Re: NBA v. Motorola

On 2/24/97, Mark Lemley <mlemley[_at_]mail.law.utexas.edu> wrote:
>
> John Noble writes:
> >
> > I don't understand the textual basis for distinguishing between
> > published and unpublished works in a preemption analysis. And I don't
> > see a readily applied policy distinction between "widely distributed"
> > works, as to which re-distribution restrictions would be preempted,
> > and less widely distributed works, as to which they would not be
> > preempted. At what point is something "widely distributed"? If I sell
> > -- excuse me, _license_ -- 10 copies of a database is that widely
> > distributed. 100 copies? 1,000 copies? Can the scope of protection
> > depend on the breadth of the market?
> >
> *************
>
> Isn't this exactly the contour of trade secret protection? The law
> seems relatively clear that I can distribute a work under
> confidentiality restriction to a few people, but that if I distribute
> it to millions, I no longer have a secret (at least if the information
> is evident from an inspection of the product). Somewhere between one
> and millions, there is a line that must be drawn.

Yes, but that line is drawn in a fact-finding process that calls upon the fact-finder to determine, as one element of a trade secret misappropriation claim, whether the plaintiff took reasonable steps to secure the trade secret. Subjective, ad hoc assessments of "reasonableness" are made by fact-finders all the time in cases ranging from manslaughter to simple negligence. And the results are predictably unpredictable. The trade secret case, for example, could turn on how many employees had access to the trade secret and how many of them signed non-disclosure agreements (without any authorized outside distribution).

In the preemption context, I think it is less important which way we come out (although I obviously have a point of view) than it is to have a bright line which tells the contracting parties whether or not their contract is enforceable. Dennis suggests a distinction based on negotiated vs. shrinkwrap agreements. That's one way to go, which isn't completely unsatisfactory, but there's a vast undistributed middle, including contracts in which one party has sufficient economic leverage to effectively dictate the "negotiated" terms.

Also, as I understand it Dennis would preempt those "online" web site agreements because they don't satisfy the "face-to-face negotiation" requirement, but surely he uses the term "face-to-face" loosely, and would not automatically preempt any contract that was "negotiated" via email (or telephone). What then do you do with the web site that advises: "Here is our proposed agreement. You may agree to it by clicking on 'OK', and download the software now, or you may feel free to propose alternative terms, and we'll forward it to our lawyer and get back to you (eventually)." I don't mean to be flip. My point is that any bright line you might attempt to draw can be pretty readily circumvented with a little imagination, and (I'm afraid) some cost to commercial efficiency.

One more example. Software company develops revolutionary program for identifying defects in microchips. It licenses that program to half a dozen chip fab companies for, say, $500,000 per year. When the seventh customer shows up, a new company that wants to enter the market, he's told, "sorry, but our lawyers tell us seven licensees is one too many." The software developer then calls the first six customers to tell them that there's good news and bad news -- your cartel is safe, but next year's license will cost $1,000,000 "due to legal restrictions on the development of our market." Yeah, its an absurd example, but the point is that granting or withholding contract rights based on otherwise blameless conduct in the market will have unforeseen and potentially anticompetitive effects.

Caveat: I haven't yet read Dennis' paper, and I apologize for oversimplifying his analysis.

John Noble
<jnoble[_at_]dgs.dgsys.com> Received on Tue Feb 25 1997 - 14:54:28 GMT