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Keywords

contractinjunctionappealintellectual propertycopyrightobjection
contractplaintiffappealdiscriminationobjection

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ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 65 USLW 2014, 1996 Copr.L.Dec. P 27,529, 39 U.S.P.Q.2d 1161, 29 UCC Rep.Serv.2d 1109

Facts

ProCD, the producer of a computer software database containing telephone listings, sued Matthew Zeidenberg after he downloaded the listings and made them available on the Internet, violating the shrinkwrap license that accompanied the software. The district court ruled that the shrinkwrap license was not enforceable because its terms were not visible at the time of purchase. ProCD appealed the decision, arguing that the license was binding under the Uniform Commercial Code and that its enforcement did not conflict with the Copyright Act.

ProCD, the plaintiff, has compiled information from more than 3,000 telephone directories into a computer database. ProCD decided to engage in price discrimination, selling its database to the general public for personal use at a low price (approximately $150 for the set of five discs) while selling information to the trade for a higher price.

Issue

Must buyers of computer software obey the terms of shrinkwrap licenses?

Must buyers of computer software obey the terms of shrinkwrap licenses?

Rule

Shrinkwrap licenses included with computer software are enforceable unless their terms are objectionable on grounds applicable to contracts in general. Under Wisconsin law, a contract includes only the terms on which the parties have agreed, and a vendor may propose limitations on the kind of conduct that constitutes acceptance. The enforcement of such licenses under state law does not create rights equivalent to exclusive rights within the general scope of copyright and is not preempted by the Copyright Act.

Analysis

The court found that the shrinkwrap license was binding because the buyer accepted the terms by using the software after having the opportunity to read the license. The court reasoned that the UCC allows for contracts to be formed in various ways, including through conduct, and that the buyer's failure to reject the terms after inspection constituted acceptance. The court also noted that the enforcement of the license did not interfere with the rights granted under copyright law, as it did not restrict third parties from using the information in the public domain.

ProCD proposed a contract that a buyer would accept by using the software after having an opportunity to read the license at leisure. This Zeidenberg did. He had no choice, because the software splashed the license on the screen and would not let him proceed without indicating acceptance.

Conclusion

The court reversed the district court's decision, holding that the shrinkwrap license was enforceable and that ProCD was entitled to an injunction against Zeidenberg's unauthorized distribution of the software.

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).

Who won?

ProCD prevailed in the appeal, as the court ruled that the shrinkwrap license was enforceable under Wisconsin law. The court emphasized that the buyer had the opportunity to read the license terms and accepted them by using the software. This ruling reinforced the validity of shrinkwrap licenses in commercial transactions, allowing producers to protect their intellectual property rights while still enabling consumers to access the software.

ProCD prevailed in the appeal, as the court ruled that the shrinkwrap license was enforceable under Wisconsin law. The court emphasized that the buyer had the opportunity to read the license terms and accepted them by using the software.

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