The software license with teeth

Abstract

What happens when a graduate student in computer science buys a telephone directory on CD-ROM and uses the directory to start a business on the Internet? Can he take advantage of the legal rule that the content of telephone directories is not protected by copyright law, or is he bound by the license that came with the box of software. Those were the questions before the court in the recent case of ProCD Inc. vs. Zeidenberg. ProCD brought suit in Wisconsin federal court for infringement of its copyrights and for breach of the shrink-wrap license. On its copyright claim, ProCD ran headlong into a 1991 Supreme Court case-the Feist case-which held that the contents of telephone directories are not protected by the copyright laws because they lack sufficient creativity. Based on this case, the district court found that Zeidenberg had done nothing wrong under the copyright laws in using ProCD's directory. ProCD did no better on its shrink-wrap license claim. With its business in jeopardy, ProCD had no choice but to appeal the district court's decision to the Seventh Circuit Court of Appeals. This time ProCD won. The appeals court focused its attention on the shrink-wrap license. On the question of whether the license was a binding contract, the court noted that many commercial transactions involve paying first and receiving contract terms later. Of critical importance to the court was the fact that ProCD's license agreement allowed the purchaser to return the product after reading the license. Accordingly, although Zeidenberg did not have an opportunity to negotiate the terms of the license, if he did not agree to them, he could have sent the product back. ProCD's victory represents an important breakthrough in computer law since it is the first appellate case to enforce a shrink-wrap license. Future cases are likely to refine this decision, but for now, shrink-wrap licenses clearly have more teeth than ever before.