Software Licenses
Michael I. Shamos, Ph.D., J.D.
Institute for Software Research
School of Computer Science
Carnegie Mellon University
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
What is a License?
• A license is a permission to do something that would
otherwise be illegal
• Example: a movie theatre is private property. I can’t
go inside without permission or I would be a
trespasser.
• A movie ticket is a license to enter the theatre for a
particular period of time and stay in a particular place
• Playing a song over the radio is a public performance
of the song. It violates the public performance right
of the copyright owner. A permission to play the
song is required, usually obtained from ASCAP, the
American Society of Composers, Artists and
Performers
Software Licenses
• The owner of an authorized copy of a piece of
software may copy and execute it under certain
conditions:
“it is not an infringement for the owner of a copy of a computer
program to make or authorize the making of another copy or
adaptation of that computer program provided:
(1) that such a new copy or adaptation is created as an
essential step in the utilization of the computer program in
conjunction with a machine and that it is used in no other
manner, or
(2) that such new copy or adaptation is for archival purposes
only and that all archival copies are destroyed in the event that
continued possession of the computer program should cease to
be rightful.”
1980 Software Amendments, 17 U.S.C. §117(a)
LAW OF COMPUTER TECHNOLOGY
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© 2015 MICHAEL I. SHAMOS
Software Licenses
• To avoid the effect of this provision, software
companies often do not sell copies of their software
• They provide copies under a license agreement
• The customer does not become the owner of the
copy and therefore does not obtain the benefit of the
1980 Software Amendments
• The customer is limited to the terms of the license
agreement
• License rights can be restricted and allocated very
finely, e.g. restricting the use to a single identified
CPU
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
Why Have License Agreements?
• Define the scope of the license
• Disclaim warranties
– Sales contracts by law imply several warranties:
– Warranty of merchantability
• Fit for the general purpose for which it is sold
• Conforms to standards in the trade
• Conforms to specifications on the package
– Warranty of fitness for a particular purpose
– Warranty of non-infringement
• Limit damages
• Provide choice of law, choice of forum
• Prohibit reverse engineering
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
License Provisions
• Scope
– What the licensee is allowed to do
• Prohibitions
– What the licensee can’t do, e.g. no ASP
• Warranties
– What the licensor promises
• Transfer
– How and when the license can be transferred
• Termination
– Acts that result in termination of the license, e.g.
exceeding permissible use
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
Shrinkwrap
• A license agreement contained within packaged
software whose terms cannot be viewed until the
software is bought
• Usually provides that the user is bound once the
package is opened
• No negotiation
• No opportunity to inspect the terms in advance
• Enforceable?
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
ProCD Inc. v. Zeidenberg,
86 F.3d 1447 (7th Cir. 1996)
• ProCD published a set of CD-ROMs that allowed
lookup of all listed U.S. telephone numbers
• They were distributed with a shrinkwrap license
(inside the box) that limited further distribution of the
data
• The license terms were on the CDs and appeared on
the user’s screen each time the program was run
• Zeidenberg made the numbers available over the
Internet
• ProCD sued to enforce the license agreement
• (Copyright protection was not available for reasons
we will discuss later in the course.)
ProCD Inc. v. Zeidenberg,
86 F.3d 1447 (7th Cir. 1996)
• Shrinkwrap agreements are enforceable if
– Terms are “commercially reasonable” and not
unconscionable; and
– User has the right to reject the terms on opening
the package and receive a full refund
• Shrinkwrap need not display all of the terms so as to
be visible from the outside of the package
• Why? The consumer is assured that the terms are
commercially reasonable
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
Clickwrap
• A license agreement whose terms are displayed on
the user’s screen and acceptance is indicated by
clicking on a button
• No negotiation
• But: opportunity to review the terms before agreeing
• Clickwrap agreements are enforceable if their terms
are not “unconscionable”
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
Comb et al. v. PayPal
218 F. Supp. 2d 1165 (N.D. Cal. 2002)
• Plaintiff Toher opened a PayPal account, which
included a clickwrap agreement
• PayPal made unauthorized transfers out of Toher’s
bank account
• Toher sued and PayPal moved to compel arbitration
under the clickwrap agreement, which contained an
arbitration clause
• Toher argued that the arbitration clause was
unconscionable
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
The PayPal Arbitration Clause
“Arbitration. Any controversy or claim arising out of or
relating to this Agreement or the provision of Services
shall be settled by binding arbitration in accordance
with the commercial arbitration rules of the American
Arbitration Association. Any such controversy or claim
shall be arbitrated on an individual basis, and shall not
be consolidated in any arbitration with any claim or
controversy of any other party. The arbitration shall be
conducted in Santa Clara County, California, and
judgment on the arbitration award may be entered in
any court having jurisdiction thereof ...”
LAW OF COMPUTER TECHNOLOGY
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© 2015 MICHAEL I. SHAMOS
Comb et al. v. PayPal
• The PayPal arbitration clause is of standard form and
very common in contracts
• The Court found it unenforceable under California
law
• Procedurally unconscionable if it is a “contract
imposed and drafted by the party of superior
bargaining strength, relegates to the subscribing
party only the opportunity to adhere to the contract or
reject it.”
• PayPal argued that it was not unconscionable
because it did not concern essential items such as
food or clothing and Toher had meaningful
alternative sources for payment services.
LAW OF COMPUTER TECHNOLOGY
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© 2015 MICHAEL I. SHAMOS
Comb et al. v. PayPal
• A procedurally unconscionable contract may be
enforceable if its terms are “reasonable.”
• The Court found the PayPal agreement
unreasonable because it was “subject to change by
PayPal without prior notice (unless prior notice is
required by law), by posting of the revised
Agreement on the PayPal website”
• Since the agreement was unenforceable, the
arbitration clause was void and the Court did not
order arbitration
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
Browsewrap
• A license agreement whose terms are viewable by
following a hyperlink (e.g. “Terms of Use”)
• Provides that the user is bound by using the site
• No requirement that the user actually know about, view
or agree to the terms
• Enforceable? Usually only against knowledgeable
parties, such as corporations, not individuals.
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
Specht v. Netscape Comm. Corp.
150 F. Supp. 2d 585 (S.D.N.Y 2001),
aff’d. 306 F.3d 17 (2nd Cir.2002)
• Court refused to enforce a Netscape browsewrap
license
• Netscape did no more than place notice of the
license on the same webpage where it had made the
download available
• Netscape's license “allows a user to download and
use the software without taking any action that plainly
manifests assent to the terms of the associated
license or indicates an understanding that a contract
is being formed.”
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
Affinity Internet v. Consolidated Credit
920 So. 2d 1286 (Fla. Dist. Ct. App. 2006)
• Affinity did business as Skywebnet. Its contract
customers contained the clause, “This contract is
subject to all of SkyNetWEB’s terms, conditions, user
and acceptable use policies located at
http://www.skynetweb.com/company/legal/legal.php.”
• The terms were actually posted at
http://www.skynetweb.com/company/legal/user_agreement.php,
which contained a standard arbitration clause
• A dispute arose and Consolidated sued.
• Affinity moved to compel arbitration
• The Court held that the contract between the parties
did not contain an arbitration clause
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
Browsewrap Agreements
• Contrast Affinity with Hubbert v. Dell Corp.,
835 N.E.2d 113 (Ill App 5 Dist., August 12, 2005) app. denied,
844 N.E.2d 965 (Ill. 2006)
• Hubbert bought a computer using Dell’s website,
which contained a browsewrap agreement with an
arbitration clause
• Multiple Dell pages viewed by Hubbert during the
ordering process contained links to the agreement
• A printed copy of the agreement was included in the
box in which the computer was shipped
• The appeals court unanimously held that the
arbitration clause was conspicuous and the contract
was enforceable.
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
Other “Wrap” Agreements
• Scrollwrap
– User must physically scroll through an online
agreement and click on a separate "I agree"
button.
– Generally enforceable
• Sign-in-wrap
– Web page says that acceptance of "terms of use"
is required in order to continue. Does NOT
require the user to click on a box showing
acceptance but states, e.g., “By clicking 'NEXT' I
agree to the terms of use and privacy policy.”
– Generally not enforceable. See Berkson v. Gogo
LLC (S.D.N.Y, Apr. 9, 2015)
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
Open Source Licenses
• Scope
– What the license is allowed to do
• Warranties
– What the licensor promises
• Transfer
– Under what conditions the license can be
transferred
• Termination
– Acts that result in termination of the license, e.g.
exceeding permissible use
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
Other License Types
• Freeware
– Free proprietary software, no source code
• Shareware, trialware, demoware
– Trial software for a limited time (usually 30 or 60
days). Then a paid license is required.
• Not for Resale (NFR)
– Versions distributed for testing, preview, or
donation purposes.
– Cannot be sold or redistributed
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
Forms of Open Source
• Open source
– Source code available to the general public for use
and/or modification free of charge
– Typically for collaborative effort in which
programmers improve the code & share changes
• Corporate source
– Source is “open” to a closed community, such as
programmers from one company, or collaborating
teams
• Disclosed source
– Source is disclosed to the public for examination
but is still proprietary (full copyright)
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
GNU General Public License (GPL)
• Most popular type of open source license (70%)
• You must accept the license without modifications
• You may copy and distribute verbatim copies of the
source code
• You may modify the copy with conditions
• You must provide your changes to others
• Patent infringement does not excuse you from
license obligations
• Allows geographic restrictions
• No warranties are given
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
Major Ideas
• Shrinkwrap software licenses are enforceable if the
user has the ability to return the software for a full
refund after examining the license
• The key to enforceability of clickwrap licenses is
reasonableness of terms
• Browsewrap licenses must be conspicuous
• Open source is not the same as public domain
LAW OF COMPUTER TECHNOLOGY
FALL 2015
© 2015 MICHAEL I. SHAMOS
Q&A
LAW OF COMPUTER TECHNOLOGY
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© 2015 MICHAEL I. SHAMOS