Framework for Electronic Licensing Paul D. Callister, JD, MSLIS Director of the Leon E. Bloch Law Library & Associate Professor of Law © 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 § 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, (8 th 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.