'n, amicus curiae, American Medical
Ass'n, amicus curiae and Association of American Publishers, amicus curiae.
Christopher
A. Meyer, Michael
R. Klipper, Meyer & Klipper, Washington, DC,
for Business Software Alliance, amicus curiae.
Barry
D. Weiss, Stuart
Smith, Ronald
Julian Palenski, Gordon & Glickson, Chicago,
IL, Kenneth A. Wasch, Mark Nebergall, Software Publishers Ass'n, Inc.,
Washington, DC, for Software Publishers Ass'n, amicus curiae.
Mark
Alan Lemley, University of Texas School of Law,
Austin, TX, Peter M.C. Choy, American
Committee for Interoperable Systems, Mountain View, CA, for American Committee
for Interoperable Systems, amicus curiae.
Before COFFEY, FLAUM, and EASTERBROOK, Circuit Judges.
EASTERBROOK, Circuit Judge.
[1] Must buyers of computer software obey the terms of
shrinkwrap licenses? The *1449
district court held not, for two reasons:
first, they are not contracts because the licenses are inside the box
rather than printed on the outside; second,
federal law forbids enforcement even if the licenses are contracts. 908
F.Supp. 640 (W.D.Wis.1996). The parties and numerous amici curiae have
briefed many other issues, but these are the only two that matter--and we
disagree with the district judge's conclusion on each. Shrinkwrap licenses are
enforceable unless their terms are objectionable on grounds applicable to
contracts in general (for example, if they violate a rule of positive law, or
if they are unconscionable). Because no
one argues that the terms of the license at issue here are troublesome, we
remand with instructions to enter judgment for the plaintiff.
I
ProCD, the plaintiff, has compiled information
from more than 3,000 telephone directories into a computer database. We may assume that this database cannot be
copyrighted, although it is more complex, contains more information (nine-digit
zip codes and census industrial codes), is organized differently, and therefore is more original than the single
alphabetical directory at issue in Feist
Publications, Inc. v. Rural Telephone Service Co.,
499 U.S. 340, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991). See Paul J. Heald, The Vices
of Originality, 1991 Sup.Ct. Rev. 143, 160-68.
ProCD sells a version of the database, called SelectPhone (trademark),
on CD-ROM discs. (CD-ROM means
"compact disc--read only memory."
The "shrinkwrap license" gets its name from the fact that retail
software packages are covered in plastic or cellophane "shrinkwrap,"
and some vendors, though not ProCD, have written licenses that become effective
as soon as the customer tears the wrapping from the package. Vendors prefer
"end user license," but we use the more common term.) A proprietary method of compressing the data
serves as effective encryption too. Customers decrypt and use the data with the
aid of an application program that ProCD has written. This program, which is copyrighted, searches
the database in response to users' criteria (such as "find all people
named Tatum in Tennessee, plus all firms with 'Door Systems' in the corporate
name"). The resulting lists (or,
as ProCD prefers, "listings") can be read and manipulated by other
software, such as word processing programs.
The database in SelectPhone (trademark) cost
more than $10 million to compile and is expensive to keep current. It is much more valuable to some users than
to others. The combination of names,
addresses, and SIC codes enables manufacturers to compile lists of potential
customers. Manufacturers and retailers pay high prices to specialized
information intermediaries for such mailing lists; ProCD offers a potentially cheaper
alternative. People with nothing to
sell could use the database as a substitute for calling long distance
information, or as a way to look up old friends who have moved to unknown
towns, or just as an electronic substitute for the local phone book. ProCD
decided to engage in price discrimination, selling its database to the general
public for personal use at a low price (approximately $150 for the set of five
discs) while selling information to the trade for a higher price. It has adopted some intermediate strategies
too: access to the SelectPhone (trademark)
database is available via the America Online service for the price America
Online charges to its clients (approximately $3 per hour), but this service has
been tailored to be useful only to the general public.
If ProCD had to recover all of its costs and
make a profit by charging a single price--that is, if it could not charge more
to commercial users than to the general public--it would have to raise the
price substantially over $150. The ensuing reduction in sales would harm
consumers who value the information at, say, $200. They get consumer surplus of $50 under the current
arrangement but would cease to buy if the price rose substantially. If because of high elasticity of demand in
the consumer segment of the market the only way to make a profit turned out to
be a price attractive to commercial users alone, then all consumers would lose
out--and so would the commercial clients, who would have to pay more for the listings because ProCD
could not obtain any contribution toward costs from the consumer market.
*1450 To make price discrimination
work, however, the seller must be able to control arbitrage. An air carrier sells tickets for less to
vacationers than to business travelers, using advance purchase and
Saturday-night-stay requirements to distinguish the categories. A producer of movies segments the market by
time, releasing first to theaters, then to pay-per-view services, next to the
videotape and laserdisc market, and finally to cable and commercial tv. Vendors of computer software have a harder
task. Anyone can walk into a retail
store and buy a box. Customers do not
wear tags saying "commercial user" or "consumer user." Anyway, even a commercial-user-detector at
the door would not work, because a consumer could buy the software and resell
to a commercial user. That arbitrage
would break down the price discrimination and drive up the minimum price at
which ProCD would sell to anyone.
Instead of tinkering with the product and
letting users sort themselves--for example, furnishing current data at a high
price that would be attractive only to commercial customers, and two-year-old
data at a low price--ProCD turned to the institution of contract. Every box containing its consumer product
declares that the software comes with restrictions stated in an enclosed
license. This license, which is encoded
on the CD-ROM disks as well as printed in the manual, and which appears on a
user's screen every time the software runs,
limits use of the application program and listings to non-commercial purposes.
Matthew Zeidenberg bought a consumer package
of SelectPhone (trademark) in 1994 from a retail outlet in Madison, Wisconsin,
but decided to ignore the license. He
formed Silken Mountain Web Services, Inc., to resell the information in the
SelectPhone (trademark) database. The
corporation makes the database available on the Internet to anyone willing to
pay its price-- which, needless to say, is less than ProCD charges its
commercial customers. Zeidenberg has purchased two additional SelectPhone
(trademark) packages, each with an updated version of the database, and made
the latest information available over the World Wide Web, for a price, through
his corporation. ProCD filed this suit
seeking an injunction against further dissemination that exceeds the rights
specified in the licenses (identical in each of the three packages Zeidenberg
purchased). The district court held the
licenses ineffectual because their terms do not appear on the outside of the
packages. The court added that the second and third licenses stand no different
from the first, even though they are identical, because they might have
been different, and a purchaser does not agree to--and cannot be bound
by--terms that were secret at the time of purchase. 908
F.Supp. at 654.
II
[2] Following the district court, we treat the licenses as
ordinary contracts accompanying the sale of
products, and therefore as governed by the common law of contracts and the
Uniform Commercial Code. Whether there are legal differences between
"contracts" and "licenses" (which may matter under the
copyright doctrine of first sale) is a subject for another day. See Microsoft
Corp. v. Harmony Computers & Electronics, Inc.,
846 F.Supp. 208 (E.D.N.Y.1994). Zeidenberg does not argue that Silken Mountain
Web Services is free of any restrictions that apply to Zeidenberg himself,
because any effort to treat the two parties as distinct would put Silken
Mountain behind the eight ball on ProCD's argument that copying the application
program onto its hard disk violates the copyright laws. Zeidenberg does argue, and the district
court held, that placing the package of software on the shelf is an
"offer," which the customer "accepts" by paying the asking
price and leaving the store with the goods.
Peeters
v. State,
154 Wis. 111, 142 N.W. 181 (1913). In Wisconsin, as elsewhere, a contract
includes only the terms on which the parties have agreed. One cannot agree to hidden terms, the judge
concluded. So far, so good--but one of
the terms to which Zeidenberg agreed by purchasing the software is that the
transaction was subject to a license. Zeidenberg's position therefore must be
that the printed terms on the outside of a box are the parties'
contract--except for printed terms that refer to or incorporate other terms. But why would Wisconsin fetter the parties'
choice in this *1451 way?
Vendors can put the entire terms of a contract on the outside of a box only by using microscopic
type, removing other information that buyers might find more useful (such as
what the software does, and on which computers it works), or both. The "Read Me" file included with
most software, describing system requirements and potential incompatibilities,
may be equivalent to ten pages of type;
warranties and license restrictions take still more space. Notice on the outside, terms on the inside,
and a right to return the software for a refund if the terms are unacceptable
(a right that the license expressly extends), may be a means of doing business
valuable to buyers and sellers alike.
See E. Allan Farnsworth, 1 Farnsworth on Contracts § 4.26 (1990);
Restatement
(2d) of Contracts
§ 211
comment a (1981) ( "Standardization of agreements serves many of the same
functions as standardization of goods and services; both are essential to a system of mass
production and distribution. Scarce and
costly time and skill can be devoted to a class of transactions rather than the
details of individual transactions.").
Doubtless a state could forbid the use of standard contracts in the
software business, but we do not think that Wisconsin has done so.
Transactions in which the exchange of money
precedes the communication of detailed terms are common. Consider the purchase of insurance. The buyer goes to an agent, who explains the
essentials (amount of coverage, number of years) and remits the premium to the
home office, which sends back a policy. On the district judge's understanding,
the terms of the policy are irrelevant because
the insured paid before receiving them.
Yet the device of payment, often with a "binder" (so that the
insurance takes effect immediately even though the home office reserves the
right to withdraw coverage later), in advance of the policy, serves buyers'
interests by accelerating effectiveness and reducing transactions costs. Or consider the purchase of an airline
ticket. The traveler calls the carrier
or an agent, is quoted a price, reserves a seat, pays, and gets a ticket, in
that order. The ticket contains
elaborate terms, which the traveler can reject by canceling the reservation. To
use the ticket is to accept the terms, even terms that in retrospect are
disadvantageous. See Carnival
Cruise Lines, Inc. v. Shute,
499 U.S. 585, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991); see also Vimar
Seguros y Reaseguros, S.A. v. M/V Sky Reefer,
515 U.S. 528, 115 S.Ct. 2322, 132 L.Ed.2d 462 (1995) (bills of lading). Just so with
a ticket to a concert. The back of the
ticket states that the patron promises not to record the concert; to attend is to agree. A theater that detects a violation will
confiscate the tape and escort the violator to the exit. One could arrange things so that
every concertgoer signs this promise before forking over the money, but that
cumbersome way of doing things not only would lengthen queues and raise prices
but also would scotch the sale of tickets by phone or electronic data service.
Consumer goods work the same way. Someone who wants to buy a radio set visits
a store, pays, and walks out with a box.
Inside the box is a leaflet containing
some terms, the most important of which usually is the warranty, read for the
first time in the comfort of home. By
Zeidenberg's lights, the warranty in the box is irrelevant; every consumer gets the standard warranty
implied by the UCC in the event the contract is silent; yet so far as we are aware no state
disregards warranties furnished with consumer products. Drugs come with a list of ingredients on the
outside and an elaborate package insert on the inside. The package insert describes drug
interactions, contraindications, and other vital information--but, if
Zeidenberg is right, the purchaser need not read the package insert, because it
is not part of the contract.
Next consider the software industry
itself. Only a minority of sales take
place over the counter, where there are boxes to peruse. A customer may place an order by phone in
response to a line item in a catalog or a review in a magazine. Much software is ordered over the Internet
by purchasers who have never seen a box.
Increasingly software arrives by wire.
There is no box; there is only a stream of electrons, a collection of
information that includes data, an application program, instructions, many
limitations ("MegaPixel 3.14159 cannot be used with BytePusher
2.718"), and the terms of *1452 sale. The user purchases a serial number, which
activates the software's features. On
Zeidenberg's arguments, these unboxed sales are unfettered by terms--so the
seller has made a broad warranty and must pay consequential
damages for any shortfalls in performance, two "promises" that if
taken seriously would drive prices through the ceiling or return transactions
to the horse-and-buggy age.
[3] According to the district court, the UCC does not
countenance the sequence of money now, terms later. (Wisconsin's version of the UCC does not
differ from the Official Version in any material respect, so we use the regular
numbering system. Wis.
Stat. § 402.201 corresponds to UCC
§ 2-201,
and other citations are easy to derive.)
One of the court's reasons--that by proposing as part of the draft
Article 2B a new UCC § 2-2203 that would
explicitly validate standard-form user licenses, the American Law Institute and
the National Conference of Commissioners on Uniform Laws have conceded the
invalidity of shrinkwrap licenses under current law, see 908
F.Supp. at 655- 56--depends on a faulty
inference. To propose a change in a
law's text is not necessarily to propose a change in the law's effect. New words may be designed to fortify the
current rule with a more precise text that curtails uncertainty. To judge by the flux of law review articles
discussing shrinkwrap licenses, uncertainty is much in need of
reduction--although businesses seem to feel less uncertainty than do scholars,
for only three cases (other than ours) touch on the subject, and none directly
addresses it. See Step-Saver
Data Systems, Inc. v. Wyse Technology,
939 F.2d 91 (3d Cir.1991); Vault Corp. v. Quaid Software Ltd.,
847 F.2d 255, 268-70 (5th Cir.1988); Arizona
Retail Systems, Inc. v. Software Link, Inc.,
831 F.Supp. 759 (D.Ariz.1993). As their titles suggest, these are not
consumer transactions. Step-Saver is a
battle-of-the-forms case, in which the parties exchange incompatible forms and
a court must decide which prevails. See Northrop Corp. v. Litronic Industries,
29 F.3d 1173 (7th Cir.1994) (Illinois law); Douglas G. Baird & Robert Weisberg, Rules,
Standards, and the Battle of the Forms: A Reassessment of § 2-207, 68
Va. L.Rev. 1217, 1227-31 (1982). Our case has only one form; UCC
§ 2-207 is
irrelevant. Vault holds that
Louisiana's special shrinkwrap-license statute is preempted by federal law, a
question to which we return. And Arizona
Retail Systems did not reach the question, because the court found
that the buyer knew the terms of the license before purchasing the software.
[4][5] What then does the current version of the UCC have to
say? We think that the place to start
is § 2-204(1): "A contract for sale of goods may be
made in any manner sufficient to show agreement, including conduct by both
parties which recognizes the existence of such a contract." A vendor, as master of the offer, may invite
acceptance by conduct, and may propose limitations on the kind of conduct that
constitutes acceptance. A buyer may
accept by performing the acts the vendor proposes to treat as acceptance. And that is what happened. ProCD proposed a contract that a buyer would
accept by using the software after having an opportunity to read the license at leisure. This Zeidenberg did. He had no choice, because the software
splashed the license on the screen and would not let him proceed without
indicating acceptance. So although the
district judge was right to say that a contract can be, and often is, formed
simply by paying the price and walking out of the store, the UCC permits
contracts to be formed in other ways.
ProCD proposed such a different way, and without protest Zeidenberg
agreed. Ours is not a case in which a
consumer opens a package to find an insert saying "you owe us an extra
$10,000" and the seller files suit to collect. Any buyer finding such a demand can prevent
formation of the contract by returning the package, as can any consumer who
concludes that the terms of the license make the software worth less than the
purchase price. Nothing in the UCC requires a seller to maximize the buyer's
net gains.
Section 2-606, which defines "acceptance
of goods", reinforces this understanding.
A buyer accepts goods under §
2-606(1)(b) when, after an opportunity to inspect, he fails to make an
effective rejection under § 2-
602(1). ProCD extended an opportunity
to reject if a buyer should find the license terms *1453
unsatisfactory; Zeidenberg inspected the
package, tried out the software, learned of the license, and did not reject the
goods. We refer to § 2-606 only to show that the opportunity to
return goods can be important;
acceptance of an offer differs from acceptance of goods after delivery,
see Gillen
v. Atalanta Systems, Inc.,
997 F.2d 280, 284 n. 1 (7th Cir.1993); but the UCC
consistently permits the parties to structure their relations so that the buyer
has a chance to make a final decision after a detailed review.
Some portions of the UCC impose additional
requirements on the way parties agree on terms. A disclaimer of the implied warranty of
merchantability must be "conspicuous." UCC
§ 2-316(2),
incorporating UCC
§ 1-201(10).
Promises to make firm offers, or to negate oral modifications, must be
"separately signed." UCC
§ § 2-205,
2-209(2). These special
provisos reinforce the impression that, so far as the UCC is concerned, other
terms may be as inconspicuous as the forum-selection clause on the back of the
cruise ship ticket in Carnival Lines.
Zeidenberg has not located any Wisconsin case--for that matter, any case
in any state--holding that under the UCC the ordinary terms found in shrinkwrap
licenses require any special prominence, or otherwise are to be undercut rather
than enforced. In the end, the terms of
the license are conceptually identical to the contents of the package. Just as no court would dream of saying that
SelectPhone (trademark) must contain 3,100 phone books rather than 3,000, or
must have data no more than 30 days old, or must sell for $100 rather than
$150--although any of these changes would be welcomed by the customer, if all
other things were held constant--so, we believe, Wisconsin would not let the
buyer pick and choose among terms. Terms of use are no less a part of "the
product" than are the size of the database
and the speed with which the software compiles listings. Competition among vendors, not judicial
revision of a package's contents, is how consumers are protected in a market
economy. Digital
Equipment Corp. v. Uniq Digital Technologies, Inc.,
73 F.3d 756 (7th Cir.1996). ProCD has rivals, which may elect to compete
by offering superior software, monthly updates, improved terms of use, lower
price, or a better compromise among these elements. As we stressed above, adjusting terms in buyers'
favor might help Matthew Zeidenberg today (he already has the software) but
would lead to a response, such as a higher price, that might make consumers as
a whole worse off.
III
[6] The district court held that, even if Wisconsin treats
shrinkwrap licenses as contracts, § 301(a) of the
Copyright Act, 17
U.S.C. § 301(a), prevents their enforcement. 908
F.Supp. at 656-59. The relevant part of § 301(a) preempts
any "legal or equitable rights [under state law] that are equivalent to
any of the exclusive rights within the general scope of copyright as specified
by section 106 in works of authorship that are fixed in a tangible medium of
expression and come within the subject matter of copyright as specified by
sections 102 and 103". ProCD's
software and data are "fixed in a tangible medium of expression", and
the district judge held that they are "within the subject matter of
copyright". The latter conclusion
is plainly right for the copyrighted application program, and the judge thought
that the data likewise are "within the
subject matter of copyright" even if, after Feist, they are not
sufficiently original to be copyrighted.
908
F.Supp. at 656-57. Baltimore
Orioles, Inc. v. Major League Baseball Players Ass'n,
805 F.2d 663, 676 (7th Cir.1986), supports that
conclusion, with which commentators agree.
E.g., Paul Goldstein, III Copyright § 15.2.3 (2d ed.1996); Melville B. Nimmer & David Nimmer, Nimmer
on Copyright § 101[B] (1995); William F. Patry, II Copyright Law and
Practice 1108-09 (1994). One
function of § 301(a) is to
prevent states from giving special protection to works of authorship that
Congress has decided should be in the public domain, which it can accomplish
only if "subject matter of copyright" includes all works of a type
covered by sections 102 and 103, even if federal law does not afford protection
to them. Cf. Bonito
Boats, Inc. v. Thunder Craft Boats, Inc.,
489 U.S. 141, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989)
(same principle under patent laws).
*1454 But are rights created by
contract "equivalent to any of the exclusive rights within the general
scope of copyright"? Three courts
of appeals have answered "no."
National
Car Rental System, Inc. v. Computer Associates International, Inc.,
991 F.2d 426, 433 (8th Cir.1993); Taquino
v. Teledyne Monarch Rubber,
893 F.2d 1488, 1501 (5th Cir.1990); Acorn
Structures, Inc. v. Swantz,
846 F.2d 923, 926 (4th Cir.1988). The district court disagreed with these
decisions, 908
F.Supp. at 658, but we think them sound.
Rights "equivalent to any of the exclusive rights within the
general scope of copyright" are rights established by law--rights
that restrict the options of persons who are strangers to the author. Copyright law forbids duplication, public
performance, and so on, unless the person wishing to copy or perform the work
gets permission; silence means a ban on
copying. A copyright is a right against
the world. Contracts, by contrast,
generally affect only their parties;
strangers may do as they please, so contracts do not create
"exclusive rights." Someone
who found a copy of SelectPhone (trademark) on the street would not be affected
by the shrinkwrap license-- though the federal copyright laws of their own
force would limit the finder's ability to copy or transmit the application
program.
Think for a moment about trade secrets. One common trade secret is a customer
list. After Feist, a simple
alphabetical list of a firm's customers, with address and telephone numbers,
could not be protected by copyright.
Yet Kewanee
Oil Co. v. Bicron Corp.,
416 U.S. 470, 94 S.Ct. 1879, 40 L.Ed.2d 315 (1974),
holds that contracts about trade secrets may be enforced--precisely because
they do not affect strangers' ability to discover and use the information
independently. If the amendment of § 301(a) in 1976
overruled Kewanee and abolished consensual protection of those trade
secrets that cannot be copyrighted, no one has noticed--though abolition is a
logical consequence of the district court's approach. Think, too, about everyday transactions in intellectual
property. A customer visits a video
store and rents a copy of Night of the Lepus. The customer's contract with the store
limits use of the tape to home viewing and requires its return in two
days. May the customer keep the tape, on
the ground that § 301(a) makes
the promise unenforceable?
A law student uses the LEXIS database,
containing public-domain documents, under a contract limiting the results to
educational endeavors; may the student
resell his access to this database to a law firm from which LEXIS seeks to
collect a much higher hourly rate?
Suppose ProCD hires a firm to scour the nation for telephone
directories, promising to pay $100 for each that ProCD does not already
have. The firm locates 100 new
directories, which it sends to ProCD with an invoice for $10,000. ProCD incorporates the directories into its
database; does it have to pay the
bill? Surely yes; Aronson
v. Quick Point Pencil Co.,
440 U.S. 257, 99 S.Ct. 1096, 59 L.Ed.2d 296 (1979),
holds that promises to pay for intellectual property may be enforced even
though federal law (in Aronson, the patent law) offers no protection
against third-party uses of that property.
See also Kennedy
v. Wright,
851 F.2d 963 (7th Cir.1988). But these illustrations are what our case is
about. ProCD offers software and data
for two prices: one for personal use, a
higher price for commercial use.
Zeidenberg wants to use the data without paying the seller's price; if the law student and Quick Point Pencil Co.
could not do that, neither can Zeidenberg.
[7] Although Congress possesses power to preempt even the
enforcement of contracts about intellectual property--or railroads, on which
see Norfolk
& Western Ry. v. Train Dispatchers,
499 U.S. 117, 111 S.Ct. 1156, 113 L.Ed.2d 95 (1991)--courts
usually read preemption clauses to leave private contracts unaffected. American
Airlines, Inc. v. Wolens,
513 U.S. 219, 115 S.Ct. 817, 130 L.Ed.2d 715 (1995),
provides a nice illustration. A federal
statute preempts any state "law, rule, regulation, standard, or other provision
... relating to rates, routes, or services of any air carrier." 49
U.S.C.App. § 1305(a)(1). Does such a law
preempt the law of contracts--so that, for example, an air carrier need not
honor a quoted price (or a contract to reduce the price by the value of
frequent flyer miles)? The Court
allowed that it is possible to read the statute that *1455 broadly but
thought such an interpretation would make little sense. Terms and conditions offered by contract
reflect private ordering, essential to the efficient functioning of
markets. 513
U.S. at ---- - ----, 115 S.Ct. at 824-25. Although some principles that carry the name
of contract law are designed to defeat rather than implement consensual
transactions, id.
at ---- n. 8, 115 S.Ct. at 826 n. 8, the rules
that respect private choice are not preempted by a clause such as § 1305(a)(1). Section
301(a) plays a role similar to § 1301(a)(1): it prevents states from
substituting their own regulatory systems for those of the national government. Just as § 301(a) does not
itself interfere with private transactions in intellectual property, so it does
not prevent states from respecting those transactions. Like the Supreme Court in Wolens, we
think it prudent to refrain from adopting a rule that anything with the label
"contract" is necessarily outside the preemption clause: the variations and possibilities are too
numerous to foresee. National Car
Rental likewise recognizes the possibility that some applications of the
law of contract could interfere with the attainment of national objectives and
therefore come within the domain of § 301(a). But general enforcement of shrinkwrap
licenses of the kind before us does not create such interference.
Aronson emphasized that enforcement of
the contract between Aronson and Quick Point Pencil Company would not withdraw
any information from the public domain.
That is equally true of the contract between ProCD and Zeidenberg. Everyone remains free to copy and
disseminate all 3,000 telephone books that have been incorporated into ProCD's
database. Anyone can add SIC codes and
zip codes. ProCD's rivals have done
so. Enforcement of the shrinkwrap
license may even make information more readily available, by reducing the price
ProCD charges to consumer buyers. To
the extent licenses facilitate distribution of object code while concealing the
source code (the point of a clause forbidding disassembly), they serve the same
procompetitive functions as does the law of trade secrets. Rockwell
Graphic Systems, Inc. v.
DEV Industries, Inc.,
925 F.2d 174, 180 (7th Cir.1991). Licenses may have other benefits for
consumers: many licenses permit users to
make extra copies, to use the software on multiple computers, even to
incorporate the software into the user's products. But whether a particular license is generous
or restrictive, a simple two-party contract is not "equivalent to any of
the exclusive rights within the general scope of copyright" and therefore
may be enforced.
REVERSED AND REMANDED.
86 F.3d 1447, 65 USLW 2014, 1996 Copr.L.Dec. P
27,529, 39 U.S.P.Q.2d 1161, 29 UCC Rep.Serv.2d 1109
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