ProCD v. Zeidenberg

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ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir., 1996), is a United States contract case involving a "shrink wrap license". The issue presented to the court was whether a shrink wrap license was valid and enforceable. Judge Easterbrook wrote the opinion for the court and found such a license was valid and enforceable. The Seventh Circuit's decision overturned a lower court decision.

[edit] Facts

The case involved a graduate student, Matthew Zeidenberg, who purchased a telephone directory database, SelectPhone, on CD-ROM produced by ProCD. ProCD had compiled the information from over 3,000 telephone directories, at a cost of more than $10 million. To recoup its costs, ProCD discriminated based on price by charging commercial users a higher price than it did to everyday, non-commercial users.

Zeidenberg purchased a non-commercial copy of SelectPhone and after opening the packaging and installing the software on his personal computer, Zeidenberg created a website and offered the information originally on the CD to visitors for a fee that was less than what ProCD charged its commercial customers.

At the time of purchase, Zeidenberg may not have been aware of any prohibited use, however the package itself stated that there was a license enclosed. Moreover, because "the software license splashed across the screen and would not let him proceed without indicating acceptance," Zeidenberg had ample opportunity to read the license before using SelectPhone. Zeidenberg was presented with this license when he installed the software, which he accepted by clicking assent at a suitable dialog box—this type of license is commonly known as a click-through license or clickwrap. The license was contained, in full, on the CD.

[edit] Holding

This case actually involved a number of legal issues.

The court first held that copyright law did not preempt contract law. Under the Supreme Court case, Feist Publications v. Rural Telephone Service, the court held that a telephone directory was not protectable through copyright. In this case, the court assumes that a database of a telephone directory was equally not protectable. However, the court held that a contract could confer among the parties similar rights since those rights are not "equivalent to any of the exclusive rights within the general scope of copyright".

The court then held the license valid and enforceable as a contract. The court relied primarily on the Uniform Commercial Code (or UCC) sections 2-204 (describing a valid contract) and 2-606 (describing acceptance of a contract). There was little doubt that ProCD, in fact, offered use of the software as described by UCC section 2-606. The court examined more closely the question of acceptance.

The court held that Zeidenberg did accept the offer by clicking through. The court noted, "He had no choice, because the software splashed the license on the screen and would not let him proceed without indicating acceptance." The court stated that Zeidenberg could have rejected the terms of the contract and returned the software. The court, in addition, noted the ability to and "the opportunity to return goods can be important" under the UCC.