RE: "Double" Licenses--end-user licenses & consideration

[David_Mirchin@silverplatter.com]

Terry,

I don't want to bore readers, so this will be my last comment on this
thread.

A maxim going back to first year contract law is that "a peppercorn" is
sufficient consideration for an agreement.  It is *extremely* rare for a
contract to be invalidated for lack of consideration.  Courts try to find
consideration in every agreement, because "lack of consideration" or
"insufficient consideration" smack of hyper-technical arguments which can
undermine the agreement between two parties.

In my opinion (and this is only an opinion), "lack of consideration" is a
weak basis to argue that end-user click-on agreements are invalid

David Mirchin
VP & General Counsel
SilverPlatter Information, Inc.


Terry Cullen <tcullen@seattleu.edu> on 02/01/99 06:44:53 PM

To:   "'liblicense-l@lists.yale.edu'" <liblicense-l@lists.yale.edu>
cc:    (bcc: David Mirchin/Norwood/SilverPlatter)
Subject:  RE: "Double" Licenses--enforceability of shrink-wrap and click
      -wrap    licenses

> Terry,
>
> You want to distinguish the cases I have cited on two grounds:
>
> First, that these cases were "commercial", rather than "consumer" uses.
>
> Second, that there is no "consideration" (legalese for a "benefit")
> received by the individual researcher.
>
> Neither are applicable here.

Precisely.  That is why I think these particular licenses are
unenforceable in U.S. jurisdictions.  The licenses that have been found
enforceable can be distinguished from end-user click-ons because in every
one of those cases BOTH parties gave up something in exchange with each
other (usually, the product and the price paid for it).  Here, the
exchange the publisher makes is with the library, not the end-user.  The
publisher gets nothing from the end-user.

See below for my responses to your specific objections. Also, if you know
of any cases where a click-on license was held enforceable without
consideration (payment or exchange), I would appreciate hearing about
them.  All of the cases I've come across are up to now seem to be UCC or
commercial contract cases.

> 1. As to the commercial vs. consumer distinction--ProCD involved a
> consumer, Matt Zeidenberg, a graduate student at the University of
> Wisconsin, who went to a local store and bought SelectPhone.  He uploaded
> to the internet for free. He did not create a competing commercial
> product. So this is a quintessentially consumer purchase.

Interesting reading of the case.  Here is the trial court's recitation of
the facts (908 F.Supp. 640): "Defendants Matthew Zeidenberg and Silken
Mountain Web Services, Inc., a one-person corporation formed by
Zeidenberg, purchased copies of plaintiff's Select PhoneTM CD-ROM software
program, downloaded telephone listings stored on the CD-ROM discs to
Zeidenberg's computer and made the listings available to Internet users by
placing the data onto an Internet host computer." Here is the appellate
court's version (86 F.3d 1447): "Matthew Zeidenberg bought a consumer
package of SelectPhone (trademark) in 1994 from a retail outlet in
Madison, Wisconsin, but decided to ignore the license.  He formed Silken
Mountain Web Services, Inc., to resell the information in the SelectPhone
(trademark) database.  The corporation makes the database available on the
Internet to anyone willing to pay its price--which, needless to say, is
less than ProCD charges its commercial customers. Zeidenberg has purchased
two additional SelectPhone (trademark) packages, each with an updated
version of the database, and made the latest information available over
the World Wide Web, for a price, through his corporation. "

> Similarly, Hill v. Gateway 2000 and Brower v . Gateway 2000 were also
> consumers who purchased computers.
>
> You are correct that for consumer contracts (as opposed to commercial
> contracts), there are laws which could invalidate individual terms (such
> as disclaimers of warranties).  Usually these laws do not, however,
> invalidate the entire agreement.
>
> More relevantly, the individual researchers in scholarly databases are
> probably not "consumers" under the law.  A "consumer" (as in Article 2 of
> the Uniform Commercial Code) is someone who purchases "primarily for
> personal, family or household use."  Researchers and professionals using
> scholarly databases are more likely to be using the work as part of their
> professional/business life.

Or, they might be high school kids doing research in the public library,
or faculty doing research for a class, or myriad other factual situations.
The point is that if the end-user against whom you are trying to enforce
the terms doesn't purchase the product, the license doesn't fall within
the UCC, and all of the cases you cite are UCC cases.  In fact, the ProCD
court actually said that if somebody had found the SelectPhone CD on the
street and had done with it exactly what Matt Zeidenberg did, the license
wouldn't be enforceable against that party.  But Matt Zeidenberg bought
it, therefore the UCC applied.

> 2. As to the "consideration", --an individual searcher in a library
> absolutely receives a benefit--the ability to search the database and find
> answers to their questions.  For this benefit, they are agreeing to
> certain terms, such as that they will not do what Matt Zeidenberg did and
> put the entire database on the internet for free, undermining the ability
> of a publisher to charge for their hard work.

Absolutely, the individual searcher receives a benefit, but what exactly
do they exchange for this benefit?  Nothing that I can see.  There has to
be a "benefit" on BOTH sides.  The library makes the exchange (pays the
publisher), not the end-user.  The publisher doesn't get a thing, and in
many cases doens't even get a result from the user clicking "yes" or
"agree."  The clicking just releases the database for use, but nothing is
transmitted to the publisher.

I think your mentioning "the ability of a publisher to charge for their
hard work" is key here.  Because copyright doesn't protect "sweat of the
brow" compilations in the U.S., publishers want to find other ways to
protect revenue streams.  That's what ProCD was really about, and I don't
have a problem with that.  I do, however, dislike licenses that try to
restrict individual users from fair uses of information.  These click-on
end-user licenses do exactly that, and I find them objectionable for that
reason.  I think publishers need to find ways to protect their databases
from commercial exploitation that are less onerous with respect to
individual end-users.

> 3. Finally, the CompuServe v. Patterson case is an electronic license.
> It?s true the case uses the word "agreement", but that's what a license
> is--an agreement.  Richard Patterson had to type the word "Agree" after
> the electronic license and transmit it to CompuServe by computer.

Precisely.  He asented to specific terms, and the assent was transmitted
to Compuserve.  A contract was formed.  He received a benefit (marketing)
and Compuserve received a benefit (shareware for it's web shareware site.)
Again, nothing is transmitted to the publisher in the case of an end-user
click-on; instead, the software just releases the database for use.  The
library has already paid for the end use of the database and negotiated
the terms of the license, and the price the publisher charges takes into
consideration who the users are and how many there will be at any one
time. The publisher gets nothing from the end-user.  The person sitting at
the computer generally doesn't understand their fair use rights, so it's
the chilling effect on the end-user that's at work here. 

Terry Cullen, Esq. 
Electronic Services Librarian 
Seattle University School of Law Library 
950 Broadway Plaza, Tacoma, WA 98402-4470 
Email:   tcullen@seattleu.edu 
Phone:  253-591-7092 
FAX:  253-591-6313