Framework for Electronic Licensing
Paul D. Callister, JD, MSLIS
Director of the Leon E. Bloch Law Library &
Associate Professor of Law
Email callisterp@umkc.edu
© 2006, Paul D. Callister. This work is licensed under a Creative Commons Attribution-NoDerivs 2.5
License.
Framework of Licensing Issues
• Which Rights are Addressed by Agreement?
• What Law Applies? UCITA, UCC Article 2, UCC Article 2A,
Common Law, etc.
• Formation--“Click Wrap,” and “Shrink Wrap”
• Enforceability of Contractual Terms Against a Fundamental
Public Policy or Conflicting with Other Law
• Choice of Law and Forum
• Warranties
• Remedies—Electronic Self-Help
Licensing – What Rights are Addressed
by Agreement?
• 17 USC § 106 - reproduction, adaptation and derivative works,
distribution, public performance, public display, and digital audio
transmission
• Neighboring rights or droit de suite (California Resale
Royalties Act and Berne Convention, to which US is a
signatory) - compensate fine, rather than literary, artists for
subsequent resale and reproduction of their works
• Moral Rights or le droit moral - attribution or paternity (including
anonymous and pseudonymous publication); integrity (no
derogatory subsequent use); disclosure (or non-disclosure),
reconsideration, and withdrawal (from circulation); association (or
disassociation from products or institutions distasteful to author
and artist).
• E-Rights – New York Times v. Tasini (Is a database a revision of
a previous collective work falling under 17 USC § 201(c) exception
for publication of “collective works”).
What Law Applies?
• Uniform Computer Information Transactions Act - Maryland and
Virginia only
• UCC Article 2 – As of 2003, state courts in California,
Connecticut, Florida, Kansas, Illinois, Massachusetts, Michigan,
Nebraska, New Hampshire, New York, Pennsylvania,
Tennessee, and Wisconsin. Federal courts in Indiana (applying
New Hampshire Law) New Jersey and Oklahoma.
• UCC Article 2A (dealing with leases) – Suggested as appropriate
to apply by Nimmer.
• NACCUSL recommends excluding “information” from definition
of goods” under UCC Articles 2 and 2A. Consequence would be
application of Common Law.
• Hague Convention on Choice of Court Agreements – excludes
consumer and employment agreements, but low formation
threshold (“by any other means of communication which renders
information accessible so as to be usable for subsequent
reference”)
• Other international law: UNCITRAL Model Law on Electronic
Commerce (excludes copyright licenses); CCISG (excludes
goods for consumer purposes); EU Directive on Unfair Terms in
Consumer Contracts, EU Data Directive, EU Directive on Legal
Protection of Databases.
Formation?
• Copyright Law - 17 USC § 204(a) requires written contracts.
• UCITA § 201 – General rule writing required if over $5,000.
Otherwise, no writing required if term is less than one year,
performance tendered and accepted, agreement admitted under
oath, or written confirmation is received between merchants and
no objection made within reasonable time.
• UCITA § 107, 112, 207, and 208 deal with electronic agents, click
and shrink wrap agreements and recognize them as
“manifestations of assent.” Must have opportunity to review
terms before assent is given (which may be after payment is
tendered, but must be before use for “mass market license”) with
right of refund (cost free for “mass market license”).
• UCC § 2-204(1) - “any manner sufficient to show agreement”
(courts are divided as to whether shrink wrap agreements are
enforceable).
• UCC § 2A-204(1) – same as article 2.
• CCISG – permits electronic agreements (without a writing)
unless one of contracting states expressly excludes this
provision.
Enforceability of Terms “Violating a
Fundamental Public Policy”
• Criticism of Software - UCITA § 205, Comment 3 – prohibition of
criticizing software is problematic (mass market of final product v.
negotiated release of early, pre-public release)
• Consumer protection laws - UCITA allows preemption of federal law
and state consumer protection laws)
• Fair use and other Copyright Privileges – Recognizes public interest
but fundamentally advocates enforceability. Distinction between
negotiated and mass market licenses.
Enforceability of Terms “Violating a
Fundamental Public Policy” - Continued
• Prohibitions of multiple copies, use of information for commercial
purposes, limited number of authorized users, or modification of
agreement are all thought to be enforceable under UCITA (even for
mass market licenses). However, terms in a “mass market”
agreement that prohibit persons from observing the visible
operations or characteristics of software and using the observations
to develop noninfringing commercial products, the prohibit quotation
of limited material for purposes of education or criticism, or that
preclude a nonprofit library licensee from making an archival
(backup) copy would ordinarily be invalid in the absense of showing
significant commercial need.
• UCC article 2 and 2A also address unconscionable contracts and
conflicts with public policy.
• Davidson & Associates v. Jung, 422 F.3d 630, (8th cir. 2005)
(Missouri state law applied) – “Owner's state law claims for breach of
end user license agreement and terms of usage agreement were not
preempted by federal copyright law.” Also violated anti-circumvention
and anti-trafficking provisions of DMCA.
Choice of Law and Forum
• UCITA § 109
– Law selected by parties except for consumer contracts (between
licensed merchant and consumer and pertaining to application of
consumer law)
– If no choice is designated - “Most significant relationship”
– Outside the US only applies if “substantially similar protections and
rights” to those under UCITA (not “merely different”)
• UCC Article 2
– Can’t be contrary to “fundamental policy”
– Similar to UCITA “reasonable relation test”
• UCC Article 2A
– Most limited
– Place where lessee resides at time agreement is enforceable
• Hague Convention on Court Selection Agreements
– Excludes consumer (personal and household use) and employment
agreements
– Forces courts to strictly honor selection of the parties per agreement
and to recognize judgments of other signatory states on the issue of
court selection.
Warranties
• UCITA
– Warranties as to accuracy of Information (§ 401)
• Two kinds of Merchants (§404)
– Those “in a special relationship of reliance with licensee” who collect
and compile previously non-published information have duty of
“reasonable care.” Expertise, position of trust and confidence, in the
business, personally tailored information are all factors for
consideration.
– Others
• “Merchant regularly dealing in information of the kind warrants that
the information will be delivered free of the rightful claim of any
third person by way of infringement or misappropriation.” Not
limited to merchant’s own acts.
• Other licensors – “No person holds a rightful claim, to, or interest
in, the information which arose from an act or omission of the
licensor, other than a claim by way of infringement or
misappropriation, which will interfere with the licensee's enjoyment
of the interest.
• Only can be waived by “specific language or by circumstances that
give licensee reason to know that licensor does not warrant that
competing claims do not exist or that the licensor purports to grant
only the rights it may have.” Must be conspicuous.
– Implied warranty of merchantability (“fit for the ordinary purposes for
which such computer programs are used”)
Warranties (Continued)
• UCC 2 and 2A Warranties
–
–
–
–
–
non-infringement express warranties
implied warranties of merchantability
implied warranties for particular purposes
no warranty as to accuracy (just warranty as to title)
only 2A has quiet enjoyment (but limited to acts of licensor not third
parties)
Licensor’s Remedies
• UCITA – Electronic Self-Help and Denial of Access
– Banned for “mass market licenses
– Mass market Licenses don’t include site licenses or “access” contracts
– Non-mass market licenses require 15-day notice of breach with right of
cure
– Prohibited if result in “substantial injury or harm to the public health or
safety or grave harm to public interest substantially affecting third
persons not involved in the dispute.”
• UCITA is similar to UCC Article 9, but no analogous provision in
Article 2 or 2A. There’s no good fit under UCC. Use of self-help
without UCITA may subject to liability under RICO or other law.