Re: Consideration in a Shrinkwrap Contract

John Noble writes:

: At 4:00 PM -0400 10/5/00, Peter D. Junger wrote:
:
: >I wasn't claiming anything, I was asking questions. But I am willing
: >to claim that every transfer of a _copy_ of a copyrighted work that is
: >made for valuable considertion and does not create a bailment a sale
: >of goods (unless, of course, the copy is realty). ...
:
: Dear Mr. Speilberg: I would like to offer you this opportunity to consider
: purchasing the film rights to my forthcoming novel. I hereby offer to send
: you a COPY of my novel upon the condition that only you may read it to
: decide whether you would like to make the film. By accepting this offer,
: you agree that 1) you will not let anyone else read it: 2) that you will
: not describe its plot to anyone regardless of whether the description might
: qualify as a fair use; and 3) that you will dispose of it only by
: destroying it regardless of whatever rights you might otherwise have under
: the first sale doctrine.
:
: Are you saying that deal is uneforceable?

No. But if that deal is enforceable, it is a contract not a license. A license is a grant (a conveyance) of permission to the licensee to do something that the licensee could not otherwise legally do. (If you give me permission to breath, that is not a license. If you give me permission to park in your driveway this afternoon, that is a license.

Now it the deal that you describe is enforceable it is certainly not a license. If Speilberg accepts the deal then there is a contract between yourself and Speilberg. If Speilberg describes the plot to someone or gives the copy of the novel away to someone, he has broken the contract and liable for damages. But the donee of the copy of the book is not bound by the contract. And, since there was no license to begin with, the donee is certainly not bound by any license.

: >
: >: Of course books and CDRoms are goods. You don't enter a copyright license
: >: when you buy a book because it isn't offered under license. There are lots
: >: of cases to which the first sale doctrine applies, including software sale
: s
: >: where the license does not purport to restrict resale of the "good" on
: >: which the program is fixed.

So you are saying that the first sale doctrine doesn't apply to sales where there is a license? Where does the Copyright Act say that?

Where is there a license in the case of the CDrom? There may be a copy of a piece of paper called a ``license'' hiding inside the shrinkwrap, but where is there an actual license. The purchaser of the CDrom doesn't need the vendor's permission to use it or sell it to someone else, so the vendor can't grant the purchaser a license to do those things. And the purchaser doesn't need the permission of the copyright holder to do those things.

The purported restrictions in the purported ``license'' are not likely to held to be binding for all sorts of reasons, but if they are binding, they are binding as a contract terms, not as part of a license.

: >
: >If I go into CompUSA and buy a modem, a book on Java, and a copy of RedHat
: >7.0 software, where is the license for any of those transactions? I plunk
: >down the three different articles and sign the credit cart receipt? What
: >is there any license?
:
: I'm not sure what you're asking -- the modem and book are unlicensed, the
: software is licensed.

There was no difference from my point of view or CompUSA's point of view in the three transactions, so why is one subject to a license and the others aren't?

If the publisher of a book slips a piece of paper into each copy of the book saying that the purchaser of the book agrees not to let anyone else read it and not to read it himself more than ten times, do you think that that piece of paper imposes a binding obligation on the purchaser? Do you come to a different conclusion if the word ``LICENSE'' appears at the top of the slip of paper.  

: >
: >(Now of course, some of the software---most of the software---in the RedHat
: >distribution does come with a license that allows me to make and distribute
: >copies of that software as long as I also supply the source code, but that
: >license enables me, rather than limits me, so it is not what you are
: >talking about.
:
: Well, it is what I'm talking about. I don't understand why it is possible
: for the buyer to contract for more rights but not fewer rights. How is it
: that only the seller is permitted to surrender rights by contract? I
: understand that the enforceabililty of a shrinkwrap license might well turn
: on whether the rights are surrendered by the author of the contract. But as
: I understand it, you are arguing more generally that an author can
: surrender rights by license but the buyer of a copy can not, without regard
: to whether the contract is negotiated at arms length.

What you don't understand is that a license is not a contract, and certainly not a bilateral contract. The RedHat license is a license because it permits the licensee to do things that he could not lawfully do without the permission of the licensor, who is the owner of the copyright. The only restriction imposed on the licensee is a condition subsequent that the grant to the licensee is terminated if the licensee distribures object code without also making the source code available.

:
: : You can have an IP transaction that is a license, or that is a sale of
: >: goods, or that is a sale of goods subject to a license
: >
: >what's that?
:
: Shrinkwrapped software is what we were talking about. Copy sold -- use by
: license. But I can imagine other examples. I'll sell you a horse, upon the
: condition that you not turn it into dog food. I think the US government
: actually does that in a program that sells wild horses to individuals.

So you sell me a horse subject to a condition subsequent. Where's the license? If the condition subsequent is enforceable then if I turn the horse into dog food, you are suddenly the owner of a lot of dog food. But in the case of a CDrom that I buy from CompUSA CompUSA does not purport to make the sale subject to a condition subsequent. And CompUSA is the vendor, not the owner of the copyright on the programs on the CDrom.

:
: >
: >, or even a bailment,
: >: a gift, a conditional gift, a loan, a pledge, or a hypothecation
: >
: >I think that it could be a hypothecation only in Puerto Rico or some other
: >civil law jurisdiction
:
: A hypothecation is simply a pledge, as to secure a promise, but without
: delivery of the collateral. Your everyday recordable security interest is a
: form of hypothecation. It may have been appropriated in civil statutes, but
: it's a common law term.
:
: >
: >: ferchrisakes -- the law is more accomodating than you allow. Neither the
: >: Copyright Act, nor certainly the UCC, prohibits the grant or enforcement o
: f
: >: a copyright license. The only questions are 1) whether the shrinkwrap
: >: satisfies the contract formalities required to give rise to an enforceable
: >: license; and 2) whether certain license provisions which can be
: >: characterized as enlarging the copyright owner's statutory rights (e.g.
: >: surrendering fair use) are always, in any event, unenforceable.
: >
: >I thought you were arguing the transfer was not a sale of goods and not
: >subject to the UCC. Are you now admitting that it is a sale of goods?
: >
:
: I don't know how you got that from what I said. My point was only that if
: there is a law that renders a copyright license *generally* unenforceable,
: it is not the Copyright Act or the UCC, which are the laws that have been
: pointed to as authority for the proposition that shrinkwrap licenses are
: unenforceable. You suggest, below, common law doctrine re restraints on
: alienation -- that's an interesting direction, but I wonder whether it gets
: you all the way to where you want to go. Will that thread from the common
: law really invalidate a contract in which the parties explicitly agree that
: A will provide B a copy of X in return for B's promise that he will use it
: only for certain purpose and will not convey it to anyone else for any
: purpose. Again, I'm trying to understand whether you simply believe that a
: shrinkwrap is unenforceable, or whether I correctly understand that your
: position is that you cannot ever condition the transfer of ownership of a
: copy to restrict its use and disposition.

The restrictions, whatever they are, are not a license. As to the enforceability of contracts restricting the purchasers' right to do whatever the purchaser wants to do with the purchased goods that is not forbidden by copyright law, I suspect that some are valid and some are not. But shrinkwrap ``contracts'' where the purchaser doesn't know the terms of the contract until after he purchases the goods are unenforceable at common law and, if some statute purports to make them enforceable, it would violate the Due Process clause of the Fifth and Fourteent Amendments, among other problems.

:
: >Now if it is a sale of goods, then isn't any contractual provision in
: >what you call a license that purports to keep the buyer from transferring
: >the goods void as an unreasonable restraint on alienation---an issue that
: >has nothing to do with copyright law?
:
: I guess that's the issue -- let's assume it doesn't violate the rule
: against perpetuities. What's left of the law regarding restraints on
: alienation that would disallow a transfer prohibition that expired upon the
: death of the last living descendant of Jos. Kennedy plus 21 years, or
: whatever the rule requires. Which raises a whole 'nother possibility --
: could software be transferred "in trust"?
:
: >And can't any condition that
: >the buyer not use the goods in certain ways be attacked as being repugnant
: >to the grant as a matter of common law? And if there was a shrinkwrap
: >license inside the box that was not brought to the buyer's attention by
: >the vendor---and that is enforceable---then doesn't the buyer have a
: >cause of action not only for failure of consideration but also of fraud
: >against the vendor.
:
: You're back to the enforceability of the shrinkwrap, but I'm more
: interested in your insistence that a transfer of a copy for consideration
: is either a bailment or it's unconditional, even if negotiated at arms
: length. But maybe I've misunderstood.

It is either a sale or a bailment. There are conditional sales, but don't tell me that when I buy a CDrom from CompUSA, I've purchased the disk subject to a conditional sales agreement. There are also contracts possible by which I agree not to do certain things, but that involves the enforceability of shrinkwrap agreements, which is not what you seem to want to discuss.

--
Peter D. Junger--Case Western Reserve University Law School--Cleveland, OH
 EMAIL: junger@samsara.law.cwru.edu    URL:  http://samsara.law.cwru.edu   
        NOTE: junger[_at_]pdj2-ra.f-remote.cwru.edu no longer exists