86 F.3d 1447 (7th Cir. 1996)
ProCD, Inc. compiled information from more than 3,000 telephone directories into a computer database.1
The database cost more than $10 million to compile and is expensive to keep current.2 ProCD sells a version of the database called SelectPhone on CD-ROM discs.3 The company sold the database to the general public for personal use at a low price of approximately $150 for the set of five discs while selling information to the trade for a higher price.4 Every box containing its consumer product declares that the software comes with restrictions stated in an enclosed license.5 This license is encoded on the CD-ROM disks as well as printed in the manual and appears on a user's screen every time the software runs.6 The license limits use of the application program and listings to noncommercial purposes.7
Matthew Zeidenberg bought a consumer package of SelectPhone in 1994 from a retail outlet in Madison, Wisconsin.8 He formed Silken Mountain Web Services, Inc. to resell the information in the SelectPhone database.9 Zeidenberg purchased two additional SelectPhone packages, each with an updated version of the database.10 He made the latest information available over the World Wide Web for a price through his corporation.11
ProCD filed this suit seeking an injunction against further dissemination that exceeds the rights specified in the licenses.12 The district court held the licenses ineffectual because their terms do not appear on the outside of the packages.13 The court added that the second and third licenses stand no different from the first because they might have been different.14
Whether buyers of computer software must obey the terms of shrinkwrap licenses?15
Shrinkwrap licenses are enforceable unless their terms are objectionable on grounds applicable to contracts in general, for example if they violate a rule of positive law or if they are unconscionable.16
Yes. ProCD compiled information from more than 3,000 telephone directories into a computer database at a cost exceeding $10 million.17 ProCD sold a version called SelectPhone on CD-ROM discs to the general public for personal use at approximately $150 for a set of five discs while charging higher prices to commercial users.18 The license encoded on the discs and printed in the manual limited use to noncommercial purposes.19
Zeidenberg purchased a consumer package of SelectPhone in 1994 from a retail outlet in Madison, Wisconsin.20 He formed Silken Mountain Web Services, Inc. to resell the information over the Internet at a lower price.21 He purchased two additional updated packages and made the latest information available on the World Wide Web through his corporation.22 Under UCC section 2-204 a contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.23
ProCD proposed a contract that a buyer would accept by using the software after having an opportunity to read the license at leisure.24 Zeidenberg did so when the software splashed the license on the screen and would not let him proceed without indicating acceptance.25 The license terms are not shown to be unconscionable or violative of positive law.26 The contract formed by conduct therefore binds the buyer.27
Buyers of computer software must obey the terms of shrinkwrap licenses.28
Whether shrinkwrap licenses are contracts because their terms appear inside the box rather than on the outside?29
A vendor as master of the offer may invite acceptance by conduct and may propose limitations on the kind of conduct that constitutes acceptance.30 A buyer may accept by performing the acts the vendor proposes to treat as acceptance.31 Notice on the outside, terms on the inside, and a right to return the software for a refund if the terms are unacceptable may be a means of doing business valuable to buyers and sellers alike under the UCC.32
Yes. Every box containing the consumer product declares that the software comes with restrictions stated in an enclosed license. The license is encoded on the CD-ROM disks as well as printed in the manual.33 It appears on a user's screen every time the software runs.34 Zeidenberg purchased the package.35
He used the software after seeing the license.36 He thereby accepted the terms under UCC section 2-204 by conduct recognizing the existence of the contract.37 The UCC permits contracts to be formed in ways other than paying the price and walking out of the store.38 ProCD proposed such a different way without protest from Zeidenberg.39
Wisconsin has not forbidden the use of standard contracts in the software business.40 Terms inside the box with a right of return are enforceable just as warranties furnished with consumer products are routinely enforced.41
Shrinkwrap licenses are contracts even though their terms appear inside the box rather than on the outside.42
Whether federal copyright law forbids enforcement of shrinkwrap licenses even if the licenses are contracts?43
Rights created by contract are not equivalent to any of the exclusive rights within the general scope of copyright under 17 U.S.C. section 301(a).44 Contracts generally affect only their parties while copyright is a right against the world.45 Enforcement of shrinkwrap licenses does not withdraw information from the public domain or interfere with national objectives.46
No. ProCD's software and data are fixed in a tangible medium of expression and within the subject matter of copyright.47 The shrinkwrap license creates only contractual rights that restrict Zeidenberg and his corporation as parties to the agreement rather than exclusive rights against strangers.48 Zeidenberg wants to use the data without paying the seller's commercial price.49 Enforcement of the two-party contract leaves everyone free to copy and disseminate the underlying telephone books.50
It does not create the type of interference with federal policy that section 301(a) targets.51 Analogous contractual promises to pay for intellectual property or limit use of rented media remain enforceable.52 The copyright act therefore does not preempt the license here.53
Federal copyright law does not forbid enforcement of shrinkwrap licenses even if the licenses are contracts.54