Software Transactions and Electronic
Contracting
I. Introduction
Electronic contracts, also called "point-and-click" or
"clickwrap" contracts, are becoming quite prevalent as more
and more business is being conducted online. These
contracts are executed entirely online, usually without any
paper changing hands. It is estimated that as much as $600
billion will be spent on consumer goods purchased by means
of the Internet by the year 2000.1 By means of an
electronic contract, sellers and consumers enter into
agreements previously accomplished by traditional paper
contracts. For example, a software producer may advertise
the products it offers for sale on its Internet web site. A
purchaser can indicate their acceptance of the offer by
clicking on a button which states, "Buy" or "I Accept."2
Generally, the enforceability of online contracts is
governed by ordinary contract principles. There is nothing
fundamentally different about contracting online than on
paper.3
Electronic contracts are obviously desirable for
sellers because of their ease of administration. No face to
face meeting is required and the transaction as a whole is
highly efficient in terms of time and other costs. Consumers
also benefit from the ease and convenience with which they
are allowed to purchase software products without leaving
the comfort of their homes.
The purchase of mass-marketed software products is a
common online transaction. Software may be purchased and
downloaded directly from the internet. Transactions
involving mass-marketed software are usually subject to
licensing agreements, the terms of which often disclaim
express and implied warranties and limit the products' use.
Much debate has surrounded the enforceability of
clickwrap contracts in the context of mass-market software
transactions. The licensing agreements which result from
these transactions have been criticized as being
unenforceable for a variety of reasons. In most commentary,
the question of the enforceability of clickwrap has revolved
around the validity of shrinkwrap agreements. While there
will be some similarities between clickwrap and shrinkwrap,
shrinkwrap is relevant only with regard to software
transactions, and has very unique characteristics. It is
these unique characteristics that pose the greatest threat
to shrinkwrap's validity.
The issues at the heart of the debate center on the
typical terms of mass-market software shrinkwrap and
clickwrap agreements, and not on the more general legal
question of whether contracting online has the same
requirements and validity as contracting on paper.4 Because
online contracts will be subject to the same analysis as to
their validity as ordinary contracts, this paper focuses on
those elements of shrinkwrap and clickwrap software
agreements which are questionable in light of ordinary
contract law. Additionally, some of the difficulties with
shrinkwrap can be avoided in the clickwrap context.5
Part II of this paper discusses the various aspects of
both shrinkwrap and clickwrap software agreements which pose
problems for the enforceability of such contracts under
ordinary contract principles. Part III outlines existing
caselaw surrounding shrinkwrap and concludes that the courts
have not yet come to grips with how to treat modern mass-
market software agreements. Part IV briefly outlines the
purposes and scope of the proposed Article 2B of the Uniform
Commercial Code and looks at some of the commentary for and
against enactment of this new article. Part V consists of
the author's conclusions about the general enforceability of
shrinkwrap and clickwrap software agreements and the likely
success and impact of the new Article 2B.
Part II. Distinguishing Characteristics of Mass-Market
Software Transactions
The use of shrinkwrap agreements for software
transactions has recently been upheld by the Seventh
Circuit.6 Shrinkwrap contracts occur when a consumer has
purchased a software product and the terms of the software
licensing agreement are either printed on the outside of the
package, or, more commonly, enclosed inside the packaging.
The consumer is deemed to have agreed to the terms of the
contract by opening the package.7 Often, this will be the
first time a consumer has access to the terms of the
transaction into which they have already entered by
purchasing and opening the software. These "post-sale"
terms have been central in court decisions dealing with
shrinkwrap enforceability.
Shrinkwrap and clickwrap contracts for mass-market
software may not be enforceable if an end user is not given
an opportunity to review and affirmatively assent to the
terms of a license prior to the consummation of the
transaction.8 Pinpointing the moment at which the
transaction becomes consummated is critical, then, to
determining whether a given license agreement is
enforceable.
Normally, when purchasing goods the offer is made by
placing an item for sale on the shelf of a retail
establishment. The buyer accepts by remitting the purchase
price at the check-out. Once payment has been made, a
contract is formed. However, shrinkwrapped software often
contains vital terms of the license inside the box, so that
the terms are only available for a buyer's perusal after
payment has been made and the software taken home. Caselaw
has, until recently, comported with the idea that such post-
sale license terms were not part of the agreement which was
made at the time of purchase, and thus were unenforceable.9
It has been asserted, however, that "the ability of
licensors in mass-market transactions to use post-sale terms
in shrink-wrap and click-wrap licenses is essential to the
continued existence of a retail software market."10 Whether
these terms actually comport with traditional contract and
other law is the focus of this Part.
Contract Formation and Traditional Contract Principles
Analysis of traditional contract formation is guided
primarily by the Restatement (Second) of Contracts (1981)
and Article 2 of the Uniform Commercial Code, which deals
with contracts for the sale of goods.11 A contract generally
requires an offer, acceptance and consideration.12 An offer
is "a manifestation of willingness to enter into a bargain
so made as to justify another person in understanding that
his assent to that bargain is invited and will conclude it."13
Assent to be bound to an agreement may be indicated by
conduct.14
There is nothing conceptually difficult in thinking of
shrinkwrap and clickwrap contracts as fitting into this
analysis. In a clickwrap contract, for example, an
advertisement and invitation to buy a product posted on a
web page constitutes an offer. An individual surfing the
Web may come upon the invitation and decide he likes the
offer and wishes to accept it. He clicks on a "buy" button,
submits the required information such as his Visa number and
shipping address, and by such conduct consummates the
transaction. In the case of shrinkwrap, the analysis is
somewhat more difficult given that most terms of a license
to use software are read by the consumer (if at all) only
after purchasing the product and, hence, "it is difficult to
say that there has been a `meeting of the minds' sufficient
to indicate contract formation."15
Mass-Market Software Transactions and Contract Law
Mass-market software transactions are usually standard
form contracts. Standardized contracts are also generally
known as "contracts of adhesion." Invalid adhesion
contracts are standard form or boilerplate contracts which
contain terms that would not have been agreed to by the
party manifesting assent had she known the terms were part
of the contract.16 While not invalid per se, contracts of
adhesion give rise to the possibility that a contract might
be invalid because it would be unfair or unconscionable to
enforce it.17 Unconscionability involves unequal bargaining
power between contracting parties and unreasonable or
patently unfair contract terms.18 In the mass-market
software transaction, the contract is a non-negotiated
document written by the seller of the software. There is
often no opportunity for consumers to read warranties and
disclaimers before they actually purchase the product.19
Even if the terms of a software license agreement are
available to consumers before they download a software
product, consumers often do not read the terms they are
"agreeing to" by clicking an "accept" button.20
Mass-Market Software Transactions and Copyright Law
Even if shrinkwrap and clickwrap are ultimately
accepted as valid contracts, the enforcement of these
contracts may be problematic in light of federal copyright
law. Through the use of software licensing, licensors
attempt to limit the ways purchasers (licensees?) may use
software products.21 These limitations are in addition to
already existing limits in place by virtue of copyright
laws. For example, section 117 of the Copyright Act allows
an "owner" of a copy of a computer program to make copies or
adapt computer programs if it is "an essential step in the
utilization of the computer program in conjunction with a
machine . . ., or "for archival purposes only . . . ."22 Yet
many software license agreements prohibit copying the
licensed software.23 As another illustration, section 107
of the Copyright Act allows for the "fair use" of a
copyrighted work.24 Software transactions typically prohibit
the reverse engineering of its software. Both copying and
reverse engineering of computer software have been held to
be a "fair use" of software in some situations.25 Thus,
even if a potential use would be considered a "fair use"
under copyright law, licensors can achieve greater
protection and prohibit such use by way of a shrinkwrap or
clickwrap license.
It is argued that the use of shrinkwrap and clickwrap
to contract around copyright law is unfair and even
illegitimate. Federal copyright laws effect a delicate
balance of interests intended to optimize creativity.26
Congress enacted the 1976 Copyright Act pursuant to its the
"copyright clause."27 Congress later enacted the Computer
Software Copyright Act of 1980, which extended copyright
protection to computer software.28 "The primary rationale
for extending copyright protection to computer programs was
the need for an economic incentive to create programs, which
can be copied far less expensively than they can be
produced."29 The Computer Software Copyright Act attempts
to"strike a careful balance between the rights of copyright
owners on the one hand and program users on the other . . .
."30
State contract law might be preempted by the Copyright
Act by virtue of section 301(a), which provides that "all
legal or equitable rights that are equivalent to any of the
exclusive rights within the general scope of copyright . .
.are governed exclusively by
this title."31 Thus, if the rights which are created under
software license agreements are indeed equivalent to the
rights granted under the "general scope of copyright," then
they would be preempted.32
III. Shrinkwrap Caselaw
Cases addressing the enforceability of shrinkwrap are
few. Most have held that specific shrinkwrap agreement
terms are not enforceable. There are two circuit court
cases invalidating certain provisions in specific shrinkwrap
agreements and one circuit court case upholding shrinkwrap
agreements generally. While these cases do not provide
clear guidance as to whether shrinkwrap agreements will be
enforced, they highlight some of the important issues
surrounding the use of shrinkwrap.
In Vault Corporation v. Quaid Software Ltd., Vault
Corporation ("Vault") made diskettes with a copyrighted
protective device called "PROLOK," which was designed to
prevent unauthorized copying of software programs loaded on
to them.33 Packages of PROLOK were accompanied by a license
agreement which prohibited copying, modification,
decompilation or disassembly of the program.34 Quaid
Software Limited ("Quaid") created a product with the
capability to unlock the PROLOK protective device, allowing
the reproduction of software programs on the PROLOK
diskettes.35 Vault sued Quaid for copyright infringement
based on the fact that Quaid copied Vault's program into its
computer's memory and contributed to the unauthorized
copying of programs placed on its PROLOK diskettes.36 Quaid
also sued for breach of the license agreement.37 The
district court held that the shrinkwrap license in that case
was an unenforceable contract of adhesion.38 The court also
found that a Louisana statute which purported to make
shrinkwrap contracts enforceable was preempted by federal
copyright law.39
The Fifth Circuit affirmed on appeal, holding that
section 117(1) of the Copyright Act permits the copying of a
program into a computer's memory, regardless of the intent
behind this act.40 Thus, "Quaid did not infringe Vault's
exclusive right to reproduce its program in copies under
section 106(1)."41 The court also held that the Louisiana
statute provisions which allowed owners of computer programs
to prohibit "the adaptation of its licensed computer program
by decompilation or disassembly" were preempted by section
117 of the Copyright Act.42 The Fifth Circuit did not speak
directly to the "contract of adhesion" issue.
Another case addressing shrinkwrap enforceability is
Step-Saver Data Systems, Inc. v. Wyse Technology.43 In that
case, Step-Saver Data Systems, Inc., a value-added reseller,
purchased software from The Software Link, Inc. ("TSL").44
Step-Saver placed its orders with TSL by phone and TSL
promised during the call to ship the orders promptly.45 The
parties exchanged purchase orders and invoices with price,
quantity, shipping and payment terms.46 A "Limited Use
Agreement," printed on the software packaging, purported to
disclaim all express and implied warranties that the
software would be free of defects and excluded any
liabilility on the part of TSL.47
After receiving complaints from its customers and after
attempting to reach a solution with Wyse and TSL, Step-Saver
brought breach of warranties claims against the companies
and alleged that TSL had made intentional
misrepresentations.48 The Third Circuit held that a valid
contract was formed by the course of conduct of the parties
after they exchanged phone calls, purchase orders, and the
order invoices and then TSL shipping the product.49 Thus,
the subsequent License Agreement which accompanied the
product altered the terms of the contract and thus were not
part of the agreement. The court came to its conclusion by
applying U.C.C. 2-20750, and finding that the license
agreement proposed additional, material terms which were not
accepted by Step-Saver.51
In ProCD v. Zeidenburg,52 the Seventh Circuit held that
"shrinkwrap licenses are enforceable unless their terms are
objectionable on grounds applicable to contracts in general
(for example, if they violate a rule of positive law, or if
they are unconscionable)."53 ProCD sells a database
containing telephone directories called SelectPhone (tm),
available at different prices for commercial and non-
commercial users.54 Its software packages are wrapped in
plastic "shrinkwrap." The packaging for non-commercial
users states on its exterior that an enclosed license
imposes restrictions of the use of the product.55 One such
restriction included in the license stated that the software
was to be used for non-commercial purposes only.56
The ProCD court treated the licenses as "ordinary
contracts accompanying the sale of products, and therefore
as governed by the common law of contracts and the Uniform
Commercial Code."57 The court declined to analyze the
possible legal differences between licenses and contracts.58
The defendant, Matthew Zeidenberg, argued that a contract
was formed by ProCD placing the product on the retailer's
shelves, constituting an offer, and his payment of the
purchase price, indicating acceptance of the offer. The
terms of the license agreement were not part of the offer or
the acceptance, and thus, the defendant argued, were not a
valid part of the agreement.
Judge Easterbrook, writing the decision of the court,
rejected this argument. The license terms were incorporated
by reference to them on the outside of the package. The
contract was not consummated until Mr. Zeidenberg read the
license terms and failed to reject them, and the offer, by
returning the software.59 The court stated: "Pro CD proposed
a contract that a buyer would accept by using the software
after having an opportunity to read the license at leisure."
(emphasis added).60
Judge Easterbrook's decision relied on U.C.C. and
Restatement (Second) of Contracts principles, as well as
examples of other "money now, terms later" transactions.61
He started with U.C.C. section 2-204(1) "A contract for the
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." The court
read this as conferring a broad right on a software vendor
to be "master of the offer" and invite acceptance in a
specified manner.62
As a matter of contract law, the ProCD decision does
not appear problematic. It is possible, however, that other
courts may not follow Judge Easterbrook's analysis.
Instead, courts newly addressing this issue may follow the
analysis in Step-Saver and consider post-sale terms such as
the ones in the license agreement at issue in ProCD
unenforceable as terms introduced after a contract was
already consummated.63 However, given the enforceability of
post-sale terms in other kinds of transactions,64 and the
public policy noted by Judge Easterbrook of making contracts
efficient in the mass-marketed software industry,65 the
enforceability of shrinkwrap agreements seems fairly well-
grounded.66
No case has yet answered the question of whether
clickwrap contracts are enforceable.67 Yet these agreements
are less problematic than shrinkwrap in most cases, since it
is quite easy for the vendor of software available on the
internet to provide the full terms of the license on one or
more screens which require the potential customer to
manifest agreement before she may download the software.
Thus, the possible problem of post-sale terms can be
entirely avoided. Most commentators believe that clickwrap
agreements will be held to be enforceable.68
IV. Article 2B to the UCC
Some of the uncertainty surrounding electronic and
shrinkwrap contracting would be resolved with the adoption
of a proposed Article 2B of the Uniform Commercial Code.
This new article has been in the works since 1993, when a
committee of the National Conference of Commissioners on
Uniform State Laws began drafting revisions of UCC Article 2
in order to address software licensing.69 In 1995, a new
committee was formed to draft UCC Article 2B, which is
expected to set out standards of electronic contracting
specifically. Advocates from all possible interest groups
have participated in committee meetings, including software
and consumer representatives.70 Various drafts, including
the February 1998 version, are available on the Internet at
the official site of the National Conference of
Commissioners of Uniform State Laws:
<http://www.law.upenn.edu/library/ulc/ulc.htm>.
Proposed Article 2B (Licenses) generally provides that
mass-market software transactions are enforceable.71 It
"attempts to strike a balance between the need for post-sale
terms in mass-market licenses and the danger they pose to
the unwary."72 It covers all transactions (sales and
licenses) in software and all "licenses" of other
"information," i.e., an online newspaper.73 In a contract
which would require a signed writing under the UCC Article
2, a "record" would replace the usual requirement of a
writing and "authentication" would replace signature
requirements.74 2B also provides for the enforceability of,
and sets forth rules for, "mass-market licenses," which are
standard form licenses for purchasers of software available
to the general public in the retail market.75
Under Article 2B, if a purchaser manifests assent by
affirmative conduct before or during the initial use of the
software, the mass market agreement will be enforceable.76
This would effectively overrule the Step-Saver decision,
discussed above, which held that the time of contract
formation was at the time the order for the product was
placed. As the court in ProCD reasoned, the contract is
consummated only after a purchaser has taken the software
home, read the license agreement, and has had an opportunity
to reject the terms. Under ProCD and Article 2B, the
license terms are no longer additional terms to an already
existing contract.
If adopted, UCC Article 2B would broaden the scope of
contract law in order to deal with the relatively unique
attributes of software licensing. "It is clear that the
U.C.C. draft represents a significant change in the
direction of greater enforceability of shrinkwrap licenses
in general and of individual terms of those licenses."77 It
is projected that 2B will be ready for presentation to state
legislatures for their consideration by the fall of 1998.78
V. Conclusion
Shrinkwrap and clickwrap contracts in the mass-market
software context appear to be gaining widespread acceptance
both in the business world and recently in the courts.
While there appear to be some concerns for consumer
protection under these contracts of adhesion, injustices can
be dealt with adequately within the realm of traditional
contract law using concepts such as unconscionability. The
proposed Article 2B of the UCC has broad support and will
probably be adopted as states become interested in
establishing standards for mass-market software
transactions.
_______________________________
1 Richard D. Harroch, Online, Draftsmanship is Still
Pivotal (February 2, 1998)
<http://www.ljx.com/internet/0202webks.html>. A U.S.
Department of Commerce report issued in April, 1998 projects
there will be about $300 billion in commercial online
transactions by the year 2002. U.S. Sees Big Growth in
Electronic Commerce, (April 15, 1998)
<http://127.0.0.1:15841/v1?catid=655619&md5=eb6e57fd510afd68
0db75483fdf31729.
2 For an example of a clickwrap agreement, see
<http://www.viarch.org/html/spec/clickwrap_agreement.htm>.
The act of copying or downloading software is usually the
act of assent to license terms in online contracts:
IMPORTANT - READ BEFORE COPYING OR DOWNLOADING
THE
ATTACHED VI ARCHITECTURE SPECIFICATION.
By downloading or copying the attached VI
Architecture Specification ("Specification"),
you
. . . agree to abide by the terms and conditions
of this License Agreement ("Agreement").
Do not
copy or download this specification until
you have
carefully read and agreed to the following
terms
and conditions. If you do not wish to
agree to
these terms and conditions do not download
or copy
this specification.
<http://www.viarch.org/html/spec/clickwrap_agreement.htm>.
This clickwrap goes on to claim that, except for the license
agreement, "no other license or right is granted to you
under any patents, copyrights, trade secrets, or other
intellectual property rights by this Agreement, either
directly or by implication, estoppel, or otherwise. Any
further license under such intellectual property rights must
be express and in writing." Id. The clickwrap provides
that the specification is supplied "as is," and disclaims
"any express or implied warranty of any kind including
warranties of merchantability, noninfringement, or fitness
for a particular purpose." Id. Additionally, the license
purports to excuse the company from liability "for any
damages whatsoever . . . ." Id.
3 The main issues affecting the validity of clickwrap are
the fact that there is no written agreement and the fact
that the statute of frauds requires a signed writing for the
purchase of goods over $500. U.C.C. section 2-201(1).
Neither of these issues pose particular problems for
clickwrap as compared to traditional paper contracts. There
are numerous instances in which transactions are conducted
without any actual written contract being involved,
including service contracts such as those for dry cleaning
and parking one's car in a garage. See Fred M. Greguras,
et.al., Electronic Commerce: On-Line Contract Issues, 452
PLI/Pat 11, 16 (1996). Additionally, parties contracting to
purchase software over $500 will likely have some written
confirmation of the sale in conjunction with their online
transaction. Id. at 17. Additionally, proposed Article 2B
would solve this potential problem by imposing different
requirements for software transactions. See discussion of
the proposed Article 2B of the U.C.C., infra.
4 The main issues for clickwrap are the fact that there is
no written agreement and the fact that the statute of frauds
requires a signed writing for the purchase of goods over
$500. U.C.C. 2-201. Neither of these issues pose
particular problems for clickwrap as compared to traditional
paper contracts. There are numerous instances in which
transactions are conducted without any actual written
contract being involved, including service contracts such as
those for dry cleaning and parking one's car in a garage.
See Fred M. Greguras, et.al., Electronic Commerce: On-Line
Contract Issues, 452 PLI/Pat 11, 16 (1996). Additionally,
parties contracting to purchase software over $500 will
likely have some written confirmation of the salein
conjunction with their onlinetransaction. Id. at 17.
5 Clickwrap can avoid the problem of post-sale terms by
requiring purchasers to affirmatively assent to contract
terms before being allowed access to the software. Maureen
A. O'Rourke, Fencing Cyberspace: Drawing Borders in a
Virtual World, 82 Minn. L. Rev. 609, 688-89 (1998). "The
main advantage of on-line software distribution is that it
avoids the major contractual obstacles to the enforceability
of shrinkwrap licenses. Apik Minassian, The Death of
Copyright: Enforceability of Shrinkwrap Licensing
Agreements, 45 U.C.L.A. L. Rev. 569, 576 (1997)(noting that
online software transactions requiring the that the
purchaser agree to all terms before receiving the software
allows a vendor to ensure that all terms become part of the
transaction at the outset).
6 ProCD v. Zeidenburg, 86 F.3d 1447 (7th Cir. 1996).
7 Kent Stuckey, Shrink-Wrap/Point-and-Click Agreements,
(visited March 1, 1998)
<http://www.ljx.com/internet/excerpt.html>.
8 See Draft U.C.C. section 2B-112, 2B-113, 2B-307.
9 See, e.g., Step-Saver v. Wyse Technology, 939 F.2d 91
(3rd Cir. 1991); Arizona Retail Sys. Inc. v. The Software
Link Inc., 831 F. Supp. 759 (D. Ariz. 1993).
10 William A. Streff Jr. and Jeffrey S. Norman, Courts, UCC
Tackle Shrink-Wrap Licenses, (October 14, 1997)
<http://www.ljx.com/internet/1014shrink.html>.
11 There is some dispute about whether the purchase of
software is really a sale of goods or whether it is more
acurately characterized as a licensing arrangement.
"[A]lmost all courts and commentators that have considered
the issue have concluded that t shrinkwrap license
transaction is a sale of goods rather than a license, and is
therefore covered by Article 2 of the current U.C.C." Mark
A. Lemley, Intellectual Property and Shrinkwrap Licenses, 68
S. Cal. L. Rev. 1239, 1244, n. 23 (1995)(citing cases).
12 "[T]he formation of a contract requires a bargain in
which there is a manifestation of mutual assent to the
exchange and a consideration." Restatement (Second) of
Contracts section 17(1) (1981).
13 Restatement (Second) of Contracts section 24 (1981).
14 "A contract for sales 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."
UCC 2-204(1).
15 William A. Streff Jr. and Jeffrey S. Norman, Courts, UCC
Tackle Shrink-Wrap Licenses, (October 14, 1997)
<http://www.ljx.com.internet/1014shrink.html>.
16 See Restatement (Second) of Contracts section 211(3)
(1988).
17 UCC section 2-302(1) provides that a court need not
enforce an unconscionable contract.
18 Mark A. Lemley, Intellectual Property and Shrinkwrap
Licenses, 68 S. Cal. L. Rev. 1239, 1254-55 (1995).
19 Wendy R. Leibowitz, In New UCC Software Contracts, Is the
Customer Always Wrong? (February 23, 1998)
<http://www.ljx.com/internet/ircomm.html>.
20 Joseph P. Verdon, Article 2B: Transitions in Software and
`Information,' (August 13, 1997)
<http://www.ljx.com/internet/0813ucc2b.html>. See also Carl
S. Kaplan, Are Click-Wrap Terms of Agreement Enforceable?
(October 2, 1997)
<http://www.nytimes.com/library/cyber/law/100297law.html>(no
ting that chat room participants virtually never read
clickwrap "terms of use" agreements before "agreeing" to
them). Note, however, that "[a] contract need not be read
to be effective; people who accept take the risk that the
unread terms may in retrospect prove unwelcome." Hill v.
Gateway 2000,Inc., 105 F.3d 1147, 1148 (7th Cir. 1997).
21 See Tim Alan Covington, The Future of Shrinkwrap Licenses
(1994) <http://www.fenwick.com/pub/future.html> (discussing
the "four main objectives" of shrinkwrap licenses).
22 17 U.S.C. section 117. Additionally, section 117 states:
Any exact copies prepared in accordance with
the
provisions of this section may be leased,
sold, or
otherwise transferred, along with the copy
from
which
such copies were prepared, only as part of
the
lease, sale, or other transfer of all rights
in
the program. Adaptations so prepared
may be
transferred only with the authorization of
the
copyright owner.
17 U.S.C. section 117.
23 Lemley at 1266.
24 17 U.S.C. section 107 provides:
[T]he fair use of a copyrighted work,
including
such use by reproduction in copies or phonorecords
or by any other means specified by that section,
for purposes such as criticism, comment, news
reporting, teaching (including multiple copies
for
classroom use), scholarship, or research,
is not
an infringement of copyright. In determining
whether the use made of a work in any particular
case is a fair use the factors to be considered
shall include--
(1) the purpose and character
of the use,
including whether such use is of a commercial
nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted
work;
(3) the amount and substantiality
of the portion
used in relation to the
copyrighted work as a whole; and
(4) the effect of the use upon the potential
market for or
value of the copyrighted
work.
25 See, e.g., Atari Games Corp. v. Nintendo of Am., Inc.,
975 F.2d 832 (Fed. Cir. 1992)(reverse engineering); Vault
Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir.
1988)(copying and reverse engineering).
26 Apik Minassian, The Death of Copyright: Enforceability of
Shrinkwrap Licensing Agreements, 45 U.C.L.A. L. Rev. 569,
592 (1997).
27 "The Congress shall have the Power . . . [t]o promote the
Progress of Science and useful Arts, by securing for limited
Times to Authors and Inventors the exclusive Right to their
respective Writings and Discoveries . . . . U.S. Const.
art. I, section 8, cl. 8.
28 Michael E. Johnson, Note, The Uncertain Future of
Computer Software Users' Rights in the Aftermath of MAI
Systems, 44 Duke L. J. 327, 330.
29 Id. at 330-331
30 Id.
31 17 U.S.C. section 301(a)(1994).
32 Apik Minassian, The Death of Copyright: Enforceability of
Shrinkwrap Licensing Agreements, 45 U.C.L.A. L. Rev. 569,
585 (1997). See also Mark A. Lemley, Intellectual Property
and Shrinkwrap Licenses, 68 S. Cal. L. Rev. 1239, 1270-1274
(1995) (discussing the extreme complexity of this
determination and discussing cases coming to different
conclusions concerning software transactions and copyright
preemption).
33 Vault Corp. v. Quaid Software, Ltd., 847 F.2d 255, 256
(5th Cir. 1988).
34 Id. at 257.
35 Id.
36 Id. at 259.
37 Id. at 268.
38 Vault Corp. v. Quaid Software, Ltd., 655 F. Supp. 750,
761 (E.D. La. 1987), aff'd, 847 F.2d 255 (5th Cir. 1988).
39 Id.
40 Vault Corp. v. Quaid Software, Ltd., 847 F.2d 255, 261
(5th Cir. 1988).
41 Id.
42 Id. at 270.
43 939 F.2d 91 (3rd Cir. 1991).
44 Step Saver Data Systems, Inc. v. Wyse Technology, 939
F.2d 91, 94 (3rd Cir. 1991).
45 Id. at 95-96
46 Id.
47 Id. at 96-97.
48 Id.
49 Id. at 100.
50 U.C.C. section 2-207 provides in part:
(1) A definite and seasonable expression
of acceptance or a
written confirmation which is
sent within a reasonable time
operates as an acceptance even
though it states terms
additional to or different from
those offered or agreed
upon, unless acceptance is expressly
made conditional on
assent to the additional or different
terms.
(2) The additional terms are to be construed
as proposals
for addition to the contract.
Between merchants such terms
become part of the contract unless:
(a) the offer expressly
limits acceptance to the terms
of the offer; (b) they
materially alter it; or (c) notification
of objection to
them has already been given or
is given within a reasonable
time after notice of them is received
. . . .
51 Id.
52 86 F.3d 1447 (7th Cir. 1996).
53 Id. at 1449.
54 Id.
55 Id. at 1450.
56 Id.
57 Id.
58 Id.
59 Id. at 1452-53.
60 Id. at 1452.
61 For example, the purchase of insurance, an airline
ticket, and a theater ticket. The court also mentioned the
purchase of consumer goods, such as radios and television
sets, where terms including warranties are included inside
the box and are usually first read after the purchaser has
brought the product home. Id. at 1451.
62 Id.
63 William A. Streff Jr. and Jeffrey S. Norman, Courts, UCC
Tackle Shrink-Wrap Licenses, (October 14, 1997)
<http://www.ljx.com.internet/1014shrink.html>.
64 See, e.g., Carnival Cruise Lines, Inc. v. Shute, 499 U.S.
585 (1991) (upholding a foreign selection clause attached to
a cruise ticket received after purchase of the ticket).
65 "Notice on the outside, terms on the inside, and a right
to return the software for a refund if the terms are
unacceptable . . . may be a means of doing business valuable
to buyers and sellers alike." ProCD v. Zeidenberg, 86 F.3d
1447, 1451 (1996).
66 See Elizabeth S. Perdue, Challenges of On-Line Contracts
With a Point and a Click (December 1997)
<http://www.ljx.com/internet/97_12click.html>, for a list of
cases citing ProCD without criticism.
67 Actually, in CompuServ, Inc. v. Patterson, 89 F.3d 1257
(6th Cir. 1996), the court implicitly approved the use of
clickwrap agreements in determining that defendant, because
he had entered into clickwrap agreements with plaintiff, had
requisite contacts with plaintiff's state to establish in
personam jurisdiction.
68 Richard D. Harrock, Online, Draftsmanship Is Still
Pivotal, (February 2, 1998)
<http://www.ljx.com/internet/0202webks.html>.
69 Stephen Y. Chow, Contracting in Cyberspace: The Triumph
of Forms? 41-Jun B. B.J. 16, 28 (1997).
70 Joseph P. Verdon, Article 2B: Transitions in Software and
`Information,' (August 13, 1997)
<http://www.ljx.com/internet/0813ucc2b.html>.
71 Id.
72 William A. Streff Jr. and Jeffrey S. Norman, Courts, UCC
Tackle Shrink-Wrap Licenses, (October 14, 1997)
<http://www.ljx.com.internet/1014shrink.html>.
73 Joseph P. Verdon, Article 2B: Transitions in Software and
`Information,' (August 13, 1997)
<http://www.ljx.com/internet/0813ucc2b.html>.
74 Id.
75 Id.
76 U.C.C. Article 2B (February 1998 draft) section 2B-
308(a).
77 Mark A. Lemley, Intellectual Property and Shrinkwrap
Licenses, 68 S. Cal. L. Rev. 1239, 1262 (1995).
78 Joseph P. Verdon, Article 2B: Transitions in Software and
`Information,' (August 13, 1997)
<http://www.ljx.com/internet/0813ucc2b.html>.