Copyright, Licensing, and the 'First Screen'

Abstract

One prong of the antitrust litigation against Microsoft Corporation challenges the terms under which Microsoft has licensed its Windows operating system to computer manufacturers (OEMs). Plaintiffs complain that the license agreements' requirement that the screen to appear when customers initially turn on (boot up) a computer display certain features common across all Windows-based platforms (the first screen provision), though seemingly within the ambit of normal copyright license agreements, violates the antitrust laws. This paper examines the screen provision in the context of the law and practice respecting computer software licensing. The section provides background on copyright. The second section explores the considerations relevant to licensing contracts. The third section addresses the intersection between antitrust and copyright licensing. The fourth section directly considers the screen provision--what it does, what interests it serves, and what efficiencies it generates. A concluding section argues that, while the provision should pass antitrust muster, the process of examining such licensing provisions under the antitrust laws may do more harm than good. Although Microsoft (not unique among profit-seeking enterprises) no doubt seeks advantages in competing with rivals, the screen provision assists Microsoft's efforts to define its copyrighted product, to reduced training costs to consumers, and to guard against degradation of its product or free riding by licensees. Principal-agent contracts--including licensing contracts--presumptively advance joint interests of the principal and agent, and the screen provision can be seen in context as one component of a contract that (taken as a whole) efficiently responds to differences between interests that a licensor internalizes and those that motivate licensees. Antitrust analysis of principal-agent contracts, however, requires parties to parse particular contract terms in order to assess the efficiency effects (and the other effects on the market for software) of one or more particular contract terms. That analysis necessarily entails an artificial assignment of effects among contract terms that are not divorced from other parts of the principal-agent contract and is likely to be distorted from the considerations informing parties to the contracts. The paper discusses risks attending such analysis in the context of copyright licensing.