January, 1999
87 Calif. L. Rev. 17
LENGTH: 36003 words
SYMPOSIUM: The Metamorphosis of Contract into Expand
David Nimmer, Elliot Brown, Gary
N. Frischling*
Copyright © 1999 David Nimmer, Elliot Brown, and Gary N. Frischling.
* The authors practice copyright law at Irell & Manella LLP in Los Angeles.
SUMMARY:
... Article 2B of the Uniform Commercial
Code (U.C.C.) provides model rules to govern transactions in the digital
domain, such as the licensing of
software and electronic contracting. ... When a copyright owner distributes
its software, it is free to grant
a license extending only to specified uses, while excluding others. ...
At least
for the modes of software distribution
used today, copyright law provides all the teeth a publisher needs to
control use and dissemination of
her work. ... Since the distribution right is an exclusive right in copyright
law,
distributions outside the license
infringe the copyright. ... If, however, the copyright owner elected a
licensing
framework, given the structure of
the transactions, the end user's right to "use" (e.g., copy) the software
depends on the end user license.
... The contract at issue in ProCD, Inc. v. Zeidenberg differs from the
foregoing examples in the one respect
relevant to nonstatutory preemption: it contravenes one of the core
policies of the Copyright Act by
extending quasi-copyright protection to works that do not qualify as "original."
... Although the Act limits the
copyright owner's rights to "public" distribution, publishers who follow
the logic
of ProCD, Inc. v. Zeidenberg may
amplify their statutory rights simply by wrapping books in cellophane,
subject
to the limitation that the buyer
is barred from passing the purchased copy on to a friend. ...
TEXT:
Article 2B of the Uniform Commercial
Code (U.C.C.) provides model rules to govern transactions in the digital
domain, such as the licensing of
software and electronic contracting. By addressing fundamental contract
issues in the burgeoning world of
digital commerce, it provides a salutary update to extant provisions of
the
U.C.C. dealing with traditional
goods sold in traditional modes of commerce. However, to the extent that
Article 2B aspires to protect copyright
owners from improper uses of copyrighted works, it solves a
non-problem. Copyright owners already
enjoy robust and adequate protections under the Copyright Act. Far
more troubling than solving this
non-problem, however, is the possibility that Article 2B will be used to
upset
copyright law's "delicate balance"
between the rights of copyright owners and copyright users. This balance
is
disrupted when state law is permitted
to enlarge the rights that copyright owners enjoy.
Attempts to alter the "delicate balance"
through contract should fail under the doctrine of preemption. Article
2B assumes a pose of neutrality
on the extent to which copyright law preempts contractual encroachment,
yet it facilitates emerging practices
designed to alter the balance and place the burden of defending the
proper bounds of copyright on copyright
users. In this Article, the authors argue that if Article 2B is to be
enacted, it must proscribe contracting
practices that seek to extend copyright protection beyond its current
scope.
The Death of Copyright: n1 A Short, Cautionary Tale
The year is 2010. With the closure
of the last B&N-Walden-Borders-Broadway superstore in Upton, California,
no more off-line retail content
stores remain in the United States (apart from the Scholar's Palazzo in
Disneyland). Theaters, music venues,
and movie houses have all but disappeared in the wake of in-home - not
to mention implantable - content
delivery. Funding for public libraries and the arts has been diverted into
providing each person in America
with access to the all-purpose device for accessing anything - Microsquish
Audiovisual Utilization System (MAUS).
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n1. With apologies to Professor Grant
Gilmore, author of The Death of Contract (1974). Rumors of contract's
death proved, of course, to be greatly
exaggerated, as will be evident from the analysis herein. Moreover, the
true specter confronted today is
not so much the death of copyright per se, but rather copyright as we know
it - a law striking a balance between
the rights of copyright owners and the rights of the public. Cf. David
Nimmer, The End of Copyright, 48
Vand. L. Rev. 1385 (1995) (arguing that new trade discipline has
eviscerated traditional notions
of autonomy in the copyright arena).
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Now, anyone who wishes to read poetry,
browse great works of art, enjoy a novel, watch an epic feature film
(or humble television show), or
experience any other work of authorship can, as a practical matter, do
so only
through the instrumentality of the
MAUS. To access any work through the MAUS, the user must first click "OK"
(or, in the case of implantable
access, blink a cortical acknowledgment) on the ubiquitous authorization
screen. That screen lets the user
acknowledge that she agrees to be obligated to abide by all terms and
provisions of <http://www.contracts.com
/ usurious perpetual adhesive overreaching / 2001$ $ $ £
<yen>.html>. This file (colloquially
known as the "Gates from Hell Agreement") contains a hundred pages of
boilerplate initially setting forth
the text of Title17, United States Code, in haec verba, but thereafter
subject
to innumerable accretions, modifications,
and revisions designed to magnify the rights of proprietors.
Some companies had initially expressed
reluctance at committing their works to protection under the foregoing
regime; they were concerned that
end users would find a way to circumvent the click-wrap contemplated
above. However, with a nod to Ovid,
the MYRRHA Encryption/Subversion Systems furnished the answer.
Thanks to MYRRHA, it has been conclusively
proven that no one anywhere can ever obtain access to any
protected works in any form whatsoever
without personally clicking on the omnipresent authorization screen.
In addition, proprietors take heart
from the fact that to buy any current equipment capable of accessing
content, users must sit down for
a half-hour tutorial at the appliance store and personally and meticulously
agree to the Gates from Hell Agreement.
The user's assent is, in each instance, routinely recorded on DCDVDB
crystal, capturing for posterity
not only the user's facial expression and utterances, but also her brain
state manifesting willing and voluntary
assent.
Overview
In a commercial world burgeoning
with transactions involving software and other electronically-delivered
copyrighted works, an oft-expressed
concern arises that traditional rules of commercial contract law - which
evolved to address trade in goods
- will prove ill-suited to address the peculiar needs of trade in digital
products. The Uniform Commercial
Code, after all, arose to address the paradigm of a sale of goods, a context
that typically involves, at least
in part, a negotiated contract between buyer and seller and where the value
lies in the physical object exchanged.
The typical software transaction, by contrast, does not involve a direct
sale between the software proprietor
and the end user; rather, it involves a non-negotiated license (otherwise
known as a "shrinkwrap" contract)
governing uses of the intangible asset (for example, software) embodied
in
a tangible thing that is sold (for
example, the diskette or CD-ROM) - or even absent the nominal sale of a
tangible thing (for example, delivery
directly over the Internet). It is natural to suspect that the law for
widgets may be inadequate for digits.
n2
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n2. "A body of law tailored to transactions
whose purpose is to pass title to tangible property can not be
simply applied to transactions whose
purpose was to convey rights in intangible property and information."
U.C.C. art. 2B, Preface at 4 (Draft,
Mar. 1998). [All versions of Article 2B are available on the Internet.
See
National Conference of Commissioners
on Uniform State Laws, Drafts of Uniform and Model Acts Official Site
(last modified Sept. 2, 1998) <http://www.law.upenn.edu/library/ulc/ulc.htm>.
The Official Site offers the
Article 2B drafts in several file
formats, among which the pagination is inconsistent. In this Article and
throughout this issue of the California
Law Review, page references are to the pages as they are numbered in
the Acrobat PDF file format. Only
the prefaces to the drafts are cited by page number; all other material
is
cited by section number. The draft
of August 1, 1998, has no page numbers in its on-line versions, and
therefore the preface of that draft
is cited without page references. Ed.]
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It is here that Article 2B of the
Uniform Commercial Code comes to the rescue. The proposed model law
addresses many of the questions
on which traditional commercial contract law is silent, for instance, whether
a digital signature constitutes
adequate consent to a contract, n3 what warranties attach to digital products,
n4 what choice-of-law rules apply
in transactions over the Internet, n5 what rules govern the transferability
of a license, and how notions of
mitigation, consequential damages, releases, inspection, etc., operate
in the
context of digital products. n6
In sum, it provides some measure of certainty to electronic contracting.
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n3. See U.C.C. 2B-113 (Draft, Mar. 1998).
n4. See id. 2B-401-409.
n5. See id. 2B-107.
n6. See id. 2B-502, 608, 701-716.
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Because Article 2B accommodates contracts
over copyrightable subject matter, it is relevant to both the
federal and state law planes of
legal discourse. As discussed below, the symbiosis between federal
copyright protection and state contract
law is ancient, inevitable, and fully consonant with the purposes of
copyright. In developing the law
of contracts for the "digital era," Article 2B therefore represents a salutary
update to the U.C.C. that can benefit
both buyers and sellers of digital goods by providing clear rights and
guidance in matters beyond the experience
and imagination of the drafters of the current U.C.C. n7 Article 2B
thus carries on the role that state
contract law has traditionally occupied in shaping commerce in copyrighted
works.
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n7. Although fashioned for the needs
of digital commerce, Article 2B theoretically allows proprietors of
traditional copyrighted works (such
as books) to "opt-in" to its framework as an alternative to the classic
structure of Article 2. See U.C.C.
2B-103(c) (Draft, Mar. 1998). As will be discussed below, applying Article
2B
to old-fashioned copyrighted works
creates a potential for mischief.
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But harmony is not the end of the
symphony. n8 When examined in light of its potential impact on copyright
law's "delicate balance," n9 Article
2B presents the specter of becoming an unwelcome meddler. On the one
hand, Article 2B might erroneously
be imagined to solve a fundamental problem that does not need solving -
protecting the rights of copyright
proprietors insofar as third parties exploit the intangible expression
underlying their works. On the other
hand, Article 2B ignores and potentially weakens the rights of copyright
users. These two phenomena are interrelated.
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n8. Part of the dissonance stems
from Microsoft v. Harmony, 846 F. Supp. 208 (E.D.N.Y. 1994), discussed
infra in Section II.B.
n9. The metaphor of a delicate balance
or equilibrium is widespread. As one court has articulated it: "The
copyright law seeks to establish
a delicate equilibrium. On the one hand, it affords protection to authors
as an
incentive to create, and, on the
other, it must appropriately limit the extent of that protection so as
to avoid
the effects of monopolistic stagnation.
In applying the federal act to new types of cases, courts must always
keep this symmetry in mind." Computer
Assocs. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 696 (2d Cir. 1992). We
will refer to this "delicate balance"
often, tracing its genealogy through Supreme Court cases and to Chief
Judge Crabb's opinion in ProCD,
Inc. v. Zeidenberg, 908 F. Supp. 640 (W.D. Wis.), rev'd, 86 F.3d 1447 (7th
Cir.
1996), treated at length below.
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As discussed below, n10 Article 2B
solves a non-problem to the extent that it aspires to protect the exclusive
rights of authors granted under
the Copyright Act from improper uses of digital products by end users.
The
rights of copyright proprietors
are already fully protected by the Copyright Act without the need for bilateral
contracts, and thus a fortiori without
the need for any provisions under the U.C.C. validating mass market
contracts.
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n10. See infra Part II.
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Solving a non-problem for copyright
proprietors may do no harm, but Article 2B's framework threatens to
create new problems for copyright
users. As further discussed below, n11 the copyright laws are designed
to achieve a "delicate balance"
between the rights of copyright proprietors and copyright users. This
balance is disrupted when state
law is permitted to enlarge the rights of copyright proprietors at the
expense
of copyright users. Although attempts
at altering the delicate balance struck by copyright law should fail under
the doctrine of preemption, a recent
decision from the Seventh Circuit n12 illustrates that courts sometimes
fail to appreciate the preemptive
force of copyright, even when the subject contract is intended to defeat
users' rights validated by on-point
United States Supreme Court precedent.
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n11. See infra Part IV.
n12. ProCD, 86 F.3d 1447. See discussion infra Part III.
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Article 2B purports to remain "neutral"
on questions of federal preemption based on encroachments by contract
on copyright doctrine. However,
by making provisions of software licenses presumptively enforceable while
providing no limitations on overreaching
contract terms that proprietors may unilaterally decide to impose,
Article 2B facilitates known practices
designed to alter the "delicate balance" and places the costs of
defending the proper bounds of copyright
on copyright users. This result is neither desirable nor necessary.
Article 2B can help maintain rather
than undo the delicate balance that lies at the core of copyright by giving
some guidance as to which types
of constraints are at odds with copyright and therefore preempted. But
absent appropriate corrections to
its current instantiation, it is likely to result in the use of contracts
- backed
up by the force of the U.C.C. -
systematically to displace the rights of users. It is important to appreciate
that such resort to contract does
not represent the election of contract protection in lieu of copyright.
Instead, it represents the use of
contract to distort copyright, grotesquely at times. Proprietors who might
take advantage of Article 2B do
not opt out of copyright protection; they enjoy all of its benefits plus
all of
the benefits that can be accorded
by contracts diminishing the rights of users. We suggest, accordingly,
that
if Article 2B is to be enacted,
it first be amended to evince greater sensitivity towards proscribing certain
contracting practices that are inconsistent
with sound copyright policy.
This Article proceeds in four Parts.
Part I reviews the existing relationship between federal copyright law
and
state contract doctrine. Part II
argues that copyright law already provides adequate protection to copyright
owners who distribute software,
and that attempts by copyright owners to enlarge their rights by contract
conflicts with copyright law's concern
for the rights of users. Part III undertakes a critical discussion of the
Seventh Circuit's decision in ProCD,
which upheld a "shrinkwrap" license that extended contractual protection
against copying to subject matter
that the Supreme Court has already declared uncopyrightable. Finally, Part
IV critiques the failure of Article
2B, under a guise of "neutrality," to take into account the rights of
information users and the demands
of federal law.
I The Inevitable Coexistence of Copyright and Contract
A. Transfer
Copyright is, at heart, a creature
of the Constitution and the Copyright Act. But ownership and exploitation
of
copyright are structured at every
turn by contract. Unlike the monistic copyright system of German law, under
which authors may never separate
themselves from ownership of the indivisible whole, U.S. copyright law
follows a regime of infinite divisibility.
n13 The statute itself contemplates transfers in the nature of "an
assignment, mortgage...or any other
conveyance, alienation, or hypothecation of a copyright or of any of the
exclusive rights comprised in a
copyright...." n14
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n13. Compare Adolf Dietz, Germany
4[2][a], in International Copyright Law and Practice (Melville B. Nimmer
&
Paul Edward Geller eds., 1998) with
3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright 10.03 (1998)
[hereinafter Nimmer on Copyright].
See generally Thomas F. Cotter, Pragmatism, Economics and the Droit
Moral, 76 N.C. L. Rev. 1, 8-10 (1997)
(contrasting German monistic system with U.S. copyright). The Act also
explicitly contemplates that the
copyright owner may transfer the copyright bundle or any piece of it by
"any
means of conveyance." 17U.S.C. 201(d)(1)
(1994). An exception to the general rule of alienability is the very
limited rights of visual artists,
conferred by a 1990 amendment. See 17U.S.C. 106A(e)(1) (1994). To this
highly
circumscribed extent, U.S. law resembles
the French notion of inalienability in the moral rights sphere. See 3
Nimmer on Copyright, supra note
13, 8D.01[A], 8D.06[D]. Yet even here it departs from the French template
of imprescriptibility, by allowing
waivers of moral rights. See 17U.S.C. 106A(e) (1994).
n14. 17 U.S.C. 101 (1994).
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One salient feature of the terms
just quoted is the failure of the Copyright Act to define any of them.
Given
that the United States Code nowhere
contains an established common law as to what constitutes a
"mortgage," resort to state law
to determine the nature of that device, as well as like hypothecations
of
ownership, appears inevitable.
Imagine for a moment that Atalanta
transfers ownership of her copyright to Busiris, who gives it to Cadmus,
who in turn mortgages it to Dindyma
Bank, which then forecloses and sells out to Erigone. In a worst-case
scenario for Erigone, her ownership
of the copyright could be subject to challenge on the grounds that
Atalanta was a minor who may disaffirm
the contract because it was not confirmed by the state court of her
domicile; n15 that Busiris (who
had previously been declared insane and placed under the control of a
conservator appointed by the courts
of the state in which he lived) was not bound because his legal guardian
failed to sign the purported grant;
that Cadmus neglected to perfect the mortgage in the manner
required by his own state's law;
and that Dindyma Bank had previously dissolved, thereby rendering its
purported transfer nugatory. n16
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n15. See Cal. Fam. Code 6750-6751
(West 1994). See also Baez v. Fantasy Records, Inc., 144 U.S.P.Q. 537
(Cal. Super. Ct. 1964) (disaffirming
contract by minor reaching her majority).
n16. "What if there is no "proprietor'
at the time of renewal, because the corporation in which copyright vests
has become defunct? Under general
principles, it would seem necessary to trace disposition of assets under
state corporate law to locate the
proprietor in that instance." 3 Nimmer on Copyright, supra note 13, 9.03
n.6.1.
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In each of those particulars, the
battle is waged primarily under state law. n17 To take the case of an
individual committed to an insane
asylum, for example, it is difficult to find any governing federal law,
and thus
to resist wholesale descent into
the minutiae of the subject state's ordinance. In the balance of the other
instances, federal law likewise
does not directly speak to the question of who holds the capacity to enter
into
a contract. Erigone therefore faces
the prospect of lengthy explorations of state law in order to validate
her
federal copyright claims. The best
she can hope for is the application not of the particular law of the state
in
which Atalanta, Busiris, Cadmus,
and the rest chanced to live, but instead a general notion of common law
as
applied throughout the several states.
n18 But even that victory does not invoke the application of federal
norms; instead, it looks to an abstract
notion of state law. n19
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n17. Another oft-litigated issue
in the copyright sphere arises when a party to a copyright contract attempts
to rescind it, for non-performance
or otherwise. The determination of whether the combined circumstances
warrant rescission arises either
under the law of the state in which the contract was executed (or the parties
were located) or more broadly under
the general state common law of contracts. See 3 Nimmer on Copyright,
supra note 13, 10.15[A] (collecting
cases).
n18. See id. at 9.03 n.6.1 (citing
Fleming v. Charles L. Harney Constr. Co., 177 F.2d 65, 70 (D.C. Cir. 1949)
(construing Surplus Property Act
of 1944 such that corporate "dissolution cannot be distinguished from the
death of a natural person," and
following general common law rather than rule of state of incorporation)).
n19. Whether the subject law tracks
that of an individual state or a more generalized notion of state law is
of
no moment to the discussion that
follows. Nonetheless, it strikes us that copyright law tends to focus on
the
"brooding omnipresence" of common
law, rather than on the particulars enacted in any given jurisdiction.
See,
e.g., Community for Creative Non-Violence
v. Reid, 490 U.S. 730 (1989) (determining status of "employee"
under Copyright Act by reference
to the factors set forth in the Restatement (Second) Of Agency). Cf. Erie
R.R. Co. v. Tompkins, 304 U.S. 64
(1938) (rejecting federal "general law" as rule of decision in diversity
cases).
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B. Works for Hire
As the above hypotheticals demonstrate,
the symbiotic relationship between copyright and contract continues
throughout the life of a copyright.
Moreover, it can begin even before copyright birth, the moment an original
work of authorship is fixed for
the first time in a tangible medium of expression. n20 In this guise, it
arises as a
factor in defining who the "author"
is and thus in determining the identity of the initial "copyright
owner." n21 Ordinarily, the author
is the efficient cause of parturition, that is, the human being(s) who
gave
birth to the work. The Act departs
from the default rule, however, when a preexistent contract applies to
certain categories of specially
commissioned works "if the parties expressly agree in a written instrument
signed by them that the work shall
be considered a work made for hire." n22 Thus, both at gestation and
throughout its life, a copyright
is owned according to a complex scheme deriving in large part from state
law.
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n20. See 17 U.S.C. 102(a) (1994).
n21. "Initial Ownership - Copyright
in a work...vests initially in the author or authors of the work." 17U.S.C.
201(a) (1994).
n22. 17U.S.C. 101 (1994). In the
Seventh Circuit, the contract must indeed be prenatal. See Schiller&
Schmidt, Inc. v. Nordisco Corp.,
969 F.2d 410, 413 (7th Cir. 1992). In the Second Circuit, a more ameliorative
rule prevails. See Playboy Enters.,
Inc. v. Dumas, 53 F.3d 549, 559 (2d Cir. 1995) (citing with approval 1
Nimmer on Copyright, supra note
13, 5.03[B][2][b]).
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C. Sale, Rental, Lease
But it is not solely the question
of ownership over which state law governs. Copyright exploitation, too,
can
often turn on distinctions that
equally derive from state laws. In this respect, we depart from the intangible
essence of the copyrightable work
and move to the tangible good in which it may be embodied. n23 Consider
that copyright owners enjoy the
exclusive right "to distribute copies or phonorecords of the copyrighted
work
to the public by sale or other transfer
of ownership, or by rental, lease, or lending." n24 Moreover, one in
possession of a lawfully made copy
"is entitled, without the authority of the copyright owner, to sell or
otherwise dispose of the possession
of that copy...." n25 As was the case with respect to "mortgage" and the
rest, neither the Copyright Act
itself nor other applicable features of federal law define when a "sale"
or
"rental" or act of "lending" of
a physical item has taken place. For these questions as well, resort to
state law
appears inevitable. n26
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n23. See 17 U.S.C. 202 (1994).
n24. 17 U.S.C. 106(3) (1994).
n25. 17 U.S.C. 109(a) (1994). This
provision - imprecisely labeled the "first sale" doctrine - plays a large
role
below. See infra Section III.B.
n26. One case apparently holds that
perfume with a copyrighted label, although imported from abroad, was in
fact "sold" within the United States
under the pertinent provision of the Uniform Commercial Code. See
Cosmair, Inc. v. Dynamite Enters.,
Inc., 226 U.S.P.Q. 344, 347 (S.D. Fla. 1985). That case treats gray market
importation, a subject that the
Supreme Court addressed in Quality King Distributors, Inc. v. L'Anza Research
International, Inc., 118 S. Ct.
1125 (1998).
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In sum, federal copyright doctrine
leaves to state law the vast bulk of issues concerning contracts affecting
copyright. It follows that state
contract law (and cognate doctrines arising under state law) determine
to a
great extent the destiny of a copyrighted
work and the physical object in which it is embodied. Those state
rules play a critical role in maintaining
the "delicate equilibrium" between the rights of copyright holders
to reap the rewards of their intellectual
property and the rights of the public to unimpeded advancement of
knowledge and expression.
D. Contract Formation
Consonant with the traditional interplay
between state contract law and federal copyright law, the U.C.C. can
help define the mechanics of contract
law in the context of contemporary transactions. For example, Article
2B creates rules to govern electronic
contracting and provides that the fact that a contract is in electronic
form does not alter or reduce its
effect, validity, or enforceability. It gives binding weight to electronic
signatures, and it sets forth rules
for determining who shall be held responsible for electronic messages.
n27 All
of these factors may arise in the
context of an electronic license of copyrightable subject matter - an
electronic contract for distribution
rights in a book or motion picture, for example - which parties modify
by
e-mail and sign using digital signatures.
Because federal copyright law, standing alone, is silent as to whether
such a contract is enforceable,
the U.C.C. can usefully fill the doctrinal gap in this and like instances.
Article
2B therefore can provide important
support to the goal of maintaining copyright's "delicate equilibrium" in
the
digital age.
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n27. See U.C.C. 2B-113-116 (Draft, Mar. 1998).
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E. Limits of Contract Rights
Nonetheless, federal abdication in
favor of determinations of contract principles under state law has its
limits.
In certain particulars, the Copyright
Act itself sets forth some governing parameters applicable to contracts
and other matters typically reserved
to determination under state law. When those circumstances obtain,
federal law controls, notwithstanding
contrary state doctrines. n28
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n28. For a lengthy discussion of
copyright contracts in contrast to state law doctrines of community property,
see generally David Nimmer, Copyright
Ownership By the Marital Community: Evaluating Worth, 36 UCLA L. Rev.
383 (1988).
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One example is so pronounced as to
have virtually escaped notice. Undoubtedly the most well-known aspect
of Anglo-American contract law is
its requirement of a quid pro quo - the doctrine of consideration. n29
It is
doubtful that the law of any state
in the union dispenses with that general requirement. n30 Were it applicable
to the copyright sphere, that doctrine
would invalidate grants of copyright ownership unrequited by
the grantee. n31 Yet "notwithstanding
that feature of state law, no consideration is necessary under federal
law to effectuate a transfer of
copyright ownership that does not purport to require consideration." n32
(Nonetheless, one must acknowledge
that few, if any, cases have tested the boundary of consideration-less
copyright grants, presumably because
grantees of valuable copyrights invariably recite the delivery of "$ 10
and other good and valuable consideration"
in order to escape serving as a test case. n33)
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n29. Thus, A's promise to B to pay
$ 1000 if A cannot run a marathon in under 5 hours is a nullity. But B's
agreement to give A a peppercorn
if A timely completes the marathon probably resuscitates the contract.
See
Restatement (Second) of Contracts
17 (1979).
n30. Of course, exceptions exist
under state law. Thus, A's promise to pay $ 1000 to the United Way without
any return obligation is often enforceable
under an exception to the doctrine of consideration for promises to
make charitable contributions.
n31. Recall that Busiris gave the
copyright hypothesized above to Cadmus gratis. Were a requirement of
consideration applicable to copyrights,
an additional quiver would accrue to the bow of Erigone's enemies.
n32. 3 Nimmer on Copyright, supra note 13, 10.03[A][8].
n33. See, e.g., id. Form21-21.
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The most prominent example of federal
contract requirements trumping contrary state doctrine that has
received treatment in published
decisions is the Act's requirement that any transfer of copyright ownership
n34 "is not valid unless an instrument
of conveyance...is in writing and signed by the owner of the rights
conveyed...." n35 Even if state
law validates oral grants - attested by the grantor before the mythical
bench
of fifty bishops, for example -
that law must bow to the superior force of the federal enactment. n36
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n34. Note that such transfers definitionally
exclude nonexclusive licenses under copyright. See 17U.S.C. 101
(1994).
n35. 17U.S.C. 204(a) (1994).
n36. See, e.g., Valente-Kritzer Video
v. Pinckney, 881 F.2d 772, 775-76 (9th Cir. 1989) (holding preempted
claims for breach of oral contract
and tortious breach of contract); Marshall v. New Kids On The Block
Partnership, 780 F.Supp. 1005, 1009
(S.D.N.Y. 1991) (rejecting claim as one for breach of an oral contract
rather than for infringement of
the copyright orally transferred); Library Publications, Inc. v. Medical
Econs.
Co., 548 F.Supp. 1231, 1234 (E.D.
Pa. 1982) (finding unenforceable oral agreement for transfer of copyright
ownership), aff'd, 714 F.2d 123
(3d Cir. 1983).
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Another example of the same phenomenon
- though this one has gone unlitigated - arises under copyright's
termination-of-transfers doctrine,
which allows authors a "second bite of the apple" for works that they long
ago sold, gave away, or otherwise
alienated. n37 In particular, the Act itself provides with respect to
transfers of copyright ownership
that, following the lapse of a set period, n38 "termination of the grant
may be
effected notwithstanding any agreement
to the contrary, including an agreement to make a will or to make
any future grant." n39 Accordingly,
a contract not to exercise an author's termination rights may be
fully operational under state law,
yet the superior force of federal law nonetheless bars its enforcement,
effectively rendering it a nullity.
n40
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n37. See 17 U.S.C. 203, 304(c) (1994).
More technically, the Supreme Court has labeled the
reversion-of-renewals doctrine as
a "second chance" and, correlatively, the termination-of-transfers device
here under consideration a "third
opportunity" for authors to profit from works that they had long ago
alienated. Stewart v. Abend, 495
U.S. 207, 220, 225 (1990).
n38. In brief, grants effectuated
before 1978 are subject to termination following 56 years of the work's
copyright subsistence; grants effectuated
thereafter are subject to termination 35 years after the work's
publication. See generally 3 Nimmer
on Copyright, supra note 13, 11.05.
n39. 17 U.S.C. 203(a)(5), 304(c)(5) (1994).
n40. See generally 3 Nimmer on Copyright, supra note 13, 11.07.
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Much confusion arises in attempting
to reconcile these strands. n41 As an example, consider the ruling that
when Congress used the term "children"
in the context of termination of pre-1978 transfers n42 it intended to
adopt antecedent state family law
definitions as to who qualifies for that label, n43 whereas when Congress
used the same word in the same Act
to apply to termination of post-1978 transfers, it intended to adopt a
federal definition incorporated
into the Copyright Act itself. n44 The court reached that result by attempting
to follow Congress's will in enacting
a given provision of the Copyright Act. n45 As we shall see, that
desideratum furnishes the touchstone
for proper analysis in the journey that follows.
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n41. As the drafters of Article 2B
comment, "The relationship between federal law and state contract law is
complex." U.C.C. 2B-105 reporter's
note 1 (Draft, Mar. 1998). In our opinion, even the Courts of Appeals have
erred on both sides of the issue
under discussion, that is, state contract law control over disposition
of
copyrights. The Ninth Circuit misconstrued
Congress's will in holding doctrines of state contract law preempted
in Rano v. Sipa Press, Inc., 987
F.2d 580 (9th Cir. 1993), criticized in 3 Nimmer on Copyright, supra note
13,
11.01[B]. The Second Circuit, by
contrast, inappropriately failed to advert to Congress' will to allow even
oral
grants of nonexclusive licenses,
see infra note 47, by disallowing them under state law in Grappo v. Alitalia
Linee Aeree Italiane, S.p.A., 56
F.3d 427, 431-32 (2d Cir. 1995), criticized in 3 Nimmer on Copyright, supra
note 13, 10.03[A][8].
n42. On the termination-of-transfer doctrine, see the preceding paragraph and its footnotes.
n43. The rationale here stems from
DeSylva v. Ballentine, 351 U.S. 570 (1956), which looked to state family
law in the reversion of renewal
context. Yet even this Supreme Court ruling is not unlimited, as the Court
indicated that applicable state
law would not be followed to the extent that it defined children "in a
way
entirely strange to those familiar
with its ordinary usage." Id. at581.
n44. See Stone v. Williams, 970 F.2d
1043, 1064-65 (2d Cir. 1992), cert. denied, 508 U.S. 906 (1993),
discussed in 3 Nimmer on Copyright,
supra note 13, 11.03[A][2][a].
n45. The court followed the logic
that the provision applicable to pre-1978 grants was intended to continue
prior law on the subject, which
had been subject to the Supreme Court's gloss in DeSylva. By contrast,
the
provision applicable to grants entered
on January1, 1978, and thereafter was created out of whole cloth; in
this instance, Congress presumably
wished to apply the definition of "children" that it incorporated into
the
same new enactment. See Stone, 970
F.2d at 1064-65.
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II Contract Need Play No Role in Protecting Copyright Rights
Though Article 2B, as noted above,
can usefully serve a complementary role to copyright, there is one
significant function for which Article
2B is not needed: to protect the copyright interests of copyright
proprietors, especially in the context
of mass market distribution of software, one of the paradigmatic
transactions under Article 2B. Contrary
to the claim that Article 2B is needed to protect copyright interests in
that context, existing copyright
law adequately protects those owners when they distribute
copyrighted mass market software,
even in a world in which shrinkwrap agreements are not deemed
enforceable contracts. n46 That
conclusion follows because the exclusive rights granted under the copyright
laws effectively preclude use of
computer software - to the extent the Constitution and Congress accord
a
monopolytherein - without the express
or implied permission of the copyright owner.
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n46. Other interests of the copyright
owner, such as the right to a royalty stream, limitations of liability,
and
limitations of warranties, may,
by contrast, require enforceable contracts for protection. It is precisely
these
other interests that Article 2B
properly serves.
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A. Enforceability of Unilateral License Terms
When a copyright owner distributes
its software, it is free to grant a license extending only to specified
uses,
while excluding others. Moreover,
any such license does not require a bilateral contract. A simple, unilateral
statement by the copyright owner
of the scope of its license suffices. n47 In most cases, use beyond the
scope of that license constitutes
actionable copyright infringement under existing copyright law. n48 To
the
extent that any such use beyond
the scope of the unilateral license is not copyright infringement - for
instance, because it constitutes
fair use under section 107 - state contract law cannot produce a different
result.
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n47. See 3 Nimmer on Copyright, supra
note 13, 10.03[A] (citing cases). Indeed, even an oral statement may
be sufficient to grant a nonexclusive
license. See id.
n48. See, e.g., S.O.S., Inc. v. Payday,
Inc., 886 F.2d 1081, 1088 (9thCir. 1989) ("Copyright licenses are
assumed to prohibit any use not
authorized.").
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Several hypotheticals illustrate
the ability of publishers to protect their intellectual property rights
when
engaging in mass distribution of
software. First, Procne picks up the latest copy of SuperSmart321, a nifty
spreadsheet program, at CompUSA.
She purchases the program without opening the box and takes it home.
Unlike most software products, SuperSmart321
contains no license terms of any kind.
In this hypothetical, existing copyright
law permits Procne to do exactly what a typical publisher and typical
buyer would contemplate: use the
software on a single computer and make a backup copy. Because Procne
purchased a copy of the software,
she clearly falls within the ambit of the statutory section securing rights
to
those owners. n49 She thus is entitled
to copy the software onto her computer's hard drive in order to run it,
n50 as well as to make a tangible
backup copy. n51 Any further copying of the software - and thus,
effectively, use on any other computer
system - constitutes copyright infringement unless excused,
for instance as a fair use. n52
Thus, copyright law alone affords the publisher of SuperSmart321 ample
power
to prevent Procne from making or
distributing improper copies of the software, or even duplicating the
software on multiple machines in
her home or office. No bilateral contract is necessary to protect the software
publisher's rights.
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n49. See 17 U.S.C. 117 (1994) ("It
is not an infringement for the owner of a copy of a computer program to
make...another copy or adaptation
of that computer program...as an essential step in the utilization of the
computer program in conjunction
with a machine....").
n50. See 17 U.S.C. 117(1) (1994).
n51. See 17 U.S.C. 117(2) (1994).
n52. See 17 U.S.C. 107 (1994).
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Second, Pandion picks up the latest
copy of SuperSmart321 by purchasing it via the Internet. He pays for it
with a credit card and downloads
it to the hard drive of his computer. Once again, the results will be
effectively the same as above, even
without a written license agreement. Pandion still owns the copy of the
computer program on his hard drive
and is authorized to use it (but not reproduce it except for backup
purposes) pursuant to the statutory
sections invoked above. n53
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n53. See 17 U.S.C. 117 (1994). One
could argue in this context that Pandion is not the "owner of a copy of
a
computer program" under section
117 because a "copy" under the Copyright Act is a material object in which
a
work is fixed and Pandion did not
purchase a material object (the hard disk), but only the data comprising
the
computer program. In light of the
fact that Pandion was authorized to download the data to his hard drive
(or
to another conventional storage
medium such as a diskette), it is more reasonable to conclude that Pandion
has purchased a copy of the program,
that is, a tangible medium in which the work is embodied. See, e.g.,
MAI Sys. Corp. v. Peak Computer,
Inc., 991 F.2d 511, 518-519 (9th Cir. 1993). See infra Section II.B. But
even accepting the proposition that
what is purchased must meet all the requisites of a "copy" before
downloading begins, Pandion would
seem to have a powerful argument that, by virtue of purchasing the
software on-line, he received an
implied license to use what he paid for. See, e.g., Effects Assocs., Inc.
v.
Cohen, 908 F.2d 555, 558-59 (9th
Cir. 1990) (implying license from delivery, without restriction, of special
effects footage for use in film).
In the absence of any terms to the contrary communicated at the time of
the
license, Pandion should have the
right to use the software for its ordinary and intended purpose, that is,
on a
single computer. For an extended
treatment, see David Nimmer, Brains and Other Paraphernalia of the Digital
Age, 10 Harv. J.L. & Tech. 1
(1996) [hereinafter Nimmer, Brains].
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Third, Itys purchases a "10 User
Pack" of Virulator, a software package that locates all computer viruses
on a
user's hard drive, removes them
and e-mails them to Iraq. He installs the software on the network server
in his
office. The envelope containing
the CD-ROM, as well as the install screen, inform Itys that: "This software
product is licensed for installation
on a network server, to be accessed by no more than 10users
simultaneously. All other rights
are reserved."
Under existing copyright law, the
manufacturer's 10-user limitation is enforceable regardless of whether
state
law treats the above notice as part
of a binding bilateral contract. n54 A copyright owner may grant a
non-exclusive license by any words
or conduct tending to show such a license. n55 Thus, by virtue of the
above language, the publisher of
Virulator has expanded Itys's right to use his copy on a single machine
n56 to include making one copy on a server and up to nine other copies
in the random access memory (RAM) of client computers. If Itys were to
allow 20 users to access the software, the copies existing in the
RAM of machines 11-20 would be unlicensed and hence infringing. n57 The
publisher thus has the lever it needs to preclude unlicensed use, without
obtaining Itys's enforceable promise via the U.C.C. not to use the software
on more machines than authorized.
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n54. The U.C.C. drafters lean in
the same direction. See U.C.C. 2B-111 reporter's notes (Draft, Mar. 1998)
(restricting usage for consumers
only enforceable under copyright law without any requirement for assent).
n55. See 3 Nimmer on Copyright, supra note 13, 10.03[A].
n56. That is, the default right that
Itys would have in the absence of the subject language under 17 U.S.C.
117.
n57. See MAI, 991 F.2d 511 (stating
that loading a copy of software into computer's RAM constitutes creation
of a "copy" under the Copyright
Act).
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Fourth, after her company's IPO,
Philomela decides that she has grown bored with life in the Silicon Valley,
exercises her stock options and
moves for a year to Tahiti (after thrashing Thrace). Before she moves,
she
posts an ad on the Internet offering
to rent her copy of MegaCAD 3D, an elaborate $ 10,000 software
package. Tereus has an eight-month
project for which he desperately needs MegaCAD. He spots Philomela's
ad and jumps at her offer. Tereus
pays $ 1,000 for a year's use of the disks. Can the publisher of MegaCAD
prevent this transaction?
Under existing copyright law, Philomela
may not rent or lease her copy of the software. n58 Similarly, Tereus is
not entitled to use the software,
as to do so would involve copying the software into the computer's RAM,
which constitutes infringement in
the absence of a license. n59 Thus, the publisher has a viable copyright
infringement claim against Philomela
and Tereus. An enforceable promise by Philomela not to rent her software
is unnecessary here, too.
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n58. See 17 U.S.C. 109(b)(1)(A) (1994).
n59. See, e.g., MAI, 991 F.2d 511.
Tereus cannot avail himself of the benefits of section 117 because he is
not the "owner" of the copy he wishes
to use, having simply rented it. See 17U.S.C. 202 (1994).
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Fifth, Bacchus needs software to
help him manage a fleet of trucks for his party-hearty business. Like all
good
small businessmen, Bacchus is cost-conscious.
He finds a shareware package on the Internet, OINOS, which
looks like it will do the trick.
Bacchus downloads the OINOS software, reads the license, which provides
that
he may use the software for his
own business purposes, but cannot modify or redistribute it. He pays the
$
19.95 registration fee and uses
the software. Two years later, Bacchus realizes he needs an integrated
system to link his truck management
software with the rest of his business. He hires an independent software
consultant to build such a system.
Because he loves OINOS so much, Bacchus specifically asks the consultant
to make his new system work just
the same way. The consultant, who is convinced he is underpaid, takes a
shortcut and includes a modified
version of some of the OINOS code in the system he has been
fermenting. Ultimately, the new
system is so successful that Bacchus markets it to other trucking businesses.
Can the author of OINOS complain?
Of course. It does not matter whether the license agreement that
accompanied the OINOS software is
deemed an enforceable contract. Under existing copyright law, Bacchus
had no right to have the OINOS software
modified or incorporated into another system, thereby creating
unauthorized derivative works. n60
Nor did he have the right to reproduce it for distribution to others, whether
as part of a new system or separately.
Article 2B adds nothing of substance to the rights of OINOS's owner.
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n60. See 17 U.S.C. 106(2) (1994).
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One could spin out numerous other
hypotheticals involving typical modes of software distribution and reach
the same result. At least for the
modes of software distribution used today, copyright law provides all the
teeth a publisher needs to control
use and dissemination of her work. No ersatz shark via contractual promise
is necessary to enforce these rights.
The conclusion that contract is not
needed to protect copyright interests further pertains when we consider
other forms of distribution in the
digital realm. Consider, for example, the Divx (Digital Video Express)
technology for distribution of movies,
which may be upon us in the very near future. Divx operates like a DVD
disk containing a movie, except
that the encryption software included on the Divx disk limits the user
to
playing the movie for a set number
of days following the first time she plays the disk. n61 Once the initial
viewing period expires, the owner
of a Divx disk can obtain additional play time, or in some cases convert
the
disk to unlimited play, for a fee.
n62 What if a studio selling movies on Divx disks feels it needs an enforceable
promise by the buyer not to attempt
to circumvent the lockout technology built into the software?
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n61. See Digital Video Express, LP,
About Divx Technology (visited Sept. 13, 1998)
<http://www.divx.com/about divx
divxtechnology.htm>.
n62. See id.
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Although one can appreciate the desire
of the studio to seek any and all legal protections it can, the copyright
laws of today (and certainly those
of tomorrow) should prove more than adequate to protect the studio's
interest, even absent the proposed
contract. n63 Modifying the Divx software to defeat the lockout
(assuming, for the sake of argument,
it were technically possible) likely would involve either unauthorized
reproduction of at least a portion
of the copyrighted work, or the creation of an unauthorized derivative
work.
Either way, copyright infringement
liability would result. Moreover, any doubt about the impropriety of
defeating anti-copying technology
will likely be laid to rest by pending federal legislation. n64 Thus, even
on
the so-called bleeding edge of technology,
we find it difficult to see a need for state law protection of
copyright rights in connection with
the mass-market distribution of copyrighted works.
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n63. To a certain extent, the best
protection for the studio will come from the quality of its technology.
Regardless of whether copyright
law or contract law forms the basis of a claim, suing individual buyers
of
movies for making illicit copies
on behalf of relatives or friends is unlikely to be economically worthwhile,
even if
one somehow concluded that it were
sound business practice. Pursuing large-scale pirates (including those
who sell devices or software to
defeat copy protection) can be done as effectively, if not more, under
the
copyright laws as under contract.
See Cable/Home Communication Corp. v. Network Prods., Inc., 902 F.2d 829
(11th Cir. 1990).
n64. See WIPO Copyright Treaties
Implementation Act, H.R. 2281, 105th Cong. (1997). See generally David
Nimmer, Aus der Neuen Welt, 63 Nw.
U. L. Rev. (forthcoming 1998).
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B. The Conflation of Licensing with Distribution
The considerations set forth above
assimilate software contracts to traditional means of copyright
exploitation. The Article 2B posits
"two distinct frameworks" in this regard. n65 It is worth reviewing the
drafters' view of the matter at
some length:
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n65. U.C.C. art.2B Preface at7 (Draft, Mar. 1998).
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The first [framework] involves use
of a master copy and is common in the movie industry and in software
contracts. Under this framework,
a "distributor" receives access to a single master copy of the information
work and a license to make and distribute
additional copies or to make and publicly perform a copy. For
example, Correl Software may license
a distributor to allow its software to be loaded into the distributor's
computers or video games. The contract
will contain a number of terms. Correl may limit the distributor to no
more than 1,000 to be distributed
only in the computers and only if subject to an end user license. Since
both
the making copies of and the distribution
of copies are within the scope of the owner's copyright, acts that go
outside the contractual limitations
are infringements as well as contractual breaches.
An alternative methodology uses actual
copies of the software. Here, for example, Quicken may license a
distributor to distribute its accounting
software in packages provided to the distributor by Quicken. A license
is
used in the software industry here,
although some other industries may sell copies to the distributor for resale.
In the license, the distributor
may be allowed to distribute copies to retailers, provided that certain
conditions
are met, such as terms of payment,
retention of the original packaging, and making the eventual end user
distribution occur subject to an
end user license. Since the distribution right is an exclusive right in
copyright
law, distributions outside the license
infringe the copyright.
In both sequences, the information
product eventually reaches an end user. If it does so in an ordinary
chain of distribution complying
with the distribution licenses, the end user is in rightful possession
of a copy. If
the distribution involved sales
of copies, nothing more is required. The end user is the owner of the copy.
Copyright law spells out limited
rights that flow to the owner of the copy (e.g., to distribute it, make
a
back-up if it is software, make
some changes essential to use if [sic] its software). There is no direct
contractual relationship between
the copyright owner and the "end user."
If, however, the copyright owner
elected a licensing framework, given the structure of the transactions,
the
end user's right to "use" (e.g.,
copy) the software depends on the end user license. Typically, this is
characterized as a license from
the producer to the end user. It creates a direct contractual relationship
that
would not otherwise exist and which,
in light of concepts of privity, might not be implied as between these
parties. The contract, then, at
this point, jumps past the chain of distribution and creates a direct link
to the
producer by the end user. It is
also, in this sequence, the only contract that enables the end user to
make
copies of the software in its own
machine. n66
Given that, as the hypotheticals
set forth in the previous subsection of this Article reveal, n67 copyright
law
itself regulates the activities
of remote purchasers of software, why does Article 2B attempt to create
"a
direct link to the producer by the
end user"? n68 The answer stems from the language italicized above.
Through these various references,
the draft posits a framework that falls short of a sale, constituting merely
a
license.
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n66. Id. (emphases added, except for sixth emphasis ("these parties")).
n67. See supra Section II.A.
n68. Elsewhere, the draft goes even
further: "The form establishes for the first time a relationship between
the copyright owner and the end
user that may be central to the end user's right to use the information."
U.C.C. 2B-508 reporter's note 5
(Draft, Mar. 1998).
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
The first two paragraphs quoted above
contrast "access to a single master copy" with the "alternative
methodology [that] uses actual copies
of the software." It is indeed possible to imagine access without making
actual copies. For instance, instead
of purchasing diskettes containing Microsoft Word 97 and loading it onto
your hard drive, you could pay a
monthly fee to log onto the Microsoft web site and create and edit
documents there. At the end of each
session, you would download your text and save it, but you would never
obtain any copy of the computer
program itself. That scenario indeed involves access without the alternative
of obtaining actual copies. By contrast,
if you do download Word 97 onto your hard drive, then you have
already moved to the realm in which
copyright law's first-sale doctrine applies. n69 This realm is
entered, moreover, regardless of
whether the label "license" applies to Microsoft's granting of rights in
the
copyright to the program.
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n69. See 17 U.S.C. 109 (1994).
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For these purposes, it is vital to
differentiate between tangible and intangible property. n70 When a software
publisher distributes its product,
it certainly does not part with copyright ownership. n71 Instead, the only
matter under examination is whether
it has parted with ownership of the physical media incorporating that
software. Article 2B evidently takes
the view that a status short of sale exists - which it calls "licensing"
-
whereby end users nonetheless acquire
full dominion over the tangible property that comes into their
safekeeping.
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n70. See 17 U.S.C. 202 (1994).
n71. Only to the extent that the
publisher assigns the copyright or exclusively licenses it (or engages
in other
hypothecations, such as mortgages)
does a transfer take place. In a typical mass market situation, no such
transfer of copyright interests
has occurred.
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One line of cases cited by the drafters
of Article 2B apparently vindicates the existence of this type of
"licensing" framework. It is exemplified
by Microsoft Corp. v. Harmony Computers & Electronics, Inc., n72 which
arose over the distribution of Microsoft's
MS-DOS and Windows software. The facts in the case are unclear. It
may be that some of the software
at issue in the case was pirated. To that extent, the subject diskettes
were clearly unauthorized, outside
the safe harbor of the first-sale doctrine, n73 and thus rightfully subject
to
seizure and suppression. n74 On
the other hand, the opinion can also be read to arise from a factual posture
in
which Microsoft produced copies
of Windows software, which it then distributed to Original Equipment
Manufacturers (OEMs). The OEMs then
disposed of the copies in their possession, as they were entitled to do
under the first-sale doctrine. To
the extent that the case implicated the first scenario, it is uninteresting
-
counterfeit products are clearly
not entitled to further distribution. But the second scenario is evidently
the
basis for the Article 2B drafters'
citation to the case. n75 It is accordingly necessary to evaluate it from
that
standpoint.
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n72. 846 F.Supp. 208 (E.D.N.Y. 1994), cited in U.C.C. 2B-508 reporter's note 5 (Draft, Mar. 1998).
n73. See 17 U.S.C. 109 (1994) (limiting protection to copies "lawfully made under this title").
n74. See Harmony, 846 F. Supp. at212.
An additional problem for the defense in that case was an inability to
trace its precise distributions
back to initial productions by Microsoft. See id. Given that the request
was for a
preliminary injunction, it is not
surprising that the factual record before the court at that time was sparse.
n75. See U.C.C. 2B-508 reporter's note 2 (Draft, Mar. 1998).
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Microsoft v. Harmony rejected the
defendants' first-sale defense on the basis that "Microsoft only licenses
and
does not sell its Products." n76
What does that holding mean? To appreciate its import, the buzzwords
"licenses" and "Products" must be
unscrambled.
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n76. 846 F.Supp. at213.
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License of tangible medium. If the
underlying facts were that Microsoft leased diskettes or CD-ROMs to
end users and sent its agent to
collect those physical media at a time specified in the lease, then no
sale of
those physical products occurred.
Under those assumed facts, Microsoft had not parted with possession of
a
physical copy. On that basis, no
sale occurred and copyright's first-sale doctrine does not come into play.
n77
That is one possible sense in which
Microsoft may have "licensed" its "Product."
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n77. See 17 U.S.C. 109 (1994). Note
that the statute itself does not actually require a "sale" for the section's
protections to be triggered; instead
it applies to all "owners" of lawfully made copies.
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License of copyrighted work embodied
in tangible medium. By contrast, if the underlying facts were that
Microsoft issued only a license
to its MS-DOS and Windows products, but did so through the sale or other
permanent disposition of tangible
items embodying those products, then the first-sale implications are wholly
different. Imagine, for example,
that Microsoft gave OEMs diskettes with the intent that they would be
distributed to end users who could
discard the diskettes in the trash or erase and reuse them n78 - so long
as
the users did not reproduce the
subject software. n79 Under this latter scenario, a sale of the physical
medium has occurred, and its purchaser
is clothed under the Copyright Act with the rights belonging to rightful
owners of physical property, subject
to all of the obligations under the Act that are reserved to Microsoft
of
exercising copyright dominion. This
is the second sense in which Microsoft may be said to "license" its
"Product."
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n78. See Nimmer, Brains, supra note 53, at 22.
n79. An exception to the copyright
owner's exclusive reproduction right of course is coterminous with the
rights secured to users to actually
exploit the computer program, guaranteed to them under 17U.S.C. 117.
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These two paradigms are illustrated
by the evolution of motion-picture exploitation. Film owners have the
option not to sell their works,
but only to "license" them. For decades, the motion-picture studios followed
exactly that course, jealously guarding
ownership of the celluloid prints and only renting them to theaters for
exhibition, retrieving the physical
stock at the end of the theatrical run. n80 That course of action matches
the first set of facts hypothesized
above. Alternatively, motion-picture studios also have the option of
distributing tangible copies of
their films - as they have done since the advent of the videotape era.
n81 That
conduct from the 1980s to the present
matches the second scenario.
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n80. In the later era of television
syndication, film proprietors adopted the practice of "bicycling" film
prints
from one television station to another,
again to preserve strict control over the physical stock. See National
Broad. Co. v. Sonneborn, 870 F.2d
40, 51 (2d Cir. 1989).
n81. See 2 Nimmer On Copyright, supra note 13, 8B.01[B].
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Software publishers likewise enjoy
the same rights. They can engage solely in rental or lease of physical
media, mandating return of the subject
tangible items at the end of the term. Or they can incorporate
their software onto physical items
that they then release from their control, setting them into the stream
of
commerce. In the latter instance,
the end user, while admittedly a licensee of the copyright, is not a licensee
of the diskette or CD-ROM in her
possession. Instead, she is the owner of those physical media containing
licensed works. As such, she is
clothed with full rights under the first-sale doctrine. No innovation in
software
distribution so far has forced reevaluation
of the traditional paradigm.
Which circumstance actually obtained
in Microsoft v. Harmony, the exemplar of the "licensing" paradigm?
Sadly, the opinion fails to clarify
the matter, and that inability to distinguish between differing paradigms
is
only too typical. n82 Nonetheless,
lack of clarity does not create a new "licensing" paradigm. Instead, if
there
were a bona fide lease of the physical
goods, then one legal regime pertained; if Microsoft actually sold or
otherwise permanently disposed of
those physical goods, retaining full copyright ownership in itself, then
another legal regime governed. Current
copyright law does not recognize any regime of "licensing" n83 that
stands intermediate between those
two possibilities. n84
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n82. Other examples are Microsoft
Corp. v. Gray Computer, 910 F.Supp. 1077, 1084 (D.Md. 1995) and Triad
Systems. Corp. v. Southeastern Express
Co., 64 F.3d 1330, 1333 (9th Cir. 1995). See generally 2 Nimmer on
Copyright, supra note 13, 8.12[B][1].
See also Nimmer, Brains, supra note 53, at 21-25 (discussing MAI v.
Peak, 991 F.2d 511).
n83. In Quality King Distributors,
Inc. v. L'Anza Research International, Inc., 118 S.Ct. 1125 (1998), the
Supreme Court distinguishes between
the ""owner' of a lawfully made copy" and "any nonowner such as a
bailee, a licensee, a consignee,
or one whose possession of the copy was unlawful." 118 S.Ct. at 1131.
Standing by itself, that dictum
cannot illuminate who, in the Court's mind, deserves the status of "licensee,"
although its juxtaposition with
"a bailee [and] a consignee" hints that the Court views "a licensee" in
this
context as one who has not obtained
ownership of the physical product, corresponding to the category
posited above of "license of tangible
medium." We thus must revert to the potential constructions of that term
set forth in the text.
n84. It is instructive to undertake
some archaeological excavation into the myth that a separate "licensing"
paradigm exists. One student commentator
maintains that "if the software is only licensed, then the software
developer may prevent the user from
transferring ownership in a copy to a third party." Ira V. Heffen, Note,
Copyleft: Licensing Collaborative
Works in the Digital Age, 49 Stan. L. Rev. 1487, 1499 (1997). As support,
the
Note cites the current case of Microsoft
v. Harmony and traces its genealogy back to a handbook published by
the Practicing Law Institute. See
id. at 1494 n.37 (citing William H. Neukom & Robert W. Gomulkiewicz,
Licensing Rights to Computer Software,
in Technology Licensing and Litigation 1993, at 778 (PLI Patents,
Copyrights, Trademarks & Literary
Property Course Handbook Series No. G4-3897, 1993), available in
WESTLAW, 354 PLI/Pat 775). The authors
of that PLI handbook serve as Senior Vice President for Law and
Corporate Affairs and Senior Corporate
Attorney, respectively, with Microsoft Corporation. They explain "that
software publishers license rather
than sell software in order to negate the doctrine of first sale...." Id.
One
must congratulate their employer
on realizing, in Microsoft v. Harmony, its goal - conceded with admirable
candor - of voiding copyright's
first-sale doctrine. Nonetheless, for the reasons set forth in the text,
the
statute itself does not permit that
result, to the extent that the underlying essence of the transaction results
in a user obtaining ownership of
the physical product containing the copyrightable expression.
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Nonetheless, an innovation might
be said to be occurring through Internet distribution. Are the old
barriers breaking down such that
U.C.C. Article 2B must come to the rescue of a tottering copyright system?
We answer that question, too, in
the negative. As the foregoing example of Pandion reveals, n85 purchases
over the Internet do not suffer
from a fatal lack of privity between software owner and end user which
requires legal redress. Instead,
copyright law itself governs the usages to which Pandion may put the product
that he purchased over the Internet.
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n85. See supra Section II.A.
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Indeed, it is possible to go further
here. Someone like Pandion who purchases SuperSmart321 as embodied in
CD-ROM form has unambiguously acquired
the right to pass the CD-ROM on to a friend. Does a parity of
reasoning indicate that Pandion
himself likewise has the right to sell his computer when he wishes to upgrade
his whole system, even if the hard
drive thereby transferred contains a copy of SuperSmart321 that he
purchased over the Internet?
Now the pedal comes down to the metal:
Can Pandion keep his computer, deferring upgrades to a later day,
but nonetheless pass along solely
SuperSmart321 (by transferring the files to a friend and deleting them
from
his own hard drive, let us say)?
There are two possible answers to this question:
Yes. Under this rationale, Pandion
can take advantage of a "digital first-sale defense." n86 Pandion, by this
logic, is as much an owner of the
"copy" purchased over the Internet as he would be of the CD-ROM. Granted,
the copy in this instance cannot
be as conveniently hefted and hoisted aloft, but the mere fact of its
dispersion over manifold sectors
of the hard drive does not detract from its status as a material object
in
which the subject software is fixed
and from which it can be retrieved. n87
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n86. Nimmer, Brains, supra note 53, at 9, 33.
n87. See 17 U.S.C. 101 (1994) (defining
"copy"); MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511,
518 (9th Cir. 1993) (stating that
"loading of copyrighted software into RAM creates a "copy' of that software"
under the copyright laws).
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No. An alternative view is that Internet
distribution is different. No tangible copy has been released, because
there is no discrete "material object"
of the type invoked above that contains SuperSmart321. The
ever-shifting sectors and buffers
where the work flits and dances fail to qualify as either "material" or
an
"object" under the statutory language.
The latter view - that Internet distribution
is different because it does not result in a "copy" - must be
rejected as implausible. For were
it correct that the recipient of an Internet instantiation does not obtain
a
"copy," Pandion would be able to
distribute that instantiation freely over the Internet to thousands of
remote recipients without infringing
the copyright in SuperSmart 321. n88 Such a construction would be
disastrous for copyright owners,
and should not be viewed as implementing Congress's intent.
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n88. See 17 U.S.C. 106(1), (3) (1994)
(limiting copyright owner's rights to reproduction and distribution of
"copies").
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It is not necessary, however, to
resolve whether Internet distribution results in a "copy" to test the
adaptability of extant copyright
law to new technologies. Under the "yes" view, Pandion may dispose of his
volatile "copy" under the first-sale
doctrine; under the "no" view, he cannot. Under the former view, Internet
sales of software are assimilated
to current methods of film exploitation via videocassettes, laser discs,
DVD,
and the rest (that is, a first sale
arises), whereas under the latter view, such sales are assimilated to
motion-picture distribution in the
pre-videotape era (that is, there was no first sale). In either event,
no new
paradigm is required. n89
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n89. See Nimmer, Brains, supra note 53, at 11.
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In sum, the new paradigm of "licensing"
instead of sales, on the one hand, and lending, on the other hand,
collapses. For that reason, no new
conceptual breakthrough via U.C.C. Article 2B is required.
III The Limits on Contract via the Preemptive Force of Copyright
Our discussion in Part I demonstrates
that state contract law acts as a necessary complement to the
Copyright Act by delineating the
basic mechanics of contract formation, performance, and interpretation.
Those salutary goals can find further
expression in Article 2B. The analysis in Part II demonstrates that state
contract law is not needed to protect
the copyright interests of copyright proprietors. Those interests are
safeguarded by the Copyright Act
itself. What remains to be discussed are the ways in which state contract
law can improperly meddle with the
copyright laws by altering the copyright laws in favor of proprietors at
the
expense of users. The phenomenon
of attempted contractual displacement of copyright, and the limits of
contract in that regard, arises
in the doctrinal context of preemption.
A. General Preemption Notions
Copyright law and contract law not
only clash overtly but may clash covertly to the extent that they pursue
different implicit purposes and
objectives. When conflicts occur, preemption principles force state contract
law
to yield. The source of copyright's
preemptive power is the United States Constitution. To the extent that
any
state law "stands as an obstacle
to the accomplishment and execution of the full purposes and objectives
of Congress," n90 the Supremacy Clause mandates that the law of Congress
reign supreme. n91
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n90. Hines v. Davidowitz, 312 U.S. 52, 67 (1941).
n91. Constitutional preemption of
a competing state law regime was established in the first copyright case
to
go before the Supreme Court. See
Wheaton v. Peters, 33 U.S. (8 Pet.) 591 (1834) (holding federal copyright
law preempts state common law protection
for published works).
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Some cases describe preemption as
the upshot of a clash between state and federal law in which state law
is
vanquished. n92 Other cases have
enunciated even stricter principles according to which federal law does
not
tolerate parallel state regimes.
n93 As the Supreme Court put it in its most recent pronouncement on the
subject of parallel regimes of federal
and state intellectual property protection, "The offer of federal protection
from competitive exploitation of
intellectual property would be rendered meaningless in a world where
substantially similar state law
protections were readily available." n94
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n92. See Kewanee Oil Co. v. Bicron
Corp., 416 U.S. 470, 480 (1974) ("If the scheme of protection developed
by [a state] ... "clashes with the
objectives of the federal ... laws' then the state law must fall." (citation
omitted)).
n93. See, e.g., Compco Corp. v. Day-Brite
Lighting, Inc., 376 U.S. 234, 237 (1964) ("When an article is
unprotected by a patent or a copyright,
state law may not forbid others to copy that article. To forbid
copying would interfere with the
federal policy, found in Art.I, 8, cl.8, of the Constitution and in the
implementing federal statutes, of
allowing free access to copy whatever the federal patent and copyright
laws
leave in the public domain.")
n94. Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 151 (1989).
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On the other hand, in one case predating
the adoption of the current Act, the Supreme Court allowed greater
tolerance for state schemes covering
the same subject matter as copyright. In particular, Goldstein v.
California n95 held that the states
retain concurrent power to afford copyright protection to the works of
authors as long as such protection
does not conflict with federal law. Nonetheless, state laws enacted
pursuant to such concurrent power
can, of course, be subject to preemption by federal statute.
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n95. 412 U.S. 546, 570 (1973).
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When enacting section 301 of the
current Act, Congress took precisely that action of preempting concurrent
state law in the copyright domain.
Unlike the parallel federal and state tracks that previously applied to
the
copyright realm, section 301 federalizes
much of the domain of protection for copyrightable expression. n96 By
reason of that explicit federal
preemption, states' concurrent copyright powers lack almost all practical
significance. n97
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n96. For certain residual matters
that the states may still regulate, such as unfixed works and phonorecords
pre-dating February15, 1972, see
1 Nimmer on Copyright, supra note 13, 2.02.
n97. Goldstein held that state law
is not preempted if "Congress has drawn no balance; rather, it has left
the
area unattended...." 412 U.S. at
570. As a practical matter it may often be hard, if not impossible, to
distinguish benign from conscious
neglect, that is, to know if Congress has "left the area unattended," or
whether Congress affirmatively decided
that federal protection is not available.
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B. A Case Study in the Contract/Copyright Clash: ProCD v. Zeidenberg
1. A Twist on Feist
In ProCD, Inc. v. Zeidenberg, n98
plaintiff spent millions of dollars to produce a massive "telephone book"
of
nationwide scope. Because the "book"
contained almost one hundred million listings, plaintiff released it on
CD-ROM with copyrighted search software
designed to navigate through the mass of information. The CD-ROM
was placed in a box that stated
that the software came with restrictions listed in an enclosed license.
The
license was encoded on the CD-ROM
discs, printed in the manual, and appeared on a user's screen every time
the software ran. It expressly provided
that the end user "will not make the [search] Software or the
[telephone] Listings in whole or
in part available to any other user in any networked or time-shared
environment, or transfer the Listings
in whole or in part to any computer other than the computer used to
access the Listings." n99
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n98. 908 F. Supp. 640 (W.D. Wis.), rev'd, 86 F.3d 1447 (7th Cir. 1996).
n99. ProCD, 908 F. Supp. at645.
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When the matter under discussion
combines listing from the white pages of the telephone book and allegations
of copyright infringement, the Supreme
Court's landmark holding in Feist Publications, Inc. v. Rural Telephone
Service Co. springs immediately
to mind. n100 If that unanimous decision made anything clear, it is that
not
even a massive expenditure of funds
to compile phone listings can render them copyrightable. Instead, they
repose in the public domain - both
as a matter of statutory construction and of constitutional necessity.
Relying on Feist, defendants in
ProCD copied all the listings off the plaintiff's CD-ROMs, composed their
own
software to access the names and
addresses, and went into business in competition with plaintiff by making
all
the listings available for search
on an Internet web page.
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n100. 499 U.S. 340 (1991).
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The plaintiff responded by bringing
suit. Barred by Feist from bringing a copyright claim against the copying
of
telephone listings, plaintiffs sought
redress against defendants' constitutionally privileged copying by alleging
breach of contract and misappropriation.
2. Issues State and Federal
On the latter cause of action, the
district court concluded that "because plaintiff's misappropriation claim
is
not qualitatively different from
a copyright infringement claim, the underlying rights plaintiff seeks to
vindicate
are equivalent to federal rights
and are preempted by the Copyright Act." n101 In reference to the contract
issue, the district court noted
that most commentators disfavor rights asserted under shrinkwrap
licenses, given users' inability
to bargain over precise terms. More fundamentally, those licenses "pose
important questions about the extent
to which individual contract provisions can supplement or expand federal
copyright protection." n102 The
district court accordingly concluded that section 301 preempted the contract
claim. As Chief Judge Crabb held,
any other ruling would "alter the "delicate balance' of copyright law"
and,
more particularly, constitute an
impermissible end-run around Feist. n103
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n101. ProCD, 908 F.Supp. at661.
n102. Id. at650.
n103. Id. at658.
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This solicitude for "delicate balance"
is not an aberration. As the Supreme Court itself has noted,
It is Congress that has been assigned
the task of defining the scope of the limited monopoly that should be
granted to authors or to inventors....
This task involves a difficult balance between the interests of authors
and inventors in the control and
exploitation of their writings and discoveries on the one hand, and society's
competing interest in the free flow
of ideas, information, and commerce on the other hand.... n104
This ventilation of the contract
issue in the context of copyright poses two analytically separate issues.
n105
The first question is whether, as
a matter of contract law, the shrinkwrap license unilaterally imposed by
the
manufacturer constitutes a binding
agreement. That first question implicates construction of state law,
namely, the Uniform Commercial Code
as implemented into Wisconsin law. Assuming an affirmative answer, the
second question is whether that
contract can govern in the copyright context. This second question arises
under federal law, as a matter of
preemption via the statute or the Constitution.
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n104. Sony Corp. v. Universal City
Studios, Inc., 464 U.S. 417, 429 (1984); accord Twentieth Century Music
Corp. v. Aiken, 422 U.S. 151, 156
(1975) ("The limited scope of the copyright holder's statutory monopoly,
like
the limited copyright duration required
by the Constitution, reflect a balance of competing claims upon the
public interest." (citation omitted)).
n105. For a valuable untangling of
the two strands implicated here, see MaureenA. O'Rourke, Copyright
Preemption After the ProCD Case:
A Market-Based Approach, 12 Berkeley Tech. L.J. 53 (1997).
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The district court resolved both
matters adversely to ProCD, Inc. In reversing, the Seventh Circuit reached
the contrary conclusion on both
scores. n106 To isolate the preemption issue posed by this case, n107 we
assume for current purposes that
the subject contract is either enforceable under the U.C.C. as
currently drafted n108 or that it
would be enforceable under Article 2B. The question thereby framed is
whether ProCD, Inc.'s contract restrictions
on copying can stand consistent with federal norms. This
preemption inquiry itself occupies
two levels, statutory and constitutional.
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n106. There is no need for the two
issues to march in lockstep. Theoretically, one could determine that
plaintiff has the better argument
under state contract law as implemented through the U.C.C., but that
defendant is correct in urging that
the Copyright Act preempts the U.C.C. construction. See id.
n107. See infra Part II.C.
n108. One commentator's exhaustive
analysis reaches this conclusion. See O'Rourke, supra note 105. In any
event, even if the current U.C.C.
inclined in the other direction, the U.C.C., as amended by Article 2B,
would
unambiguously mandate this result,
thus necessitating the inquiry into preemption vel non. See infra Section
IV.B.
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3. A Step Back into History
Before proceeding to a full-scale
exploration of the issue posed in ProCD of whether copyright law preempts
application of the U.C.C. in this
arena, it is worthwhile to ponder precursor scenarios. ProCD, Inc. was
far from
the first copyright owner to attempt
to magnify its rights via contract. Indeed, it is almost commonplace in
the
history of copyright jurisprudence
that when new technology establishes products or media considered
incapable of being protected, copyright
owners seek self-help through the unilateral declaration of expanded
rights via purported contractual
limitations.
Consider the diminution of sheet
music sales and the advent of sound recordings played over the radio. n109
Given the lack of a public performance
right in those sound recordings as a matter of law, n110 RCA decided to
cure the law's lacunae by affixing
the following language to its products:
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n109. "Until the phonographic record
made possible the preservation and reproduction of sound, all audible
renditions were of necessity fugitive....
Of late, however, the power to reproduce the exact quality and
sequence of sounds has become possible,
and the right to do so, exceedingly valuable.... Hence this action."
RCA Mfg. Co. v. Whiteman, 114 F.2d
86, 88 (2d Cir. 1940).
n110. Sound recordings enjoyed no
federal protection until February15, 1972. Even since that time, federal
copyright for sound recordings has
included no public performance right in one narrow particular. See 2 Nimmer
on Copyright, supra note 13, 8.21
(discussing Digital Performance Right in Sound Recordings Act of 1995).
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Only For Non-Commercial Use on Phonographs
in Homes. Mfr.& Original Purchaser Have Agreed This Record
Shall Not Be Resold Or Used For
Any Other Purpose. See Detailed Notice on Envelope. n111
When the purchaser n112 of the records
ignored that "shrinkwrap" contract - thus anticipating Zeidenberg's
conduct by a half-century - by broadcasting
them for profit over the air, the manufacturer responded
by filing suit. No less an authority
than Learned Hand summarily rebuffed the claim. n113
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n111. RCA, 114 F.2d at 87.
n112. Of course, precedents are rarely
pristine. In RCA, it actually was not the direct purchaser from RCA who
subsequently played the records
over the air; instead, there was a middleman. But the facts in this case
were
such that "it may be assumed that
[the defendant] is charged with notice of the legends on the records, and
with the contract of [the middleman],
and that it broadcasts them on its radio system in disregard of both."
Id. at 87. Accordingly, the facts
of this case do not correspond to someone who just happened to find the
subject product on the street. See
ProCD, 86 F.3d at1454 (acknowledging that subject contract would have
no power over that individual in
the street who utterly lacked privity).
n113. See 114 F.2d. at 88 ("The records themselves could not be clogged with a servitude.").
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One could reach back even further
and likewise find the same rejection of copyright proprietors' attempts
to
tilt the "delicate balance" in their
favor. In 1908 the Supreme Court enunciated the "first sale" n114 doctrine
when it refused to enforce a book
publisher's proto-shrinkwrap license barring any retail sale of the books
there at issue for a price less
than $ 1.00. n115 Even earlier than that, a lower court had likewise refused
to
enforce use restrictions placed
on the inside cover of a book. n116
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n114. See 17 U.S.C. 109 (1994).
n115. See Bobbs-Merrill Co v. Straus,
210 U.S. 339, 350 (1908). The continued vitality of the Bobbs-Merrill
case emerges tacitly from its acknowledgment
in the Supreme Court's recent unanimous decisions concerning
the importation of gray-market goods.
See Quality King Distribs. Inc. v. L'Anza Research Int'l, Inc., 118 S.
Ct.
1125 (1998). Note that RCA v. Whiteman
likewise cites back to Bobbs-Merrill. See 114 F.2d at 88. It should be
noted that in Bobbs-Merrill, the
Supreme Court stated, "In our view the copyright statutes, while protecting
the owner of the copyright in his
right to multiply and sell his production, do not create the right to impose,
by
notice, such as is disclosed in
this case, a limitation at which the book shall be sold at retail by future
purchasers, with whom there is no
privity of contract." 210 U.S. at 350 (emphasis added). To the extent that
such absence of privity is viewed
as necessary to the holding of Bobbs-Merrill, then U.C.C. Article 2B's
creation of "a direct contractual
relationship" between copyright owner and end user serves as a subterfuge
to
undermine the first-sale doctrine,
notwithstanding that Congress has labeled it "a basic tenet of our
intellectual property law." H.R.
Rep. No. 98-781 at 23 (1984); see supra note 84.
n116. Authors& Newspapers Ass'n v. O'Gorman Co., 147 F. 616 (D.R.I. 1906).
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With that history in mind, ProCD,
Inc. v. Zeidenberg is not novel. Earlier actors throughout the twentieth
century had similarly attempted
to magnify their rights through use of contract. The novelty of ProCD thus
lies
not in the use of that device, but
instead in the fact that the Seventh Circuit was the first court that did
not
dismiss as ineffectual a copyright
owner's purported recalibration of the "delicate balance."
C. Preemption Analysis of ProCD n117
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n117. The discussion in this Section
derives from the criticism of the Seventh Circuit's ProCD opinion in Release
44 to Nimmer on Copyright, supra
note 13. © 1998 by Matthew Bender& Co., Inc. Reprinted with permission.
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1. section 301
As already noted, the district court
concluded that a ruling in favor of ProCD, Inc., would subvert Feist;
indeed, there can be little doubt
that plaintiff crafted its shrinkwrap with that precise goal in mind. The
court's
invocation of a subversive assault
on a recent on-point Supreme Court precedent should have brought to mind
general conflict pre-emption under
the Supremacy Clause. n118 Yet although its reference to
copyright's "delicate balance" adverts
to general preemption under the Supremacy Clause, the district court
ultimately failed to contemplate
preemption on that non-statutory basis. Instead, Chief Judge Crabb grounded
her analysis entirely on the narrower
statutory grounds for preemption under section 301.
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n118. See supra Section III.A.
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section 301 preempts state-created
legal or equitable rights, whether based upon common law or statute,
under the following conditions:
(1) the state law creates "legal or equitable rights that are equivalent
to any
of the exclusive rights within the
general scope of copyright as specified by section 106" and, (2) such rights
under such state law may be claimed
in "works of authorship that are fixed in a tangible medium of expression
and come within the subject matter
of copyright... whether created before or after [January1, 1978] and
whether published or unpublished...."
n119 Thus, two elements must coalesce in order to effectuate section
301 preemption, the first relating
to the nature of the rights granted under state law, the second to the
nature of the work in which such
rights may be claimed.
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n119. 17U.S.C. 301 (1994).
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The first element was the one at
issue in this case. n120 It is triggered if the state-created act is infringed
merely by engaging in one of the
exclusive rights of authors under the Copyright Act - such as the right
to
reproduce. If, however, in addition
to, or instead of, amounting to one of the exclusive rights of authors
under
the Copyright Act, a qualitatively
different element is required, then the right does not lie "within the
general
scope of copyright," and there is
no preemption. This is known as the "extra element" test. n121
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n120. The other requisite ingredient
for preemption under section 301, as just noted, is that the regulated
matter must fall "within the subject
matter of copyright." 17U.S.C. 301(a) (1994). On that latter point, the
Seventh Circuit agreed with the
district court that the telephone listings at issue fell within that subject
matter. See ProCD, Inc. v. Zeidenberg,
86 F.3d 1447, 1453 (7th Cir. 1996).
n121. See, e.g., Trandes Corp. v. Guy F. Atkinson Co., 996 F.2d 655, 659 (4th Cir. 1993).
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Reported cases confronting alleged
copyright preemption under section 301 of contract causes of action have
almost uniformly rebuffed the preemption
claim. That doctrinal result is as it should be: the vast majority of
copyright contracts easily withstand
muster under section 301 because the breach alleged amounts to more
than reproduction, distribution,
etc., of a copyrighted work. In other words, the typical contract case
satisfies
the "extra element" test. The rub
arises in ProCD in that plaintiff there drafted a contract that was exceptional
when contrasted with that vast majority.
The district court in ProCD concluded
that efforts to enforce the contract there at issue were precisely
congruent with a copyright claim
(and therefore, implicitly, failed the "extra element" test). But in an
inexplicable move that then undermined
the basis for its own ruling, the court viewed itself as disagreeing with
a trinity of appellate decisions
that had found particular contract claims not preempted: the Eighth Circuit's
ruling in National Car Rental System,
Inc. v. Computer Associates International, Inc., n122 the Fifth Circuit's
ruling in Taquino v. Teledyne Monarch
Rubber, n123 and the Fourth Circuit's ruling in Acorn Structures, Inc.
v.
Swantz. n124 The district court
in ProCD stated, "To the extent that National Car Rental, Taquino,...and
Acorn
support the proposition that a copyright
infringement claim is not equivalent to a contract claim merely
because the contract claim requires
a plaintiff to show the additional element of breach, I disagree
respectfully with their conclusions."
n125
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n122. 991 F.2d 426, 433 (8th Cir. 1993).
n123. 893 F.2d 1488, 1501 (5th Cir. 1990).
n124. 846 F.2d 923, 926 (4th Cir. 1988).
n125. 908 F. Supp. 640, 658 (W.D. Wis.), rev'd, 86 F.3d 1447 (7th Cir. 1996).
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Couched in those terms, an affirmance
would seem to proclaim "circuit conflict," thus inviting certiorari. In
fact, however, the holding of preemption
under these circumstances was not as unprecedented as Chief Judge
Crabb allowed. To appreciate why,
we must broaden our sights from causes of action alleging pure breach of
contract to those that arise in
a contracts-plus situation.
When the current Act was being deliberated,
the House Committee Report stated that the tort of "interference
with contract relations" is "merely
the equivalent of copyright protection, [and therefore] would be
preempted." n126 On that basis,
courts have held that particular contract-based tort preempted under section
301 of the Copyright Act. n127 This
result would appear doctrinally correct. n128 Moreover, it has been
extended as well to closely allied
torts, such as interference with prospective economic advantage for
foiling consummation of a copyright
contract under negotiation. n129
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n126. H.R. Rep. No. 94-1476 at 132
(1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5748. Note that this
language confronted statutory language
that was later amended. See 1 Nimmer on Copyright, supra note 13,
1.01[B][1][a].
n127. See Harper& Row, Publishers,
Inc. v. Nation Enters., 501 F.Supp. 848 (S.D.N.Y. 1980), aff'd, 723 F.2d
195 (2d Cir. 1983), rev'd on other
grounds, 471 U.S. 539 (1985); Kamakazi Music Corp. v. Robbins Music Corp.,
522 F.Supp. 125 (S.D.N.Y. 1981),
aff'd, 684 F.2d 228 (2d Cir. 1982).
n128. Insofar as unauthorized reproduction,
distribution, performance, or display causes the plaintiff to lose
the benefits that would flow from
an actual or prospective contract whereby plaintiff would authorize any
such
acts, the rights created by the
tort of contract interference do not appear to differ qualitatively from
rights
under copyright; copyright also
contemplates loss of actual or prospective contract benefits by reason
of such
unauthorized acts. Preemption in
this context would, then, appear to be justified. The fact that the tort,
unlike copyright infringement, requires
awareness of the conflicting contract and an intentional interference
with it merely means that the state-created
right is narrower than its copyright counterpart, not that it is
qualitatively different so as to
preclude preemption. See 1 Nimmer on Copyright, supra note 13, 1.01[B][1][a].
n129. See PMC, Inc. v. Saban Entertainment,
Inc., 52 Cal. Rptr. 2d 877, 885 (Cal. Ct. App. 1996) (dealing with
rival bids to enter copyright contract
to manufacture "Power Rangers" products), discussed in 1 Nimmer on
Copyright, supra note 13, 1.01[B][1][a].
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With this larger perspective in mind,
the rectitude of Chief Judge Crabb's conclusion can be appreciated. When
two parties to a negotiated contract
- even one for exploitation of copyrighted goods - dispute its terms and
application, the allegation of breach
is typically not preempted. But just as the tort of interference with
contractual relations attempts to
regulate the same subject matter as does copyright law and is therefore
preempted, when a breach of contract
cause of action - particularly one that does not result from the
bargained-for agreement of both
parties to its putative execution - is used as a subterfuge to control
nothing
other than the reproduction, adaptation,
public distribution, etc., of works within the subject matter of
copyright, then it too should be
deemed preempted.
The facts of the last scenario underlay
those in ProCD. The plaintiff was seeking to control the exclusive rights
granted by copyright law every bit
as much as in a preempted cause of action denominated "interference with
contract relations." It sought,
in short, to bar further public distribution of materials, a right that
belongs to
copyright owners under the statute.
n130 But it sought to do so with respect to a subject matter - listings
in
the white pages of a telephone book
- that a unanimous Supreme Court had ruled to be in the public domain.
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n130. See 17U.S.C. 106(3) (1994).
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Footnotes- - - - - - - - - - - - - - - - -
Because the district court did not
cite those considerations, and instead proclaimed itself at odds with
previous circuit precedent on the
subject, it set itself up for reversal. The Seventh Circuit, as it were,
accepted the invitation: "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.' The district court disagreed
with
these decisions, but we think them
sound." n131
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n131. ProCD, 86 F.3d at1454 (citations omitted).
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The first comment about the Seventh
Circuit's adherence to the district court's supposed disagreement with
the three previous cases is that
each examined contracts in a context apart from shrinkwrap licenses. By
contrast, the previous pronouncement
by a circuit court on that latter subject upheld copyright preemption.
n132 Accordingly, strict adherence
to precedent, without even examining the issues afresh, supports,
rather than undermines, the district
court's preemption ruling.
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n132. See Vault Corp. v. Quaid Software
Ltd., 847 F.2d 255 (5th Cir. 1988) (finding contract clause barring
decompilation or disassembly to
be unenforceable). The Fifth Circuit affirmed the lower court opinion on
this
point, as it did again in Taquino
v. Teledyne Monarch Rubber, 893 F.2d 1488 (5th Cir. 1990), discussed infra
in
text accompanying note 139.
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Moreover, examination of each of
the three cited circuit court decisions reveals that it is, in fact, unnecessary
to disagree with them in order to
preserve the scope of section 301 and concur in the district court's
preemption holding. Rather than
viewing those cases as being governed by a wholly different rule than the
district court followed, each of
their holdings can best be understood as turning on the specific facts
presented. None supports the Seventh
Circuit's broad conclusion that "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." n133
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n133. ProCD, 86 F.3d at1455 (citation omitted).
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First, Judge Easterbrook's reversal
of the district court's holding in ProCD cites National Car Rental for
the
sweeping proposition that "rights
created by contract" are not ""equivalent to any of the exclusive rights
within the general scope of copyright.'"
n134 Although that latter case did hold that the specific contract
there at issue was not preempted,
it did not extend its holding to contracts in general. In fact, explicitly
relying on the "extra element rule,"
National Car Rental held that "the contractual restriction" that prohibited
"processing of data for third parties"
was qualitatively different from a contract that could be "breached "by
the mere act of reproduction, performance,
distribution or display."' n135 Because "none of the exclusive
copyright rights grant [the copyright
owner] that right of their own force," and because "absent the parties'
agreement, this restriction would
not exist," the court concluded that the "contractual restriction on use
of
the programs constitutes an extra
element that makes this cause of action qualitatively different from one
for
copyright." n136 Invoking the extra
element rule, National Car Rental approvingly cited the Ninth Circuit's
Kalitta ruling, "Copyright preemption
is both explicit and broad: [It] prohibits state-law protection for any
right
equivalent to those in the Copyright
Act." n137 Turning to the copying of the software at issue in ProCD, it
was (in the words of Kalitta) ""in
and of itself,' [an act which] "would infringe one of the exclusive rights
listed
in 106.'" n138 Under the Kalitta
standard approved by National Car Rental, the license at issue in ProCD
should
therefore be held preempted, thus
bolstering rather than undermining the district court's conclusion.
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n134. Id. at 1454.
n135. 991 F.2d at 433 (citation omitted).
n136. Id.
n137. G.S. Rasmussen& Assocs. v. Kalitta Flying Serv., 958 F.2d 896, 904 (9thCir. 1992).
n138. Id.
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In Taquino, the contract at issue
"forbade [the defendant] from representing a competing company
prior to termination," a restriction
not equivalent to copyright:
The right to claim this breach of
contract is not preempted by the copyright laws. 17 U.S.C. 301 only
preempts rights equivalent to the
exclusive rights within the general scope of copyright law. A right is
equivalent if the mere act of reproduction,
distribution, or display infringes it. This action for breach of
contract involves an element in
addition to mere reproduction, distribution, or display.... n139
Similarly, the contractual restriction in Acorn did not implicate the rights granted by the Copyright Act:
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n139. 893 F.2d at1501 (citations omitted) (quoting opinion of district court).
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Implicit in the contract between
Acorn and Swantz was an agreement that while Swantz did not have to use
Acorn's plans, if he did use Acorn's
plans then he was obligated either to purchase the plans from Acorn or
to
purchase his building materials
from Acorn....This implicit provision of the contract...does not arise
out of the
subject matter of copyright and
is therefore a separate and distinct cause of action. n140
The fact-specific holdings of these
cases - that contracts that did not merely forbid reproduction, distribution,
or display are not preempted - follow
the same rule as National Car Rental. Accordingly, parallel logic dictates
that Taquino and Acorn in no way
undermine the district court's ruling.
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n140. 846 F.2d at926.
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Having run through the triad of cases
that underlay both the district and circuit courts' analysis in ProCD,
it
appears that the rule safeguarding
contract causes of action against copyright preemption is less than
categorical. Although the vast majority
of contract claims will presumably survive scrutiny - as did each of the
contract claims confronted in that
trio - preemption should continue to strike down claims that, though
denominated "contract," nonetheless
complain directly about the reproduction right. It is precisely into that
paradigm that the facts of ProCD
fall.
2. Giving Supremacy to the Supremes
We have already seen that rights
premised under state law cannot stand as "an obstacle to the full purposes
and objectives of Congress." n141
As construed by a unanimous Supreme Court in Feist, Congress did not
(and, indeed, constitutionally could
not) extend copyright protection to alphabetical telephone listings. The
shrinkwrap license at issue in ProCD
undid the right of the public that Feist conferred - the ability to
copy telephone listings without
liability. n142 As such, there would seem to be a direct conflict between
that
which federal law permits and that
which state law forbids. n143
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n141. Hines v. Davidowitz, 312 U.S. 52, 67 (1941). See supra notes 90-91 and accompanying text.
n142. In individual cases, a contract
to refrain from doing what copyright law permits may be eminently
defensible. As developed below,
the mischief in the blanket contract in ProCD is that plaintiff wanted
to have
its cake and eat it too - to exploit
telephone listings via mass market distribution, and to bar the whole world
from copying its listing. Had plaintiff
been content to maintain its database of listings as a trade secret, for
example, then its contracts would
have likely withstood a preemption challenge. See infra Section III.D.1.
n143. One can avoid the conflict
by postulating that Congress would have protected phone listings, but was
constrained by its constitutional
limits not to do so. On that theory, contractual law merely supplemented
Congress' designs, using the states'
residual power to extend the vector that Congress drew to the limits of
its
own ability. This avenue of escape,
however, was foreclosed by the Seventh Circuit, when it held that the
one aspect of the district court's
ruling that was "plainly right" was its conclusion that ProCD's software
and
data "are "within the subject matter
of copyright' even if, after Feist, they are not sufficiently original
to be
copyrighted." ProCD, 86 F.3d at1453
(quoting ProCD v. Zeidenberg, 908 F.Supp. 640, 665-67 (W.D. Wis.
1996)). In this regard, the subject
matter at issue in ProCD differs at base from those works not fixed in
any
tangible medium of expression -
such as oral sermons and jazz improvisations - over which state law can
continue to afford protection. See
supra note 96; see generally 1 Nimmer on Copyright, supra note 13, 2.02.
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It is remarkable, then, that the
Seventh Circuit reversed. Judge Easterbrook's opinion, after determining
shrinkwrap licenses to be binding
under the Uniform Commercial Code, n144 concluded that the district court
erred in its construction of section
301. n145 The Seventh Circuit did not consider constitutional preemption
apart from section 301, notwithstanding
that, as discussed above, non-301 preemption occupies its own
capacious niche in copyright jurisprudence.
n146 Combined with its facile reading of precedent under section
301, n147 its failure even to consider
the broader constitutional issues dooms the Seventh Circuit's preemption
analysis.
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n144. See supra Section III.B.1.
n145. See ProCD, 86 F.3d at1454.
n146. See supra Section III.A. For
an analysis of many cases arising in that posture, ranging from the Supreme
Court's invalidation of an Oklahoma
law banning re-transmission of out-of-state commercials for alcoholic
beverages to a district court's
invalidation of an ordinance ruling exclusive licenses of cable programming
illegal
on antitrust grounds (again, a copyright/contract
cross-over) to blind bidding of films to public disclosure of
standardized tests, see 1 Nimmer
on Copyright, supra note 13, 1.01[B][3][c].
n147. See supra Section III.C.1.
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The court attempted to highlight the error of the district court's approach through a reductio ad absurdum
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? n148
The answer to that rhetorical question
is as patent as it is incomplete. In this particular instance, the
contract relating to copyrightable
goods should be deemed enforceable, as it passes the "extra element" test
and contravenes no federal policy.
That solitary hypothetical at best demonstrates what is uncontroversial:
not every contract relating to copyrightable
goods is preempted. n149 It does not demonstrate the far greater
proposition at which it hints: No
contract relating to copyright-able goods ever is preempted under section
301(a). Moreover, even when a contract
passes muster under section 301, it is still necessary to evaluate
whether it runs afoul of the more
general preemption prerequisites mandated by the Constitution.
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n148. ProCD, 86 F.3d at1454.
n149. See supra Section III.A. (Indeed, as previously noted, the vast majority pass muster).
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The court's hypothetical video store
rental contract, albeit incomplete, still serves as a useful tool to further
the inquiry. The contract at issue
requiring the return of the physical copy at the end of the rental period
meets the "extra element" test.
Further, it contravenes no policy of the Copyright Act. To the contrary,
it
fosters the purposes underlying
copyright law by encouraging the dissemination of copyrightable works in
an
orderly fashion. n150 Likewise,
the vast majority of contracts that one may posit with respect to
copyrightable goods should prove
easy to reconcile with the purposes underlying copyright. Whether the
contract consists of imposing time
limits on when films can be shown, specifying geographic limitations on
where magazines can be distributed,
or mandating quality controls on how sculptures can be displayed, each
disserves no readily apparent doctrine
of copyright law. Accordingly, these contracts are presumptively
enforceable.
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n150. Note that attempts to amend
the Copyright Act to forbid video rentals have failed. See 2 Nimmer on
Copyright, supra note 13, 8B.01[B]
n.23.2. Had those amendments succeeded, then the posited video rental
would contravene the purposes of
the fictively amended Act; under those circumstances, the sample contract
posited by the Seventh Circuit could
well be deemed unenforceable based on conflict preemption.
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The contract at issue in ProCD, Inc.
v. Zeidenberg differs from the foregoing examples in the one respect
relevant to nonstatutory preemption:
n151 it contravenes one of the core policies of the Copyright Act by
extending quasi-copyright protection
to works that do not qualify as "original." n152 It further fails the test
of
encouraging the dissemination of
copyrightable works in an orderly fashion in that it seeks to bar the
dissemination of uncopyrightable
materials. It is, in short, nothing other than an attempt in effect to
overrule by contract binding Supreme
Court precedent. n153
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n151. It also differs in that it fails the "extra element" test. See infra Section III.C.1.
n152. In parallel fashion, one plaintiff
attempted to protect her recipe, see Griggs v. South Carolina Elec. &
Gas Co., 467 S.E.2d 608, 609 (S.C.
1995), a subject matter that falls outside copyright protection, see 1
Nimmer on Copyright, supra note
13, 2.18[I]. Rather than labeling her cause of action "breach of contract,"
she responded to unauthorized publication
of a recipe by claiming "outrage"; her husband joined in for "loss of
consortium." Those causes of actions
likewise failed the "extra element" test. See Griggs, 467 S.E.2d at 609.
n153. "Had the state of Kansas adopted
an exclusive-rights regime to protect databases after the Supreme
Court's decision, and had Rural
sued Feist for new appropriations from its white-page listings under that
law,
the Supreme Court would probably
have struck the state law down for interfering with the federal copyright
policy of promoting public access
to knowledge." J.H. Reichman & Pamela Samuelson, Intellectual Property
Rights in Data?, 50 Vand. L. Rev.
51, 144 (1997).
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The Seventh Circuit conceded in ProCD,
Inc. v. Zeidenberg that the structure of copyright law "prevents
states from substituting their own
regulatory systems for those of the national government." n154 On that
basis, the Seventh Circuit refrained
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." n155 One
wonders what variation the court
had in mind as embodying the substitution of a contractual scheme "for
those of the national government"
if not a factual scenario on all fours with a recent, unanimous Supreme
Court opinion, but reaching the
contrary result. n156 Yet the opinion did not even mention Feist in its
preemption analysis. n157
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n154. 86 F.3d at1455. The opinion
even nods in the direction of conflict preemption by invoking "the possibility
that some applications of the law
of contract could interfere with the attainment of national objectives...."
Id.
n155. Id.
n156. Curiously, the opinion earlier
conceded that one function of copyright law is to "prevent states from
giving special protection to works
of authorship that Congress has decided should be in the public domain...."
Id. at1453.
n157. The court's previous reference
to Feist consisted simply of recounting that the subject telephone
listings are not protected under
copyright law. See id. at1449. On the instant subject, the opinion blithely
concluded that "general enforcement
of shrinkwrap licenses of the kind before us does not create such
interference [with the attainment
of national objectives]." Id. at1455.
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To appreciate what is at issue here,
it is useful to conjure up similar examples of contracts designed to evade
the strictures of copyright law.
Those variants shine a brighter light on the preemption inquiry than the
Seventh Circuit's pedestrian example
of a contractual obligation to return a single copy of a rented videotape.
In each of the following examples,
the postulated conduct disturbs the "delicate balance" that the district
court in ProCD was attempting to
maintain. Adverting to the entire spectrum of preemption concerns (rather
than simply to section 301) illustrates
that each of these contracts must bow before the superior force of the
federal enactment of copyright law.
Consider n158 first a state law that
validates all oral contracts solemnly adjured before a panel of three
clergymen. n159 To the extent that
that law were applied to a contract transferring copyright ownership, the
unanimous view of the cases is that
it would be preempted under the Supremacy Clause, given the
federal command that transfers of
copyright ownership be executed in writing. n160 That single hypothetical
by itself proves that absolute freedom
of contract under state law relating to copyrightable works is
insupportable. n161
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n158. In each instance, the hypothetical
state law could be conceived as implementing the Uniform
Commercial Code within that particular
jurisdiction. Alternatively, that law could be viewed as the will of the
legislature separate from model
enactment of the Code.
n159. See supra note 36.
n160. See supra notes 34-36 and accompanying text.
n161. The Seventh Circuit premises
its ruling on the following language: "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." ProCD,
86 F.3d at1452 (quoting U.C.C. 2-204(1)). Judged by the standard of
2-204(1), oral copyright transfers
should be recognized. If the contrary force of17 U.S.C. 204(a) is deemed
to
command the opposite result, then
the question arises why the same U.C.C. section should not be overborne
because of the contrary force of
Feist, construing not only the Copyright Act but the requirements of the
U.S.
Constitution as well.
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Consider next a video store that
does not simply limit customers to home viewing (as imagined by the Seventh
Circuit's hypothetical), but goes
further and stamps each videotape in its collection with the legend: MAY
BE
VIEWED BY NO MORE THAN THREE PEOPLE
AT ONE SITTING. n162 Even better, a studio that invariably
stamped its product with that proviso
in a shrinkwrap encasing all videotapes that it manufactured would
closely mirror the actual facts
of ProCD, Inc. v. Zeidenberg. For just as the plaintiff in that actual
case sought
to use a shrinkwrap to deny the
public the right to use phone listings guaranteed by Feist, so the fictive
studio in this hypothetical case
would use its own shrinkwrap to avoid Congress' limitation of the performance
rights in videotapes to public performances,
defined as occurring only when "a substantial number of persons"
is gathered. n163 The subject proviso,
even if deemed operative as a matter of state contract law, should be
deemed preempted based on its conflict
with the federal scheme. n164
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n162. The drafters of Article 2B
concede that the doctrine of unconscionability should preclude "bizarre
and
oppressive results in standard form
contracting." U.C.C. 2B-208 reporter's note 1 (Draft, Mar. 1998). But their
notion of where oppression lies
may differ markedly from ours, much less those applied by various courts.
n163. 17 U.S.C. 101 (1994).
n164. It should be noted that the
motion-picture studios, at the outset of the videotape era, attempted to
increase their rights through the
legitimate methodology of lobbying Congress for a change to the first-sale
doctrine. See 2 Nimmer On Copyright,
supra note 13, 8B.01[B]. The studios previously concluded among
themselves that unilateral leveraging
of their rights through the shrinkwrap vehicles contemplated in the text
would not withstand judicial review.
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Consider next an on-screen announcement
prior to the airing of a television program that its broadcast to
viewers' homes is conditional on
their agreement not to engage in private home taping. Assuming the threshold
determination that the viewers'
decision to watch it notwithstanding the initial admonition constitutes
a
contractual bargain just as much
as receiving software by wire, n165 then the viewer's activation of her
VCR constitutes breach of contract.
Now, not only has the Supreme Court's Feist decision been
effectively nullified - so has its
ruling in Sony. n166
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n165. The Seventh Circuit singles
out as valid those transactions where a customer purchases software over
the Internet and receives it by
wire. See ProCD, 86 F.3d at1451. We have previously noted our view that
the
instantiation thereby rendered onto
the purchaser's hard drive constitutes a "copy" of the subject work. See
supra Section II.B.
n166. Sony Corp. of Am. v. Universal
City Studios, Inc., 464 U.S. 417 (1984) (holding private home videotaping
is fair use).
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In Sony, the Supreme Court stated
that "[copyright] protection has never accorded the copyright owner
complete control over all possible
uses of his work." n167 Yet in a world governed by Judge Easterbrook's
radical freedom to impose terms
by shrinkwrap "contract," there is no reason that such a conclusion should
pertain. Instead, the imagination
of shrinkwrap drafters can come close indeed to achieving the type of
complete control that Sony expressly
denied them.
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n167. Id. at432.
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Consider the following example of
that complete control. Although the Act limits the copyright owner's rights
to "public" distribution, n168 publishers
who follow the logic of ProCD, Inc. v. Zeidenberg may amplify their
statutory rights simply by wrapping
books n169 in cellophane, subject to the limitation that the buyer is barred
from passing the purchased copy
on to a friend. n170 Nor is there any reason that the publisher should
stop
there. It could likewise require
the reader not to skip chapters, not to read any paragraph more than three
times, n171 not to reveal the surprise
plot twists to family or acquaintances, and certainly not to quote in a
book review the few short excerpts
that the fair use doctrine would otherwise permit. n172
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n168. See 17U.S.C. 106(3) (1994).
The parallel point just made in the text relates to public performance,
as
distinguished from public distribution.
n169. Books fall into the same category
of protection under the Act as did the software at issue in ProCD:
Each qualifies as a "literary work."
See 17 U.S.C. 102(a)(1) (1994).
n170. The fear that copyright owners
would be clothed with an expansive right to control "reading" of their
materials in cyberspace has already
been realized under this scenario, and in the mundane world of hard copies
at that. See Jessica Litman, The
Exclusive Right to Read, 13 Cardozo Arts & Ent. L.J. 29 (1994).
n171. See David Nimmer, Adams and
Bits: Of Jewish Kings and Copyrights, 71 S.C. L. Rev. 219, 226 n.37
(1998) (quoting whimsical copyright
notice forbidding various usages - for instance, by reviewers unless they
"promise to read the book painstakingly
all the way through before writing their reviews").
n172. See 17 U.S.C. 107 (1994). The
U.C.C. drafters actually come close to conceding this particular point:
"If
a term in a widely distributed consumer
magazine that purports to prevent a reader of the magazine from using
a factual summary or a brief quotation
were structured to create a contract [it would pose] serious questions
of enforceability under copyright
and constitutional free speech considerations." U.C.C. 2B-105 reporter's
note
3 (Draft, Mar. 1998). We agree,
and would extend the same considerations to the software arena as well.
See
infra Section IV.B.
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The foregoing examples represent
simply the tip of ProCD's iceberg. For not only could Sony and Feist be
nullified under its approach, but
so could virtually every other court decision ever to rule in a defendant's
favor.
The Supreme Court gave wide berth
to the parody defense in Campbell v. Acuff-Rose Music, Inc. n173
That defense essentially disappears
once Roy Orbison and his fellow composers wrap their tapes and CDs in
jewel boxes armed with the appropriate
shrinkwrap language forbidding parodic exploitation. In another
unanimous ruling during the same
term, the Court held in Fogerty v. Fantasy, Inc. that attorney's fees need
to
be awarded evenhandedly to plaintiffs
and defendants. n174 But plaintiffs savvy to the options that ProCD
affords can avoid that nettlesome
limitation by adopting the expedient of wrapping their goods in packages
that guarantee by contract treble
awards of attorney's fees incurred for copyright infringement. n175
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n173. 510 U.S. 569 (1994).
n174. 510 U.S. 517 (1994).
n175. The Supreme Court noted that
copyright's purpose is to protect the public interest; as such, delineating
the bounds of copyright owners'
rights is as socially useful as vindicating an infringement claim. See
id. at527.
Again, that "delicate balance" is
swept aside under the Seventh Circuit's exaltation of copyright owners'
all-powerful contract rights.
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Circuit courts have validated reverse
engineering of software when undertaken for proper purposes. n176
Merely by prohibiting that conduct
under a shrinkwrap license, the nominally "fair use" is constricted out
of
existence. n177
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n176. See, e.g., Sega Enters. Ltd. v. Accolade, Inc., 977 F.2d 1510 (9thCir. 1992).
n177. Judge Easterbrook's praise
of "a clause forbidding disassembly" as "procompetitive" suggests that
this
result represents the conscious
intent of ProCD. See ProCD, 86 F.3d at1455; see generally Robert A. Kreiss,
Accessibility and Commercialization
in Copyright Theory, 43 UCLA L. Rev. 1 (1995).
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Before ending, one more example of
recent vintage springs to mind. A unanimous Supreme Court has just
rejected copyright proprietors'
rights to bar certain parallel importations under the Copyright Act. n178
That
impediment need not deter those
shampoo manufacturers and others who simply include with their products
shrinkwrap licenses forever barring
entry of the subject goods into the United States. Another Supreme Court
precedent likewise bites the dust
under ProCD's view of the law. The list could be multiplied endlessly.
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n178. See Quality King Distribs. Inc. v. L'Anza Research Int'l, Inc., 118 S.Ct. 1125 (1998).
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However, each example in the foregoing
parade of horribles differs in one critical respect from the facts of
ProCD in that each involves interposing
contract into the realm in which Congress had the ability to legislate.
For example, Congress could have
validated oral transfers of copyright. It could have defined "public
performance" to mean performance
before no more than three unrelated adults. It could have excluded parody
from "fair use" and instead imposed
a mandatory license scheme for all would-be parodists. n179 It could have
limited the first sale doctrine
effectively to bar all parallel imports. In other words, Congress could
have
made these choices, but it did not
do so when it set the bounds of the "delicate balance" between that which
enjoys copyright protection, and
that which is free for all to use.
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n179. For present purposes, we are
sidestepping the inquiry as to whether the First Amendment itself affords
parodic breathing space. See generally
Neil W. Netanel, Copyright and a Democratic Civil Society, 106 Yale L.J.
283 (1996); Melville B. Nimmer,
Does Copyright Abridge the First Amendment Guarantees of Free Speech and
Press?, 17 UCLA L. Rev. 1180 (1970).
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By contrast, ProCD deals with matters
outside the ambit of Congress's legislative power as delimited by the
Copyright Clause. For example, the
text of the Copyright Clause makes it clear that Congress cannot grant
copyright protection of indefinite
duration. n180 Feist makes equally clear that Congress is constitutionally
barred under the Copyright Clause
n181 from giving copyright protection to alphabetical telephone listings,
which by their nature fall below
the constitutional threshold for copyrightability. n182 It may be argued
that
the shrinkwrap license in ProCD
therefore falls outside of the realm of preemption altogether because by
definition it cannot "stand[ ] as
an obstacle to the accomplishment of the full purposes and objectives of
Congress." n183
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n180. See U.S. Const., art. I, 8, cl. 8 (authorizing Congress to grant copyrights "for limited times").
n181. An entirely separate question
arises as to whether Congress has the power under the Commerce Clause
to give copyright-like protection
to uncopyrightable materials such as alphabetical compilations of telephone
listings. That is precisely what
Congress may do should it pass currently pending database protection
legislation. See Collections of
Information Antipiracy Act, H.R. 2652, 105th Cong. (1998).
n182. The Court in Feist held open
the possibility that purloining of phone listings, under certain instances,
could give rise to liability under
the state law of unfair competition. See 499 U.S. at 354 (citing 1 Nimmer
on
Copyright, supra note 13, 3.04).
Misappropriation of listings that constitute "hot news" or trade secrets
spring
immediately to mind in this context.
Thus, we have no objection to a data provider such as NASDAQ
maintaining exclusive control over
stock listings for a limited period of time - amounting to days, for example.
But cf. Joel Rothstein Wolfson,
Contract and Copyright Are Not at War: A Reply to "The Metamorphosis of
Contract into Expand," 87 Calif.
L. Rev. 79, 88-98 (1999) (arguing that Article 2B is necessary to provide
full
protection for such data).
n183. Hines v. Davidowitz, 312 U.S. 52, 67 (1941) (emphasis added). See supra notes 90-91.
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This facile argument overlooks the
fact that a state law need not fall within Congress's authority under the
Copyright Clause to interfere with
the objectives of Congress. Consider, for example, a state law that provided
as follows:
Upon expiration of the limited term
of copyright granted by Congress in a particular work, the owner of the
copyright shall, from the moment
of copyright expiration forward into perpetuity, enjoy under the laws of
the
State of California the exclusive
right to do and to authorize any of the following: (1)to reproduce the
formerly
copyrighted work; (2) to prepare
derivative works based on the formerly copyrighted work; and (3) to
distribute copies of the formerly
copyrighted work to the public by sale or other transfer of ownership,
or by
rental, lease, or lending.
Strictly speaking, the foregoing
law is outside the lawmaking authority of Congress under the Copyright
Clause for, as noted above, Congress
is constitutionally constrained to provide limited terms of copyright
protection. But the foregoing provision
would render meaningless the term limitations imposed by the Copyright
Act and should therefore be viewed
as "standing as an obstacle to the accomplishment of the full purposes
and objectives of Congress" - copyright
protection of limited duration. Similarly, the Feist-defeating provision
of ProCD should be viewed as "standing
as an obstacle to the accomplishment of the full purposes and
objective of Congress" - extending
copyright protection only to original works of authorship. Were that not
the
case, state law could effectively
defeat all of the constitutionally generated limitations of the Copyright
Act.
Such a result would offend not only
the Congressional scheme, but would run contrary to the design of the
Copyright Clause itself. n184
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n184. See Hoehling v. Universal City
Studios, Inc., 618 F.2d 972, 980 (2d Cir. 1980) ("Where, as here,
historical facts, themes, and research
have been deliberately exempted from the scope of copyright protection
to vindicate the overriding goal
of encouraging contributions to recorded knowledge, the states are
pre-empted from removing such materials
from the public domain.").
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* * *
The Seventh Circuit's analysis of
Supreme Court preemption cases further reveals the infirmities of its ruling.
For instance, ProCD cites Kewanee
Oil Co. v. Bicron Corp., n185 a case in which the Supreme Court validated
trade secret law. n186 The point
is well taken that the states are free to protect under that rubric materials
that are otherwise uncopyrightable
- an alphabetical customer list, for example. n187 Trade secret laws
survive the "extra element" test
and contravene no federal policy pertaining to copyright. For that reason,
legions of cases rule that copyright
law does not preempt trade secret causes of action. n188
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n185. 416 U.S. 470 (1974).
n186. See ProCD, 86 F.3d at1454.
n187. See id.
n188. See 1 Nimmer on Copyright, supra note 13, 1.01[B][1][h].
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On the other hand, the same line
of cases recognizes that it is only because those state laws limit protection
to works held confidentially that
they survive preemption; otherwise, the distinction between trade secret
law
and copyright would collapse, and
trade secret law would be preempted under section 301. Thus, to the
extent that a state, as a matter
of its own internal law, labels a published book of alphabetical telephone
listings a "trade secret," the law
would be invalid under the Supremacy Clause.
That last result exactly parallels
ProCD's circumstances. Although labeled "contract under the Uniform
Commercial Code" instead of "trade
secret," the state rights under examination were precisely
congruent to those litigated (adversely
to their claimants) in the copyright sphere. Thus, the Seventh Circuit's
reference to trade secret law, far
from proving its approach correct, in fact reveals the error of its way.
n189
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n189. As to trade secrets, their
lack of public accessibility means that there is no imbalance to maintaining
by
contract a higher degree of protection
than copyright law would otherwise afford. See Kreiss, supra note 177,
at 6, 54-56. See also Dennis S.
Karjala, Federal Preemption of Shrinkwrap and On-Line Licenses, 22 U. Dayton
L. Rev. 511 (1997).
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Besides Kewanee Oil, the only other
Supreme Court cases in the intellectual property arena that ProCD cites
to
explicate its preemption analysis
are Aronson v. Quick Point Pencil Co. n190 and Bonito Boats, Inc. v. Thunder
Craft Boats, Inc. n191 The former
illustrates the general principle that contracts for non-commercialized
goods
deserve enforcement; it does not
illuminate the commercialized goods at issue in ProCD. n192
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n190. 440 U.S. 257 (1979).
n191. 489 U.S. 141 (1989).
n192. The subject contract in that
case, far from being a shrinkwrap for a published product, was "freely
undertaken in arm's-length negotiation"
for a wholly confidential product (an ingenious keyholder). Aronson,
440 U.S. at 266. "In negotiating
the agreement, Mrs.Aronson disclosed the design in confidence." Id. at263.
Quick Point explicitly agreed to
pay the negotiated consideration "in return for the use of a novel device
which
enabled it to pre-empt the market."
Id. at264. Parallel logic dictates that if ProCD had entered a negotiated
agreement with Zeidenberg to disclose
unexploited confidential phone listings, and Zeidenberg agreed "to pay
for the opportunity to be first
in the market," as did Quick Point ("an experienced novelty manufacturer"),
he
could not invoke preemption to avoid
his contractual obligations. Id. at266. The essence of Aronson is that
protection of information disclosed
in a bona fide confidential relationship is not inconsistent with the federal
patent and copyright laws. It is
a far cry to suggest, as ProCD does, that an individual publisher can obtain
similar rights by using the artifice
of a shrinkwrap contract to manufacture a "confidential" relationship with
thousands or millions of customers
who pick its product off a shelf or wire.
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Moreover, the Aronson Court's efforts
to distinguish its ruling from Brulotte v. Thys Co. n193 cast further
doubt on the Seventh Circuit's reasoning.
Brulotte held that parties may not extend by contract the maximum
federal term for patents. It therefore
proves that freedom to contract intellectual property must bow before
the federal policies implicated
in that law - the precise point that the district court in ProCD attempted
to
vindicate.
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n193. 379 U.S. 29 (1964).
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Bonito Boats is even more powerful
proof of how Judge Easterbrook's approach cannot stand. In Bonito Boats,
a unanimous Supreme Court ruled
that states lack the power to pass laws barring the plug-molding of boat
hulls. n194 But under the logic
of ProCD, relief for the losing plaintiff should be forthcoming under the
state law
of contract, for the boat manufacturer
simply needs to outfit its products with a shrinkwrap license
forbidding plug-molding. n195
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n194. The House of Representatives
recently passed a bill that would give a limited term of protection to
boat
hulls. See The Vessel Hull Design
Protection Act, H.R. 2696, 105th Cong. (1998); 144 Cong. Rec. H1247 (daily
ed. Mar. 18, 1998) (recording passage).
n195. Indeed, given the vastly larger
space available on a boat hull than on the exterior of a box encasing
software, the manufacturer could
write the whole contract in visible form, dispensing with the cellophane
altogether.
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A month after Bonito Boats was decided,
Judge Easterbrook went on record condemning it as "a step in the
wrong direction." n196 There is
nothing illegitimate about that point of view; it may one day turn the
whole
Court around. But it is quite another
matter for the Seventh Circuit to write Bonito Boats - along with Feist,
Sony, Campbell, Fogerty, and a host
of other decisions - out of existence before that day has dawned. n197
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n196. Frank Easterbrook, Intellectual
Property Is Still Property, 1 Harv. J.L.& Pub. Pol'y 108, 114-17 (1989)
("The proposition that one state's
law concerning injection molding gave anyone a monopoly profit is
hilarious."). The Court's later
ruling in Feist extended the vector of Bonito Boats. See Rochelle Cooper
Dreyfuss, A Wiseguy's Approach to
Information Products: Muscling Copyright and Patent into a Unitary Theory
of Intellectual Property, 1992 Sup.
Ct. Rev. 195. Given Judge Easterbrook's observation that "isolated cases
are not influential," one imagines
that he viewed the trend evidenced by both Supreme Court rulings as "a
web
of decisions," that he presumably
would be happy to see unravel. See Easterbrook, supra, at 118.
n197. In addition, one can add Brulotte
as another Supreme Court case, Lasercomb from the Fourth Circuit,
and Sega v. Accolade from the Ninth
Circuit. It would not be a difficult exercise to extend the inconsistent
thrust of ProCD to previous Seventh
Circuit cases as well, such as Gracen v. The Bradford Exchange, 698 F.2d
300, 304 (7th Cir. 1983).
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* * *
The threat from potential elimination
of user rights through contract, moreover, is not limited to the world
of
shrinkwrap contracts. Greater freedom
of contract should typically attach to negotiated contracts than to
non-negotiated, or "mass market"
contracts. This distinction is reasonable if, in the negotiated context,
the
potential licensee (or more generally,
the potential recipient of copyright rights) can walk away and pursue
other options. The distinction between
negotiated and non-negotiated agreements breaks down, however,
when all or significantly all access
to copyrighted works is mediated through contracts purporting to control
uses of the copyrighted work. n198
A given copyrighted work (for instance, a particular operating system
software for personal computers)
may be de facto necessary to take advantage of hardware and software
offered by other copyright owners.
No matter how vigorously a potential licensee engages in an arms-length
transaction about how she may use
that operating system software, she ultimately lacks any real option of
seeking better terms from a different
source. One can imagine, as in the cautionary tale spun at the start of
this Article, a market in which
copyrighted works as a whole can only be accessed through contract.
In these take-it-or-leave-it contexts,
the lack of true choice means that the copyright owners' contract terms
operate in effect as "private legislation"
that serves to alter en masse the public's rights granted under the
Copyright Act. n199
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n198. At present, most transactions
for copyrighted works involve a straightforward sale, as opposed to a
"license." The straightforward sale
scenario involves contract law, but does not typically purport to affect
the
copyright rights of the end user.
n199. See Robert P. Merges, The End
of Friction? Property Rights and Contract in the Newtonian World of
On-Line Commerce, 12 Berkeley Tech.
L.J. 115, 126 (1997) (footnote omitted) ("[A] dominant contractual form
can operate as a form of "private
legislation' that restricts federally conferred rights every bit as much
as a
state statute."). In the landmark
case of Shelley v. Kraemer, 334 U.S. 1 (1948), the Supreme Court struck
down racially restrictive zoning
restrictions that, as a practical matter, controlled all the real estate
of a
locality and thus obtained the force
of private legislation. Perhaps a similar mind frame should inform evaluation
of those who dominate the "real
estate" of the new space. See Alan Murray, It's Time Gates Placed Trust
in
Trustbusters, Wall St. J., Mar.
9, 1998, at A1 ("Mr. Gates has managed to win near-total control of the
most
valuable real estate in business
today: His Windows operating system has become almost the sole entry point
to cyberspace. He objects to such
comparisons, but his business position is one that even John D. Rockefeller
could envy.").
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One concern about undermining the
holding of ProCD is that to do so exposes valuable databases of
uncopyrightable materials to parasitic
copying and undermines efforts to recoup investment costs through
price discrimination. n200 One must
concede that if neither copyright law nor contract protects
uncopyrightable but valuable databases
from copying, the incentive to create such databases and the
attendant social benefits of having
such databases created may diminish. n201 Accordingly, one may argue
that it is socially desirable to
offer protection for uncopyrightable databases n202 and to foster price
discrimination as an incentive to
investment. n203 But a unanimous Supreme Court has recently
accorded no weight whatsoever to price discrimination as a basis on which
to resolve dilemmas in copyright doctrine. n204 Moreover, as the
Feist court's abolition of the "sweat of the brow" doctrine should make
clear, general considerations of social desiderata plainly cannot justify
ignoring preemption problems of constitutional dimension. Result-oriented
jurisprudence must be resisted, even if one believes the result correct.
The solution to parasitic copying of historical n205 databases, to the
extent such protection is needed, n206 is to be found in creating proper
federal protection for uncopyrighted materials, not in encouraging a contract
regime to perform an end-run around the limits of copyright.
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n200. Plaintiff in ProCD engaged
in price discrimination to recoup its $ 10 million investment incurred
by
charging less to the general public
for private use than to the trade. See ProCD, 86 F.3d at 1449. In order
to
make its price discrimination work,
it had to prevent the type of arbitrage in which defendants engaged. See
id. at 1450.
n201. Nonetheless, the law of misappropriation
can protect against purloining of "hot data." See supra note
182.
n202. Many commentators agree that
because valuable databases have little protection under copyright law,
it would be socially beneficial
to provide greater protection to maintain the proper incentives for database
creation, although they differ about
precisely what form that protection should take. See, e.g., Hearings
Concerning H.R. 2652, The Collections
of Information Antipiracy Act, Before the Subcom. on Courts and
Intellectual Property of the House
Com. on the Judiciary, 105th Cong. (1997) (statement of Laura D'Andrea
Tyson), available in 1997 WL 664842
("Because technology has expanded the potential applications of
databases to myriad research, educational,
medical and business uses, the lack of adequate legal protections
for the efforts of database providers
poses a serious public policy challenge with widespread implications.");
J.H. Reichman and Pamela Samuelson,
Intellectual Property Rights in Data?, 50 Vand. L. Rev. 51, 55 (1997)
("Traditional intellectual property
models, as supplemented by classical trade secret laws, often fail to afford
those who produce today's most commercially
valuable goods enough lead time to recoup their investments.").
n203. It is true that absent relief
under contract law, sellers of CD-ROMs face a dilemma. 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. [The type of arbitrage in
which defendants engaged] would break down the price discrimination and
drive
up the minimum price at which ProCD
would sell to anyone.
ProCD, 86 F.3d at 1450. It must be
acknowledged forthrightly that, without the contractual relief that the
Seventh Circuit enforced, it would
have been difficult for ProCD to price its particular product cheaply to
the
general public. That difficulty,
however, stems in large measure from the fact that the commercial value
of
ProCD was based almost entirely
on quintessential public domain information (alphabetical phone listings).
In
the case of works subject to copyright
protection, such as the movies or computer software discussed in the
passage quoted above, the copyright
laws provide rights to proprietors (for instance, exclusive distribution,
public performance) that are designed
specifically to permit the types of price discrimination ProCD favors.
Moreover, ProCD, Inc. may well have
been able to avoid its difficulties simply by providing some original,
value-added content, which would
be subject to copyright protection (for example, embedding the phone
number information in a proprietary
database structure optimized for speed; adding additional original
information to the listings; organizing
the listings in an original way). By denying protection for the mere effort
of collecting public domain information
(the "sweat" of ProCD's "brow"), the copyright laws create a powerful
incentive to add value to existing
information, rather than simply to repackage and distribute it. The present
authors doubt that the nation would
be better served by a system that protects compilations of public domain
information at the expense of promoting
new original expression; we nonetheless concede that this is a
subject that merits its own extended
treatment.
n204. "Whether or not we think it
would be wise policy to provide statutory protection for such price
discrimination is not a matter that
is relevant to our duty to interpret the text of the Copyright Act." Quality
King Distribs., Inc. v. L'Anza Research
Int'l, Inc., 118 S. Ct. 1125, 1134 (1998). The reasoning of Quality King
applies a fortiori to ProCD. For
in the former case each party could simply adduce one statutory provision
favoring its position (17 U.S.C.
602(a) in favor of plaintiff, 17 U.S.C. 109(a) in favor of defendant).
The Court
rejected plaintiff's policy argument
that price discrimination tipped the scales between these two sections
of
the Copyright Act. But the latter
dispute, by contrast, pits plaintiff's desire for price discrimination
against
defendant's defense of constitutional
magnitude. Thus, the ProCD defendant's arguments are far more
powerful than those which sufficed
to convince the Supreme Court in Quality King.
n205. We use the term "historical" to differentiate from "hot data." See supra note 182.
n206. Critics of currently proposed
database protection legislation point out that there is a dearth of empirical
evidence to support the claimed
need for database protection. See, e.g., Hearings Concerning H.R. 2652,
The
Collections of Information Antipiracy
Act, Before the Subcomm. on Courts and Intellectual Property of the
House Comm. on the Judiciary, 105th
Cong. (1997) (statement of Jerome H. Reichman), available in 1997 WL
662280 ("the rapid growth in the
past few years of electronic databases of all kinds, including hundreds
aimed
at the scientific market, hardly
suggests a lack of incentives."); Pamela Samuelson, Letter re: Tyson/Sherry
Report (last modified Apr. 30, 1998)
<http://www.arl.org/info/frn/copy/psamlet.html> ("The general rule of
"if
it ain't broke, don't fix it' would
seem to apply here. It is striking how little empirical evidence has been
offered
thus far by proponents of database
legislation of actual or threatened market failures that require legislative
action.").
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To conclude, if copyright law is
to maintain an autonomous existence, instead of becoming an adjunct
to whatever lawyers can draft into
shrinkwrap "contracts," then its delicate balance must be respected. For
that reason, the Seventh Circuit's
holding in ProCD, Inc. v. Zeidenberg, it is submitted, is in error.
D. Framework of Preemption Principles: To the Limits of Monopoly
From the foregoing discussion, it
should be clear that contracts can not only coexist within the overarching
copyright framework, but are essential
for its proper implementation. Because U.S. copyrights are infinitely
divisible, contract is the only
sensible means for dividing up spheres of exploitation. On the other hand,
those
convinced by the foregoing discussion
can harbor no doubt that not every device unilaterally imposed under
the rubric "contract" can pass constitutional
muster. ProCD v. Zeidenberg clearly illustrates that phenomenon.
The question therefore remains where
the dividing line lies between the permissible and the forbidden.
Abstracting from the above criticism
of the Seventh Circuit's decision in ProCD, the appropriate dividing point
emerges organically from the copyright
monopoly that Congress, acting within the framework of the
Constitution, bestows upon authors.
If a copyright owner contracts to exploit a work up to the limits of his
constitutionally and congressionally
conferred monopoly, he is acting legitimately; conversely, if an author
uses contract law to enlarge that
monopoly to apply to exploitations beyond its congressionally sanctioned
orbit, she is behaving illegitimately.
That latter conclusion follows whether the expansion derives directly from
state law n207 or as a matter of
contract law, which ultimately derives its enforceability from the same
body
of state law.
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n207. As a direct example of that
phenomenon, see College Entrance Examination Board. v. Pataki, 889 F.
Supp. 554 (N.D.N.Y. 1995) (evaluating
whether New York state law may legitimately require testing service to
reveal the expression underlying
its copyrighted examinations).
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* * *
To illustrate, let us imagine several
scenarios, each applicable to the new entity that hypothetically has
purchased all right, title, and
interest in and to the MGM classic, Gone with the Wind.
Series (i):
. The owner grants A a license to
screen the film theatrically, limited to theaters located on the south
side of
Pico Boulevard in Los Angeles.
. B receives a license to engage
in theatrical distribution anywhere in the United States, but limited to
alternate Tuesdays during leap years.
. C bargains for a license to engage
in worldwide n208 distribution by videotape, for a period of three weeks
only, at a 6% royalty.
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n208. For purposes of the current
analysis, nonetheless, the impact of contracts is treated solely within
the
borders of the United States.
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. D purchases rights of television broadcast in the Cambodian-dubbed version. n209
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n209. Cf. Gamma Audio& Video,
Inc. v. Ean-Chea, 11 F.3d 1106 (1st Cir. 1993) (determining that plaintiff
owned derivative Cambodian translation
of underlying Chinese motion picture).
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. E sews up all rights to Gone with the Wind in DVD format.
. F is the lucky winner of the same rights in CD++ format.
Series (ii):
. G receives the right, after C's
three weeks expire, to engage in distribution of videotapes at the same
6%
royalty, which G agrees to pay for
a term of 100years.
. H receives the right to engage
in theatrical screenings on the north side of Pico Boulevard and throughout
the rest of Los Angeles. However,
as a condition for granting that license, the proprietor insists that G
also
pay a like amount to license Night
of the Lepus.
. MYRRHA stands as guardian to the
portals of all copyrightable compositions. n210 In order to see Gone with
the Wind, viewers must pay the current
freight, set at $ 5 for each 37-minute segment. A comparable charge
is imposed for Night of the Lepus
and every other motion picture. Novels and poems are also metered through
MYRRHA, albeit subject to a different
tariff table.
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n210. See the cautionary tale at the outset of this Article.
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Series (iii):
. The proprietor of Gone with the
Wind has waited past the expiration of the film's term. Nonetheless, taking
advantage of MYRRHA access gates,
it charges the same rates at present as were previously imposed for
anyone to make home copies of the
work.
. In addition, the proprietor takes
out a license in the menu tree of Lotus 1-2-3, invoking MYRRHA's technology
to impose on software developers
a surcharge for incorporating that time-tested model into their latest
products.
Series (iv):
. I receives a license to display
a still frame from the film in connection with news reports surrounding
Clark
Gable's obituary. n211
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n211. For current purposes, let us
imagine that Clark Gable is still alive and that the license applies
prospectively.
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. J receives a license to screen
ten seconds of the film in conjunction with her UCLA seminar on great
films from the heyday of
Hollywood.
. K buys a shipment of 5000 videotapes
of the film, each wrapped in a shrinkwrap license forbidding any and all
uses in Nevada, even if such qualify
as "fair uses" under applicable law.
In analyzing the permissibility of
all of the contracts hypothesized above, our fundamental axiom furnishes
the
answer, at least to the first three
series: contracts are legitimate up to the full extent of the copyright
owner's monopoly as sanctioned by
Congress, and are illegitimate to the extent that they exceed the bounds
of that monopoly.
1. Permissible Limitations
Series(i) represents the uncontroversial
cases. The Copyright Act grants proprietors the exclusive right to do
and to authorize each of the affected
activities. Accordingly, those six contracts should each find
enforcement under the copyright
regime.
2. Misuse and Related Notions
Moving to series(ii), the grant to
G binds that licensee to pay royalties for a century into the future, long
after
the film's copyright will have expired.
That contractual term is illegitimate, as ruled by the Fourth Circuit in
a
landmark case curtailing the legitimate
scope of contracts over copyrightable compositions - even those
bargained for by both contracting
parties. n212
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n212. Lasercomb Am., Inc. v. Reynolds,
911 F.2d 970 (4th Cir. 1990). It would seem that the U.C.C. is
attempting to overrule Lasercomb
by presumptively validating perpetual contractual use restrictions. See
U.C.C. 2B-308(2) (Draft, Mar. 1998).
If 308 were in effect today, a contractual restriction on reproducing
Windows 95 included in the accompanying
shrinkwrap would presumptively be enforceable 150 years hence,
long after the software would have
passed into the public domain under current law. Congress has just
amended the Copyright Act to extend
terms, under the Sonny Bono Term Extension law.
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A point of terminology is in order
here. Although the landmark case just cited labeled the contract infirm
under
the doctrine of "copyright misuse,"
that term is redolent of antitrust law. It is true that instances of antitrust
violations represent one particularly
egregious instance of illegitimate behavior, but the doctrine nonetheless
should not be limited to that sphere.
n213 The fatal flaw against which the Fourth Circuit reacted is that the
copyright owner there was seeking
judicial enforcement of a contract that explicitly contravened the user
limitations incorporated by Congress
into the Copyright Act, not that it was acting in violation of the Clayton
Act or the Sherman Act. Based on
the elaborate edifice constructed above, it is submitted that the rubric
of
"preemption" better describes the
contract's infirmity than does "misuse."
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n213. Lasercomb recognizes as much. See Lasercomb, 911 F.2d at 978.
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Nonetheless, to the extent that an
antitrust violation is present, the same result should inure a fortiori
and the
subject contract must be denied
enforcement. We thus reach H, in which the copyright proprietor has
engaged in what appears to be an
illegal tying agreement (assuming, for the sake of discussion, that the
requisite requirements for market
power in the market for the tying good are met and that buyers would not
otherwise license Night of the Lepus).
n214 That improper behavior results in the invalidation of the subject
license.
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n214. Cf. Data Gen. Corp. v. Grumman
Sys. Support Corp., 36 F.3d 1147, 1169 (1st Cir. 1994) (determining
that Lasercomb could extend to tying
under appropriate facts).
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Moving now to MYRRHA, one can envision
a variety of other potential antitrust violations, from tying to
monopolization to price fixing.
Insofar as the facts support a finding of an antitrust violation, the MYRRHA
licenses must be denied enforcement
by virtue of the illicit goals they attempt to achieve.
3. Within the Subject Matter of Copyright Even as to Unprotected Works
Under the Constitution, as we observed
earlier, federal copyrights endure for terms of limited duration, after
which public policy demands that
the subject expression repose in the public domain. We have already
reviewed why state law cannot attempt
to accord protection anew on such lapsed works. n215 Could
proprietors nonetheless unilaterally
achieve the same result by wrapping their expired works in self-styled
proclamations of resurrection or
in the other devices hypothesized in series (iii)? Because such devices
would
render the "limited times" provision
of the Constitution a nullity, they cannot stand.
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n215. See supra Section III.C.2.
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The same consideration governs the
other usage hypothesized in series (iii) concerning the Lotus spreadsheet.
That work likewise lies outside
the limits of Congress' ambit to protect. n216 To allow the U.C.C. or other
devices enforced under guise of
state law to achieve the contrary result again vitiates the federal scheme
and, as such, cannot stand.
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n216. See Lotus Dev. Corp. v. Borland
Int'l, Inc., 49 F.3d 807 (1st Cir. 1995), aff'd by an equally divided court,
116 S. Ct. 804 (1996). That ruling
arises under the statute. See 17U.S.C. 102(b) (1994). But we submit that
Congress lacks authority under the
Constitution to accord copyright protection to systems, methods, and
concepts. See Baker v. Selden, 101
U.S. 99, 102 (1879).
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4. Difficulty of Drawing the Lines of Fair Use
As always, issues at the boundaries
can bedevil application of any straightforward standard. In this particular
application, copyright's infinitely
elastic doctrine of fair use can pose its share of mischief. We thus
reach series (iv).
In the abstract, it would seem perfectly
straightforward that use of a single frame of Gone with the Wind from
the hundreds of thousands of frames
that comprise the picture - and for the purpose of illustrating the
newsworthy event of reporting the
death of its leading man - qualifies as fair use. By the same token, showing
a few seconds to a film school class
would similarly seem to qualify. Solely from that perspective, the licenses
to I and J must be stricken as illegitimate.
To spell out the foregoing perspective,
the analysis runs as follows: First, a copyright owner is only entitled
to
exploit her monopoly, not to expand
it. Given that the statute itself carves fair use out of the scope of
monopoly granted the copyright owner,
n217 the copyright owner cannot require a user to contract out of fair
use. Because the licenses to I and
J deal with a use that ex hypothesi qualifies for the label of fair, these
contracts are overreaching.
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n217. See 17 U.S.C. 107 (1994).
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The fly in the ointment here is that
fair use is notoriously difficult to ascertain in the abstract. Indeed,
one
usually cannot know whether or not
a use is fair until litigation is resolved at the level of the U.S. Supreme
Court. n218 For that reason, it
may be wise in almost any circumstance to license a work rather than roll
the
dice in a lengthy judicial process.
Particularly when one reflects that cases have held against fair use in
the
selling of coursepacks destined
for educational purposes, n219 and even in the context of using short clips
for
seemingly highly newsworthy events,
n220 the vector towards settling rather than fighting takes on
tremendous magnitude. Accordingly,
the conclusion follows that the licenses to I and J should not be deemed
illegitimate. Instead, because a
court might in fact confound expectations by ruling the subject utilizations
outside the fair-use doctrine, it
is reasonable for two consenting parties to contract now to pay an
ounce of royalties in order to avoid
many pounds of attorneys' fees later.
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n218. "The malleability of fair use
emerges starkly from the fact that all three [U.S. Supreme Court fair use]
cases were overturned at each level
of review, two of them by split opinions at the Supreme Court level." 4
Nimmer on Copyright, supra note
13, 13.05 (footnotes omitted).
n219. See Princeton Univ. Press v.
Michigan Document Servs., Inc., 99 F.3d 1381 (6th Cir. 1996) (en banc)
(vacating previous panel decision
over five dissenting judges), cert. denied, 117 S.Ct. 1336 (1997).
n220. See Roy Export Co. Establishment
v. Columbia Broad. Sys., Inc., 503 F.Supp. 1137, 1148 (S.D.N.Y.
1980) (concluding that the unauthorized
broadcast of selections from Charlie Chaplin motion pictures at the
time of Chaplin's death could not
be defended on First Amendment grounds, inasmuch as the only relevance
to
the news story regarding his death
was not in the events depicted in the films but in the fact that the films
had been made). Even more startlingly,
Los Angeles News Service v. KCAL-TV Channel 9, 108 F.3d 1119 (9th
Cir. 1997), held outside the fair
use doctrine a news station's broadcast of an extraordinarily timely news
segment concerning the then-unfolding
Los Angeles riots. See also Los Angeles News Serv. v. Reuters
Television Int'l, Ltd, 942 F. Supp.
1265, 1272-74 (C.D. Cal. 1996).
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On the other hand, the fair-use doctrine
cannot be ignored in the calculus of permissible contracts. The
license to K makes no bones about
explicitly contravening it. In this particular instance, fine judgments
as to
future predictions need not take
place, for the contract itself eliminates rights guaranteed to users by
statute
under any view of its appropriate
construction. n221 The license, therefore, is impermissible.
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n221. "Although the traditional approach
is to view "fair use' as an affirmative defense, this writer, speaking
only for himself, is of the opinion
that it is better viewed as a right granted by the Copyright Act of 1976."
Bateman v. Mnemonics, Inc., 79 F.3d
1532, 1542 n.22 (11th Cir. 1996) (Birch,J.).
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
Turning to the more vexing issue
of reverse engineering, we would argue that the same considerations apply
as in license K considered above.
In other words, to the extent that a shrinkwrap contract for a
commercialized good required blanket
waiver of any and all reverse engineering rights, it should be deemed
preempted. Precedent up to the circuit
court level has upheld that activity, when appropriately undertaken, as
falling within the fair-use doctrine.
n222 Although the argument remains that the U.S. Supreme Court might
ultimately reject that construction,
until it does so those circuit-court pronouncements should be deemed
declarative of the law. On that
basis, a blanket diminution of user rights as defined by governing construction
of the statute runs afoul of the
primary axiom against illegitimate expansion of the copyright owner's
monopoly. n223
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n222. On the contours of the right, see 4 Nimmer on Copyright, supra note 13, 13.05[D][4].
n223. In our experience, we have
seen shrinkwrap licenses - and even negotiated contracts - that purport
to
bar reverse engineering for any
purpose whatsoever. If enforced, bizarre results would inure. Imagine that
P
imposes such a license term, to
which Q agrees. Imagine further that, some months into the license period,
Q
hears an allegation from a former
programmer at P that the subject product has lifted whole chunks from Q's
source code. In order to perform
the requisite Rule11 investigation, Q would need to reverse engineer P's
software to determine if such copyright
infringement (patent infringement is equally conceivable) has in fact
occurred. Can it honestly be maintained
that Q's development of an iron-clad case of copyright infringement
would leave it liable to contract
damages to P?
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IV Some Lessons for the U.C.C.
At this juncture, it is legitimate
to inquire what standards should inform a sensible drafting of U.C.C. rules.
It
will be recalled that those rules
govern state contract formation, that such state law contracts form an
essential ingredient in the scheme
of federal copyright exploitation, but that certain state law contracts
go
too far. The question posed is the
extent to which Article 2B successfully mediates the potential clash
between copyright and contract.
A. The Neutrality Myth
The drafters of Article 2B are well
aware that transactions in "information" are rife with the potential for
clash
between copyright and contract.
Theirs is an awareness born of abundant recent experience. Distribution
of
software, the quintessential "information"
product, does not typically transpire as a classic sale of a
copyrighted article, such as occurs
when an end user purchases a copyrighted novel. In that classic sale
context, the end user is free to
make use of the purchased product, to sell it, lend it, annotate it, all
subject
only to the constraints of the Copyright
Act.
Copyright owners of software, by
contrast, increasingly do not simply sell a tangible embodiment of their
copyrighted work - a diskette or
CD-ROM - and do not rely on the Copyright Act alone to constrain the end
user. Rather, by selling "goods"
intangibly, such as via "clickwraps" executed over the Internet, they seek
to
interpose a licensing relationship
with the end user as an absolute prerequisite to access and use. Even
without that instrumentality, they
still sell tangible goods via a purported contract designed to create a
licensor/licensee relationship.
The familiar name for that device, as we have seen at length, is the "shrinkwrap
license." n224
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n224. See generally Mark A. Lemley,
Intellectual Property and Shrinkwrap Licenses, 68 S.Cal. L. Rev. 1239,
1259-63 (1995).
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
The preemption issue arises in an
acute form in the shrinkwrap arena - and thus for Article 2B - because
of
the attempted use of shrinkwrap
licenses to create an intellectual property regime based on contract law
that
enlarges the copyright holder's
rights by denying users their rights under the Copyright Act. In this parallel
universe of contract-created "copyright
plus," the copyright owner enjoys all of the benefits conferred by the
Copyright Act, while users are required
to forfeit some or all of the rights secured to them under the Copyright
Act, such as the right to make fair
use of the work without the copyright owner's permission. n225
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n225. See supra PartII.
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The theoretical brake against imperialistic
aspirations here is preemption, which (as discussed above) forbids
state law from undermining the intellectual
property scheme created by Congress. But the current draft of
U.C.C. Article 2B largely avoids
any attempt to limit copyright contracts so as to respect the preemptive
boundaries of copyright. Instead,
the drafters have adopted the position that "Article 2B should not deal
with
federal preemption but should be
neutral" and that that position should be stated in the comments. n226
Implementing this principle of "neutrality,"
Article 2B directly addresses preemption only by providing,
"[a] provision of this article which
is preempted by federal law is unenforceable to the extent of such
preemption." n227
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n226. U.C.C. 2B-105 votes and action b. (Draft, Mar. 1998).
n227. Id.
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But the professed goal of neutrality
is not one that the drafters of Article 2B consistently attempt to achieve.
For instance, the March Draft for
Article 2B consciously departs from the model for sales of goods under
U.C.C.
Article 2, in order to bring the
former into harmony with "clear rules of federal law." n228 Implementing
that
approach, the draft attempts to
accommodate the Copyright Act's requirement of a writing in order to transfer
ownership of a copyright. n229 Similarly,
Article 2B departs from the good-faith purchaser rules of state law,
because copyright law offers no
such defense to claims of infringement. n230 Furthermore, the draft follows
the copyright cases that have held
that the licensee's interest is not transferable without the licensor's
consent despite the fact that this
rule contradicts some state law assumptions about transferability. n231
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n228. Id. 2B-105 reporter's note 1 (Draft, Mar. 1998) (emphasis added).
n229. See id. 2B-201 (statute of
frauds); see also id. Preface at 10 ("Copyright law precludes a transfer
of
ownership of copyright in the absence
of a writing conveying ownership. In discussing development contracts,
this Draft reflects that limitation....").
n230. See id. 2B-508 (determining that there is no bona fide purchase defense for transference of license).
n231. See id. 2B-502 (stating that
the transfer of license rights is ineffective without licensor's consent);
see
also id. 2B-502, reporter's notes
(stating that 2B-502 follows "federal case law" and "federal policy").
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Instead, the U.C.C. drafters purport
to reserve their strategy of "neutrality" - that is, doing nothing affirmative
- only for "controversial or context-determined
rules whose application cannot be predicted and must of
necessity await determinations by
individual courts in particular cases or by Congress as a general federal
policy question." n232 In other
words, the draft is "neutral" only where it chooses to be. n233
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n232. Id. 2B-105 reporter's note
4. Examples of such purportedly controversial issues are "reverse engineering
of copyrighted, but unpatented technology
and...the scope of educational or scientific fair use of digital
works." Id. One could reasonably
question whether fair use reverse engineering, or fair use of digital works
are
truly controversial. Fair use is
a fact-specific inquiry, but it cannot be that reverse engineering and
use of
digital works without the permission
of the copyright owner is never fair use. What is controversial is whether
a copyright owner can deny the public
its fair use rights through a shrinkwrap license. See supra PartII.
n233. One commentator has wryly described
Article 2B as "afflicted with a severe case of multiple personality
disorder when it tries to articulate
its relationship with federal copyright law." Jessica Litman, The Tales
That
Article 2B Tells About Its Connection
with Copyright, 13 Berkeley Tech. L.J. (forthcoming Dec. 1998)
(manuscript at 1, on file with authors).
Elaborating on the draft's lack of true neutrality, she observes:
Article 2B...selectively incorporates
copyright terms and decisions it likes, while encouraging the abandonment
of those it does not. It accomplishes
this trick by insisting that some copyright principles are invariable and
inviolate, and the provision of
Article 2B must therefore be designed to accommodate them. Other copyright
principles would constrain Article
2B licenses only in cases where the license transgresses "specific, existing
and recognized limits" imposed by
federal law, which the Preface assures us would be rare. Finally, a third
category of copyright principles
seems to reflect ideas that the drafters of Article 2B find attractive,
but find
susceptible of improvement.
Id. at 9 (citations omitted). See
also Mark A. Lemley, Beyond Preemption: The Law and Policy of Intellectual
Property Licensing, 87 Calif. L.
Rev. 111, 118 n.14 (1999) ("Article 2B has claimed a posture of "aggressive
neutrality' with respect to federal
intellectual property law. In fact, however, a change in the terms of
contract law necessarily will affect
the contract-intellectual property interface. Such a change cannot be
considered "neutral' in application,
even if it is neutral in intent..."); J.H. Reichman and Jonathan A. Franklin,
Privately Legislated Intellectual
Property Rights: The Limits of Article 2B of the U.C.C. 19 (1998) (unpublished
manuscript, on file with authors)
("When the restored power of the two-party deal in the digital universe
is
combined with the power to impose
non-negotiated license terms, it produces contracts...that are roughly
equivalent to private legislation....
This combination of powers makes a mockery of the drafters' pious claims
that "nothing in Article 2B is intended
to alter the balance between federal mandates and contract principles'
and that Article 2B "takes no position'
concerning controversial issues pertaining to the interface between
state and federal law. Whether intended
or not, the opposite is true.").
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
One criticism of this purportedly
"neutral approach" is that it is otiose. By simply restating in state law
the constitutionally mandated effect
of preemption as contained in the U.S. Constitution, it accomplishes
nothing more than the exact same
result that would inure even in its absence. n234 In particular, it does
nothing to elucidate what is preempted
or to forestall contracting behavior that is impermissible in light of
the
supremacy of copyright.
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n234. An alternative approach to
addressing preemption in Article 2B, which previously enjoyed significant
support, was to amend 2B-308 (mass
market licenses) to provide that a term inconsistent with federal
copyright law does not become part
of a contract under 2B-308. But this approach too fails to advance the
ball beyond the unassailable proposition
that preempted provisions of a contract are not enforceable.
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Further, as a practical matter, this
selective "neutrality" suffers from precisely the same shortcoming of
political neutrality in response
to real-world conflict: n235 it de facto favors those with concentrated
interests
and large financial resources and
thus tacitly invites abuses. By taking no position on preemption other
than
that "it preempts," the draft ratifies
the status quo and makes every imaginable shrinkwrap encroachment on
users' rights presumptively enforceable.
It thus forces into the arena of litigation any determination of whether
a given license or portion thereof
overreaches the supreme bounds of copyright.
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n235. In Dante's Inferno, the souls
of the dead who avoided choosing between good and evil while alive
endlessly circle the gates of hell:
"The wretched souls of those who lived without infamy and without praise
maintain this miserable mode." Dante
Alighieri, The Divine Comedy 4 (Charles Eliot Norton trans., Encyclopaedia
Brittanica 1952).
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The displacement into litigation
of allegedly controversial issues favors vested interests over a diffused
public
whose members lack both the resources
and incentives to litigate. In addition, the draft favors the contraction
of user rights over the public's
right to make fair use of copyrighted materials and to use freely what
lies in the
public domain. It is in this sense
that the metamorphosis from "contract" to "expand" becomes most apparent.
The draft's justification for not
taking an affirmative stand on allegedly "controversial" issues is that
they "must be resolved by courts
and Congress, rather than through state legislation." n236 That proposition
itself is suspect, as the two hypothetical
bills discussed below demonstrate.
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n236. U.C.C. art. 2B Preface at 10 (emphasis added).
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B. How the U.C.C. Might Help Maintain the "Delicate Balance"
One must concede, of course, that
Article 2B cannot anticipate every contract or context in which issues
of
preemption will arise and provide
an a priori fix. But limiting the focus for the moment to copyright preemption,
why could Article 2B not at least
address the means by which licenses have been used to alter the "delicate
equilibrium" - that is, the known
evils? Let us assume, for example, that the next draft were to take an
affirmative stand on copyright preemption
by incorporating the following language, which has been proposed
as an amendment to the Copyright
Act:
Boucher Bill: n237
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n237. Rep. Rick Boucher of Virginia
introduced this language in a bill to the U.S. House of Representatives
in
the current session. See Digital
Era Copyright Act, H.R. 3048, 105th Cong. (1998).
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
Respecting copyright's delicate balance
- When a work is distributed to the public subject to non-negotiable
license terms, such terms shall
not be enforceable... to the extent that they: (1) limit the reproduction,
adaptation, distribution, performance,
or display, by means of transmission or otherwise, of material that is
uncopyrightable under section 102(b)
[of the Copyright Act] or otherwise; or (2) abrogate or restrict the
limitations on exclusive rights
specified in sections107 through114 and sections117 and118 of [the Copyright
Act].
Although the foregoing language is
not presented as the "silver bullet" to eliminate preemption problems,
it
would at a minimum specifically
address at least one preemption concern identified by the current draft
as too
controversial: reverse engineering.
Given that case law upholds certain species of such reverse engineering
as
defensible under the fair use doctrine
codified in section 107 of the Copyright Act, the Boucher Bill would
clarify that a reverse engineering
prohibition in a shrinkwrap license is unenforceable to the extent that
it
abrogates or limits the statutory
fair use privilege. n238
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n238. As previously noted, Judge
Easterbrook intended the ProCD holding to reach the contrary result. See
supra note 177.
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More fundamentally, an Article 2B
incorporating the Boucher Bill would generally safeguard users' rights
by
rendering unenforceable provisions
of licenses that seek to alter the "delicate equilibrium" that the
Copyright Act establishes between
the rights of copyright owners and the rights of the public. Because it
is
salutary, this hypothetical feature
of a newly revised U.C.C. debunks the notion that debates in this sphere
"must be resolved by courts and
Congress, rather than through state legislation." n239
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n239. One defect in the Boucher Bill,
nonetheless, is its reliance on the concept of "non-negotiable license
forms." As discussed above, the
distinction between negotiated and non-negotiated licenses is often
meaningless in the preemption context.
See also Wolfson, supra note 182, at 94-97 (criticizing distinction
between negotiable and non-negotiable
forms).
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
The foregoing thought experiment
n240 reveals no reason why Article 2B could not adopt the foregoing
proposed language, thereby taking
a non-neutral stand on how preemption limits freedom of contract. The
bare fact that the U.C.C. drafters
would thereby be "taking sides," by itself, is unobjectionable: choices
are
inevitable and neutrality usually
a chimera. Indeed, Article 2B self-consciously makes choices in numerous
domains to confer differential benefits
on different constituencies. n241
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n240. One critic of an earlier draft
of this Article elevates our thought experiment entertaining the Boucher
Bill
into a specific "proposal," which
he then proceeds to attack at length. See id. In response, we have
attempted to clarify in the text
and notes above that we do not adopt the Boucher Bill as our own proposal.
Instead, the purpose of our thought
experiment, based on the text of a pending federal bill, is to refute the
claim that the drafters of Article
2B had their hands tied from affirmatively addressing preemption issues.
This
Article does not pretend to offer
a fully developed and concrete proposal of the final language that the
drafters of Article 2B should adopt.
n241. The draft's Preface lists the
benefits of Article 2B as falling into the following categories: General
Benefits; Licensor Benefits; Licensee
Benefits. It thus tacitly acknowledges that while Article 2B may seek to
strike a fair balance between licensor
and licensee rights, its individual provisions are not neutral in how they
confer benefits.
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The fact that the language proposed
above overtly addresses preemption concerns is also unobjectionable.
For as previously noted, Article
2B consciously carves out exceptions to its scope in deference to what
it
deems to be "clear rules of federal
law." Moreover, the draft expressly states that if anyone desires to
challenge its provisions as an impermissible,
or indeed preempted, state encroachment on the federal scheme,
he or she is free to seek redress
in the "courts and Congress."
The legitimacy of the thought experiment
contained in the Boucher Bill, which is premised on respect for
copyright law's delicate balance,
emerges further when it is contrasted with a hypothetical addition to Article
2B designed for the opposite purpose,
that is, one that subverts that balance. As we have noted above
repeatedly, the problem with the
current draft of Article 2B is that it presumptively validates provisions
which
impermissibly tilt in favor of proprietors.
To appreciate why that one-sidedness is illegitimate, let us entertain
conversely a hypothetical provision
crafted to enlarge users' rights, that is, for the opposite purpose from
the
current draft:
Charcutier Bill:
Solicitude for the downtrodden -
When a work is distributed to the public subject to non-negotiable license
terms, such terms shall not be enforceable
unless the licensor: (1) grants the licensee the right to reproduce
an unlimited number of copies for
persons falling below the poverty line as defined in the pertinent provision
of
the Code of Federal Regulations;
and (2) agrees that he or she will not seek more than $ 300 for any copyright
infringement committed by an orphan,
widow or widower or by an individual adjudged "insane" pursuant to the
laws of the state in which the alleged
infringement occurred.
It should be patently obvious that
the language just proposed is preempted and hence unenforceable, for it
baldly encroaches on the exclusive
rights granted to authors under the Copyright Act. n242 One hopes that
the drafters of Article 2B would
peremptorily dismiss the Charcutier Bill as slop, even were massive lobbying
brought to bear for its adoption.
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n242. Cf. Storer Cable Communications
v. City of Montgomery, 806 F.Supp. 1518 (M.D. Ala. 1992) (holding
that Copyright Act preempted Alabama
city ordinance ruling exclusive licenses of cable programming illegal on
antitrust grounds).
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Parallel considerations dictate that
license provisions should also be deemed preempted when they effect a
blatant encroachment on the rights
of users; for example their right to reproduce, adapt, distribute, perform,
or publicly display material that
was once copyrighted and the term for which has lapsed, or the right to
make
fair use of a copyrighted work.
It is here that the current draft of Article 2B needs fixing. By failing
to protect
even those obvious user rights and
by blessing as presumptively valid provisions that would rob users of their
rights, Article 2B's "neutrality"
in effect tilts towards a regime that could be condemned as no less absurd
than
the Charcutier Bill hypothesized
above, when both are viewed from the perspective of rights that Congress
has
denied to copyright owners and thus
reserved to users. Better than either the pro-proprietor tilt of the current
draft or the pro-user tilt of the
Charcutier Bill, what is needed is respect for copyright law's delicate
balance.
Though the Boucher Bill itself is
concededly not a panacea, it at least points in the right direction for
a
balanced reformulation of Article
2B's stance on preemption.
Some proponents of the draft's current
"neutrality" have suggested that it would be a mistake to build specific
preemption-driven restrictions into
Article 2B, because this will force state courts into the quagmire of
preemption analysis, a task that
they view as properly left to the federal courts as the usual arbiters
of
interpreting the Copyright Act and
its interrelationship with other laws. This leave-it-to-the-feds argument
is built on the fallacy that copyright preemption issues can be neatly
cabined within federal venues. In reality, as a necessary adjunct
of resolving contract disputes, state courts cannot avoid making
determinations regarding whether copyright law preempts particular contract
provisions. n243 Under an Article 2B regime, state courts still will not
be able to avoid determining whether given contracts (or contract terms)
are preempted if the defense is raised. Accordingly, Article 2B can be
silent on the issue, and offer no guidance (the faux "neutral" position),
or it can offer some guidance by ruling out as unenforceable contract terms
whose very purpose is to recalibrate the "delicate balance." The faux-neutral
strategy does not eliminate adjudication of preemption issues in state
court. Rather, it guarantees that state courts will face
preemption questions more frequently and on a
broader range of issues.
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n243. As cited above, state courts
must of necessity apply 17 U.S.C. 301 in evaluating the constitutionality
of
the cause of action before them.
See supra notes 129 (citing PMC, Inc. v. Saban Entertainment, Inc., 52
Cal.
Rptr. 2d 877 (Cal. Ct. App. 1996))
and 152 (citing Griggs v. South Carolina Elec. and Gas Co., 463 S.E.2d
608
(S.C. 1995)).
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A second leave-it-to-the-feds argument
adduced by the proponents of faux neutrality is that questions of
what should be preempted, to the
extent addressed in legislation, are best left to Congress. As noted above,
what is really being advocated is
selective "neutrality" about the relationship between Article 2B and federal
law. For in numerous particulars
recounted above, Article 2B is consciously crafted to be in harmony with
the
supremacy of federal law. Given
that the drafters of Article 2B clearly have the ability to take into account
issues of federal law and that they
do so when they wish to, their antagonism to Article 2B forbidding certain
overreaching contracting practices
on preemption grounds smacks of tendentious selectivity. At a bare
minimum, they should clarify why
they have singled out this particular issue as the federal-law question
to be
ducked, particularly when it is
reasonably certain that precisely the evils contemplated herein (for example,
attempting to contract away fair
use) will take place if not curbed. The worst that can be said about
implementing limits on contracting
practices designed to restrict known evils is that if such contracts are
really
not preempted, copyright proprietors
will not be able to enjoy fully the freedom to contract - or at least will
have to fight to do so. n244 Copyright
law itself will not suffer. By contrast, a failure in the other direction
threatens to impinge directly on
the federal copyright scheme.
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n244. The burden under the current
draft of challenging overreaching contracting practices is placed upon
users. By contrast, under the scheme
outlined above, proprietors would bear the burden of proving that a
contracting course upon which they
wished to embark, although presumptively disapproved by the newly
amended Article 2B of the U.C.C.,
nonetheless in fact disserved no greater purpose of copyright and contract
law.
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To sum up, whether Article 2B should choose
"neutrality" over proscribing illegitimate contracting
practices is not an either/or choice
between locating a debate in a federal forum as opposed to a state forum.
The real questions are: (1) How
will the preemption analysis unfold in state courts and under what
presumptive standards (not whether
it will take place)? (2) Who will bear the costs of attempting to diminish
users' rights to increase protections
for copyright owners (not whether such costs exist)? and (3) Who should
be forced to make a federal case
out of it before Congress, those who propose to tilt the delicate balance,
or
those who would seek to maintain
it?
In deciding each of these questions,
we come down firmly in favor of copyright, and suggest that the
attempts to rework, alter, or eviscerate
aspects of copyright through the vehicle of state contract law are
illegitimate. Accordingly, in our
view, it is those who alter the delicate balance who should bear the cost
of
this enterprise, and should be forced
to rework copyright law where it has traditionally been reworked - in
Congress.
Conclusion
It is emphatically not necessary
to view copyright law as a "law of users' rights" (as have some n245) to
adopt
the logic that undergirds this Article
- that copyright has solicitude for the rights of both authors and of users.
Instead, it is necessary simply
to view copyright law as the carefully constructed compromise between
society's disparate goals, reflecting
the delicate equilibrium invoked so often throughout the discussion above.
As the Supreme Court has taught,
"the economic philosophy behind the clause empowering Congress to grant
patents and copyrights is the conviction
that encouragement of individual effort by personal gain is the best
way to advance public welfare through
the talents of authors and inventors in "Science and useful Arts.'" n246
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n245. See L. Ray Patterson & Stanley W. Lindberg, The Nature of Copyright: A Law of Users' Rights (1991).
n246. Mazer v. Stein, 347 U.S. 201, 219 (1954).
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By contrast, n247 some may view copyright
not as embodying any balance at all, but instead solely as a
device to maximize the financial
interest of proprietors. To them, unilateral expansion of the copyright
monopoly beyond its congressionally
sanctioned orbit is to be celebrated. Obviously, those adherents will
remain unconvinced by the viewpoint
expressed herein. But we think that Supreme Court pronouncements over
the years, combined with innumerable
statutory drafting choices, debunk the notion that copyright's
vector points only in the direction
of greater and greater magnitudes of protection. n248
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n247. For a view condemning copyright
as a law of user rights but simultaneously acknowledging that
"copyright loses much of its moral
lustre" if confined purely to the goal of maximizing profits, see Jane
C.
Ginsburg, Authors and Users in Copyright,
45 J. Copyright Soc'y 1, 9 (1997).
n248. Beyond the quotation from Mazer
set forth immediately above, see the discussion above of Feist, Sony,
Bonito Boats, and Campbell. See
supra Part III.
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Nor do we think the following syllogism
holds: "some copyright protection is good, quantity increases quality,
therefore more copyright protection
is better." n249 Instead, we believe that tipping the balance too
precipitously in one direction can
be as baleful as tipping it in the other. As passionate devotees of copyright,
we can do no better than to close
with Lord Mansfield's admonition of two centuries ago n250 that the task
for lawmakers n251 is to pay careful
heed to each of the two socially useful, but antithetical, interests
mediated by copyright
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n249. In our Maimonidean attempt
to achieve the golden mean, we are equally fervent in rejecting the
converse syllogism that concludes
that less copyright protection is better. For precisely that reason we
reject
the Charcutier Bill posited above,
which would illegitimately increase user rights.
n250. Lord Mansfield "is generally
considered the single most influential English jurist of the eighteenth
century." Mark Rose, Authors and
Owners 68 (1993). His pedigree for current purposes is even more
unassailable: as William Murray,
before his elevation to the bench, he served as a practitioner in "most
of the
important Chancery cases concerning
literary property, including [Alexander] Pope v. Curll." Id.
n251. His words are wise, we submit,
for those who make laws in both the legislative and judicial branches,
at
both the state and federal level.
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We must take care to guard against
two extremes equally prejudicial; the one that men of ability, who have
employed their time for the service
of the community may not be deprived of their just merits and reward for
their ingenuity and labor; the other
that the world may not be deprived of improvements nor the progress of
the arts be retarded." n252
"Expand through contract" is a slogan
that offends a constitutionally defensible copyright regime. But when
copyright's delicate equilibrium
is respected, authors, publishers, users, and society at large are all
winners.
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n252. Sayre v. Moore (1785), quoted in Cary v. Longman, 102 Eng. Rep. 138, 139 n.(b) (K.B. 1801)
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