Who’s Afraid of ProCD?

Posted by:
Category: Computer Law, Intellectual Property Law, Seventh Circuit
Leave a Comment »

It’s a prevalent meme in contemporary copyright scholarship that the public domain is being “enclosed” by expansions in copyright law. Scholars point to many examples of this alleged expansion, including term extension, anticircumvention laws, and court decisions rejecting certain attempts to claim fair use. But one widespread source of complaint among copyright scholars is the idea that contracts are somehow being used to expand copyright owners’ rights. And the chief villain in this story is the decision that allegedly started it all, the Seventh Circuit’s own ProCD v. Zeidenberg, authored by Judge Frank Easterbrook.

I should note right off the bat that I am not quite so enamored of form agreements as Judge Easterbrook is. That much I probably share with my fellow copyright specialists. But I’ve come to the tentative conclusion that the case for contracts somehow expanding copyright rights is vastly overstated, and perhaps illusory. ProCD–with the exception of one overlooked wrinkle–is not the threat everyone seems to think it is.

Here’s how scholars typically describe the danger they see in ProCD and its progeny. “You know all of those limitations that exist in copyright law, that prevent overreaching by copyright owners? Like the doctrine that facts are not copyrightable, or that fair uses are permitted, or that a consumer can resell a copyrighted work? Well, after ProCD you can kiss those all goodbye. A copyright owner can now put terms in the license that prohibit you from doing all that. So, a copyright owner can evade the first sale doctrine by saying, ‘No redistribution of this CD is permitted.’ Or evade the copyrightability requirements by putting a ‘No copying’ license term on a telephone book. Or evade fair use by saying ‘You cannot quote this work in order to criticize it.’” (For a recent flare-up of this issue, involving patents rather than copyrights, see this example of a license placing restrictions on a package of grapes bought at the grocery store. More from Mike Madison.)

Well, that all sounds bad. But here’s what I want to know: how are these terms being enforced? Are they being enforced under the Copyright Act, or under contract law? It makes a huge difference. The Copyright Act provides remedies for infringement that include injunctions, statutory damages starting at $750 per work, and attorneys fees. It would certainly be a de facto expansion of copyright law to say that a copyright owner can get infringement damages for the copying of an uncopyrightable work, such as the white pages of a telephone book.

But it’s not clear to me that’s what ProCD and its progeny are doing. Rather, the cases I’ve seen appear to enforce such terms only with the much more limited remedies available under contract law. ProCD used contract law–specifically, UCC § 2-204 (after incorrectly denying the relevance of § 2-207, the infamous “battle of the forms” provision)–to argue that the parties could structure the transaction however they wished, including by providing a fuller statement of the terms after purchase, with a right of return. There’s nothing in the opinion that suggests that Zeidenberg was being held liable under copyright law. Indeed, the Seventh Circuit confirmed this view in Assessment Technologies v. Wiredata a few years ago. The plaintiff, Assessment Technologies (AT), was suing the defendant for attempting to obtain copyrighted databases from a third party in violation of the license terms. But as the Seventh Circuit noted, AT was not suing for breach of contract (there was no contract between plaintiff and defendant) or even tortious interference with contract. Since there was no contractual claim at issue, the Seventh Circuit declared ProCD to be “irrelevant.”

So here’s the situation I see after ProCD: License terms that govern activity within any of the exclusive rights of the copyright owner (and not excluded under any of the restrictions) can be enforced with copyright remedies. License terms governing activity outside of those exclusive rights–including activity falling within an exception, such as fair use or first sale–is governed only by contract law, with its more limited remedies. What’s wrong with that?

One response might be that, even if users don’t face copyright infringement liability for violating license terms, still they face liability of some sort for engaging in behavior that is beyond the scope of the copyright owner’s rights and we shouldn’t allow that. But fair use and the other limitations on copyrights in the Copyright Act are hardly immunities from all law whatsoever; they are only restrictions on the scope of copyright law. This is incredibly obvious when we are not dealing with information goods. For example, nothing in copyright law obligates me to part with my car. But I can enter into an enforceable contract under which I forgo my right not to transfer ownership of my car. The same principle governs non-copyright restrictions on information goods. Nothing in the Copyright Act forbids me from copying Shakespeare, but that doesn’t mean I don’t have to leave the library at closing time. Similarly, even though it’s not protected by copyright law, I can contract not to copy and redistribute the (uncopyrightable) white pages I get from a telephone company.

Another possibility, raised by the defendant in the ProCD case, is that the Copyright Act preempts contractual terms under which parties agree not to act to the full scope of the limits permitted under the Copyright Act. The verbal gymnastics I had to go through to describe that argument, however, should indicate that the right to enforce such a promise under contract law is hardly “equivalent to any of the exclusive rights within the general scope of copyright,” the test for preemption under 17 U.S.C. § 301(a). As the Seventh Circuit held in ProCD, the mere fact that contract requires mutual agreement takes it out of the scope of the Copyright Act, as the right to enforce such a bargain is hardly “exclusive”–it binds only the party that entered into the agreement.

Still, there’s one wrinkle here that gives me pause. It’s not absolutely clear to me that courts appreciate the difference between enforcement of a license as a contract and enforcement of a license under the Copyright Act. As an example, take ProCD itself. The typical remedy for a breach of contract is expectation damages. And lo and behold, in ProCD, the plaintiff actually sold a version of its phone book CD that would have allowed Zeidenberg to do what he did (Zeidenberg had bought the more limited “consumer” version). So the remedy in ProCD is rather obvious: it’s the difference in price between the deluxe version of ProCD’s product and the cheaper consumer version.

But it’s not clear that that’s the remedy that was actually awarded. ProCD had sued in the district court for “injunctive and monetary relief brought pursuant to the federal Copyright Act . . . , the Wisconsin Computer Crimes Act . . . , and Wisconsin contract and tort law.” The district court awarded summary judgement for the defendant on all counts. The Seventh Circuit then “remand[ed] with instructions to enter judgment for the plaintiff” only on the contract claim. What remedies were awarded? The Lexis headnotes suggest that the plaintiff got its injunction, but injunctions–i.e., specific performance–are an unusual contract remedy, entered only in certain circumstances like the sale of unique goods. Since ProCD had already priced the value of unrestricted distribution of its product and was selling that to others, an injunction would not seem appropriate here.

A more interesting question is whether injunctions should issue as a remedy for breaches of contract involving information goods generally, e.g., software programs or databases with no “commercial” license. I haven’t walked all the way through that analysis, and off the top of my head arguments occur to me on both sides. One thing is clear, however, which is that a court should not simply presume that an injunction is an appropriate contract remedy for a breach of a license term that falls outside a copyright owner’s Section 106 rights.

Print Friendly

You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

AddThis Social Bookmark Button

Leave a Reply