By Julie E. Cohen †
ABSTRACT
The proposed draft of Article 2B grants broad rights to enforce electronically contract provisions governing access to and use of digital works. Purveyors of digital works may engage in electronic self-help following breach of contract, and may also elect to foreclose unauthorized uses ex ante, via electronic "regulation of performance." This Article examines these provisions in light of existing law authorizing self-help repossession of tangible chattels, leading academic justifications for self-help repossession, and federal copyright law and policy. It concludes that the provisions authorize an unprecedented degree of intrusion into private homes and offices, that they lack a sound theoretical basis, and that their adoption would threaten constitutionally-mandated limits on copyright protection. It concludes, further, that the law should afford users of digital works rights of electronic self-help where necessary to preserve the copyright balance.
TABLE OF CONTENTS
I. INTRODUCTION 1090
II. ELECTRONIC FENCING AND SELF-HELP UNDER ARTICLE 2B 1092
III. DOCTRINE: SELF-HELP, TRESPASS, AND THE RIGHTS OF PERSONS 1101
A. SELF-HELP AND PRIVATE SPACES 1102
B. SELF-HELP, NOTICE AND "MATERIALITY" 1110
C. SELF-HELP IN TIME 1115
IV. THEORY: CONSENT,
EFFICIENCY, AND NORMS 1118
V. THE U.C.C., COPYRIGHT,
AND THE PUBLIC-PRIVATE
DISTINCTION 1128
A. PREEMPTION AND THE "DORMANT INTELLECTUAL PROPERTY CLAUSE" 1129
B. SPEECH HARMS AND THE FIRST AMENDMENT 1133
C. PRIVATE ENFORCEMENT AND DUE PROCESS 1134
D. PRIVATE INTERESTS AND PUBLIC ACTS 1135
VI. RESTORING THE BALANCE:
THE CASE FOR LICENSEE
SELF-HELP 1137
VII. CONCLUSION
I. Introduction
A new wind is blowing in copyright law. For centuries, authors and
their assignees have relied primarily on federal copyright law to define and
protect their legal rights. Suddenly, that may be about to change. New developments
in digital technology offer copyright owners the tantalizing possibility of
near-absolute control of their creative and informational content, even after
its delivery to end users, via self-enforcing digital contracts. Copyright owners,
along with purveyors of other (noncopyrightable) informational content, envision
using these contracts to secure-and redefine-their "informational rights."1
Within this vision of private ordering and technological self-help, contract
law rather than copyright law is paramount. Limits on
information ownership set by the public law of copyright are conceived as
optional restrictions that can be avoided using appropriate contractual language.
Proposed Article 2B of the Uniform Commercial Code (U.C.C.) is designed to
play a central role in the restructuring of information law along contract-based
lines. Information providers hope that Article 2B will establish, as background
principles of commercial law, rules that will enable them to implement their
vision of self-enforcing private ordering.2
The drafters of Article 2B characterize these rules as broadly consistent with
the existing framework of commercial law.3
They suggest, further, that the private agreements reached under such a regime
can coexist with federal copyright law without disrupting the balance it seeks
to establish.4 Information
providers agree, and argue that, in any case, such agreements lie beyond copyright's
preemptive reach.5 This article
examines those assertions. It concludes that the provisions of Article 2B threaten
a substantial departure from the existing law of self-help, and that this departure
cannot be justified by reference either to doctrine or to theory.6
Moreover, copyright law and policy point the other way, toward affording self-help
rights to users of copyrighted works.
Part II of this article describes the emerging digital "rights management"
technologies and traces the history of the provisions of Article 2B that are
designed to authorize or facilitate their implementation. Although the most
recent draft of Article 2B appears to moderate one of these provisions, issues
that earlier drafts had resolved in favor of electronic private ordering will
now confront courts. Parts III and IV explore, respectively, the doctrinal foundations
of self-help under the U.C.C. and more theoretical models advanced by legal
scholars, and conclude that none of the common justifications for commercial
private ordering supports according information providers the broad powers of
self-help that they claim as a matter of right. To the contrary, Article 2B's
self-help provisions raise important problems that the drafters have failed
to address. In Parts V and VI, I evaluate the proposed law and emerging practice
of electronic self-help against the backdrop of copyright law and policy. Part
V examines the role of the public-private distinction in mediating between copyright
and contract, and argues that Article 2B is not merely
a neutral background for private bilateral agreements, but a public act of social
ordering that is flatly inconsistent with copyright and First Amendment principles.
Part VI argues that licensees, not licensors, should be accorded rights of electronic
self-help when necessary to preserve the balance
that the Copyright Act is intended to establish.
II. Electronic Fencing and Self-Help under Article 2B
For information providers, digital networks represent both a promise
and a threat. Computer networks eliminate or minimize many of the costs associated
with product distribution, and make it possible for small businesses to serve
national or even global markets. However, digitized information is easily copied,
and networks also minimize the costs of distributing unauthorized copies. Information
providers have expressed fears that by making their products available in digital
form, they may destroy their own markets. Scholars and industry commentators
dispute these predictions of total disaster, and argue that the economic principles
that determine profitability in markets in tangible commodities do not necessarily
apply to markets in intangibles.7
Nonetheless, information providers have stated a reluctance to experiment with
digital distribution without additional legal and technological protection against
unauthorized copying.8
Happily for information providers, digital technologies also offer a solution
to their perceived problem. The same technologies that can be used to propagate
information can also build fences around it. Together with technology experts,
information providers are developing secure packaging and delivery software
designed to prevent purchasers and third parties from making unauthorized uses
of digital content.9 As envisioned
by the copyright and information industries, these "rights management systems"
will be "capable of detecting, preventing, and counting" almost every
conceivable use of a digital work.10
In addition, these industries lobbied heavily for nearly three years for legislation
that would prohibit tampering with or circumventing these systems.11
Unhappily for consumers, however, digital rights management regimes will enable
information providers to appropriate far more protection against copying and
distribution than intellectual property law now provides. Copyright law allows
some reuse of protected expression under a variety of exceptions designed to
serve the public interest, and allows any reuse after the term of copyright
protection has expired.12
Copyright also does not attach to facts, ideas, or functional principles; instead,
it treats these materials as public domain "building blocks" for future
works.13 Many compilations
of information consist largely of such public domain material and are protected
only minimally, if at all, by copyright.14
The common law tort of data misappropriation provides some protection for uncopyrightable
facts, but cannot protect against all copying, since the Copyright Act expressly
preempts state-created rights that are "equivalent" to the rights
afforded under copyright law.15
Trade secrecy law protects only information that is not generally known or readily
ascertainable, and allows discovery of protected information by reverse engineering
and other "proper means."16
In short, legal protection against unauthorized copying and distribution is
incomplete, and is so by design.
Information providers conceive digital rights management systems as self-enforcing
contracts, and argue that copyright law does not displace private bargains that
alter the distribution of rights and privileges as between the parties.17
However, courts have differed on the validity, as a matter of contract law,
of "shrinkwrap" licenses that purport to restrict the uses of information
products based on terms packaged with the product and revealed to the customer
after purchase.18 Accordingly,
many information providers have supported efforts to draft a new Article 2B
of the Uniform Commercial Code to establish different ground rules for transactions
in software, information, and other intangible intellectual products.19
Among other things, proposed Article 2B is intended to validate self-enforcing
shrinkwrap (or "clickwrap") licenses-including mass market standard
forms-implemented via digital rights management regimes.20
Proposed Article 2B implements this regime of electronic private ordering
primarily through two provisions. Section 2B-310, which applies to performance
of the contract, allows "electronic regulation of performance" by
either party in specified circumstances.21
First, section 2B-310 permits electronic regulation if expressly authorized
by a term in the license agreement.22
However, section 2B-310 goes on to create a list of exceptions that virtually
swallows this express disclosure rule. The license need not disclose electronic
regulation that merely implements a stated temporal or quantitative restriction
on use, or enforces "informational rights which were not granted to the
licensee."23 Nor must
it disclose electronic regulation that "prevents uses of the information
which are inconsistent with the agreement"-apparently, even if copyright
law or other applicable "informational rights" law would allow such
uses.24
Effectively, section 2B-310 would allow information
providers to contract around copyright law without disclosing that fact to users.
The Reporter's Notes to section 2B-310 make only oblique mention of copyright
preemption. They assert that the provision simply represents "[t]he basic
principle ¼ that a contract can be enforced."25
Proposed Article 2B does contain another provision, section 2B-105, that acknowledges
the possibility of copyright preemption of particular contract terms; in the
accompanying Reporter's Notes, the drafters disclaim jurisdiction to make specific
recommendations about preemption.26
Nonetheless, both the Reporter's Notes and the prefatory memorandum accompanying
Article 2B make clear their belief that even mass market
contracts that are inconsistent with copyright are not necessarily invalid
for that reason.27 The drafters
describe Article 2B's approach to the question of federal preemption as one
of "neutrality"; under this vision, it appears, contract may extend
wherever it is not expressly prohibited by Congress or the federal courts.28
Section 2B-715, which applies in the event of a breach by the licensee justifying
cancellation of the agreement, governs "self-help repossession" by
the licensor.29 Unlike section
2B-310, which has no analogue in the current U.C.C., section 2B-715 is expressly
modeled after section 2A-525, which authorizes self-help repossession of leased
property by the lessor, and section 9-503, which authorizes self-help repossession
of secured collateral by the holder of the security interest.30
Like sections 2A-525 and 9-503, section 2B-715 allows self-help repossession
following cancellation if possible "without a breach of the peace."31
Cancellation, in turn, requires a material breach or express contractual authorization.32
In addition, section 2B-715 adds the express requirement that the repossession
not create "a foreseeable risk of personal injury or significant damage
to information or property other than the licensed information."33
The most recent draft of Article 2B is silent on the question of electronic
self-help repossession-or, more precisely, since nothing physical need be reclaimed,
electronic self-help deactivation or depossession-of licensed information
products. This was not always so. In previous drafts, Article 2B contained a
special provision expressly authorizing electronic self-help repossession.34
Section 2B-716 (now omitted) established additional procedural requirements
for electronic self-help in cases involving licensed software "material
to the licensee's business."35
Such material could be repossessed or "depossessed" electronically
only if the licensor first gained physical possession of a copy (subject to
the "breach of the peace" limitation) or if the license authorized
the repossession and the licensor gave at least ten business days' notice.36
By implication, licensed information consisting of "informational content,"
or used for personal rather than business purposes, was subject to electronic
repossession without physical possession and without notice of any kind, as
long as no "breach of the peace" occurred.37
During its short life, proposed section 2B-716 was enormously controversial.
The drafting committee itself was deeply divided on the question of electronic
self-help, so much so that for a time section 2B-716 existed in two versions,
a majority version allowing electronic self-help and a minority version prohibiting
it except to the extent expressly authorized by other law.38
The new section 2B-715 simply steers clear of the entire controversy without
resolving any of the issues that former section 2B-716 raised. The Reporter's
Notes state that the draft "takes no position on whether self-help can
be pursued through electronic means."39
This abrupt retrenchment leaves to the courts the task of interpreting the "breach
of the peace" and "material breach" limitations in the context
of digitally-mediated transactions in creative and informational works.
Together with other provisions of Article 2B that validate mass market "licenses,"40
sections 2B-310 and 2B-715 would give information providers enormous power to
alter the balance of creator rights and user privileges established by the Copyright
Act.41 This is true even
though section 2B-715 now leaves unanswered the question of electronic self-help
following cancellation. As Professor Friedman correctly recognizes, the most
effective electronic self-help is the kind covered by section 2B-310-so-called
"electronic regulation of performance" that simply forecloses potential
breach at the outset.42 As
the technologies of electronic regulation become more sophisticated, a separate
right of electronic "repossession" is of less moment. As I have noted,
the drafters of Article 2B nonetheless characterize sections 2B-310 and 2B-715
as entirely consistent with the existing framework of commercial law, and indicate
their belief that the regimes of private ordering authorized by Article 2B would
not violate copyright law or other law or policy.43
The remainder of this article evaluates those contentions.
III. Doctrine: Self-Help, Trespass, And The Rights Of Persons
Both the common law and the U.C.C. have traditionally afforded rights
of self-help to vendors and creditors. However, both bodies of law limit the
right to enter private property to repossess goods, allowing such entry only
when the circumstances indicate consent, or at least acquiescence. Judged against
these limits, Article 2B sanctions a degree of intrusion
into private homes and offices that is unprecedented. It also authorizes
self-help in a much broader range of circumstances, including those in which
licensee conduct, although defined as breach, is privileged by the public law
of copyright. To a far greater extent than existing law, Article 2B elevates
the rights of mass market vendors over those of consumers and rights in "informational
property" over the rights of persons to security and autonomy within private
spaces.44 Whether and to
what extent this approach is warranted depends on how "intrusion"
is conceived and on the purposes that self-help and the legal standards governing
it are thought to serve.
Before digital technologies made remote or prospective self-help possible,
self-help repossession necessarily entailed physical recovery of disputed goods
following an alleged breach of contract. The law of self-help thus has been,
until now, the law of physical, ex post repossession of chattels, which in turn
has focused heavily on the likelihood of physical violence. Courts considering
these cases have not explained, because they have not needed to, whether the
judicially-developed "breach of the peace" standard is only
designed to minimize the likelihood of physical violence and harm to persons
and property, or is (or should be) more broadly concerned with preventing nonconsensual
intrusion-and if so, what kinds of nonconsensual intrusion count. Because the
universe of possible transgressions with respect to leased and secured chattels
is relatively narrow, they also have not explored whether in other circumstances
the law might or should impose substantive limits on the sorts of dereliction
that justify self-help behavior. Finally, they have not considered whether standards
developed to govern self-help following cancellation should apply to self-enforcing
"regulation of performance" ex ante. Article 2B's proposed extension
of self-help privileges to encompass electronic repossession and prospective
self-help requires answers to all three sets of questions.
A. Self-Help and Private Spaces
The physical self-help tactics employed at the dawn of the consumer
credit era created risks of physical violence and raised questions about debtors'
rights to security against trespass and other intrusions. To minimize these
concerns, courts developed rules that allowed self-help repossession only if
it could be accomplished without a breach of the peace.45
Although courts created exceptions to the law of trespass to accommodate a perceived
need for self-help repossession of chattels kept on private property, they used
the "breach of the peace" standard and the concept of noncoerced consent
to cabin these exceptions. Thus, creditors could enter private property to recover
chattels sitting in plain view in a yard or driveway, if the debtor offered
no resistance.46 They could
not, however, break into a debtor's home or business premises, or use or threaten
force to gain entry if permission to enter was refused.47
Only the state could enter a private home or office against the owner's will,
and then only within the limits established by due process principles.48
The rules governing self-help repossession under Articles 9 and 2A of the
U.C.C., which expressly incorporate the "breach of the peace" standard,
mirror those developed under the common law.49
Creditors may enter upon private property, but their ability to do so is severely
restricted. "'The two primary factors considered in making th[e] determination
are the potential for immediate violence and the nature of the premises intruded
upon.'"50 Although many
contracts expressly authorize creditors to enter private premises to effectuate
repossession, courts have read the breach of the peace limitation into these
clauses, as well.51 In the
eleven states that have adopted the Uniform Consumer Credit Code ("U3C")
as a modification to Article 9, moreover, the creditor may not enter a dwelling
"unless the consumer voluntarily surrenders possession of the collateral
to the creditor."52
Courts in non-U3C jurisdictions have not specified what constitutes permissible
entry, and why, in situations not involving overt force or threats of force.53
Generally speaking, courts in non-trespassory repossession cases have allowed
some forms of deceit and trickery and prohibited others, and have justified
both kinds of results by reference to the relationship between force, consent,
and the likelihood of harm.54
How should the ancient "breach of the peace" standard and its associated
concern with protecting private spaces be understood in connection with virtual,
nonrepossessory self-help? Is the touchstone nonconsensual intrusion, or is
the objection to nonconsensual intrusion simply that it threatens violence?
Plainly, the nonviolent nature of electronic self-help-not to mention electronic
"regulation" of performance-does not negate its invasiveness from
the consumer's perspective. The widespread outrage that greeted rumors of a
"registration wizard" in Microsoft's Windows software, which purportedly
reported back to Microsoft via the Internet on the contents of users' hard drives,
suggests that individuals also assess intrusion in other ways.55
(Imagine, for example, that a team
of high-tech repo men had just used a transporter device to "beam"
your sofa out of your living room and back to the furniture store. It would
be difficult for the creditor to convince you that no intrusion had occurred.)
The law of privacy agrees that intrusion need not be violent to be actionable;
nonconsensual "intrusion upon seclusion" is actionable without regard
to the intruder's use of force.56
Assessing the degree of intrusion allowable as a matter of commercial law, therefore,
requires us to do more than simply weigh the risk of physical injury to persons
or property against the licensor's countervailing proprietary rights.
The fact that section 2B-715 also prohibits self-help repossession in situations
presenting a risk of injury to information, independent of any injury to persons
or tangible property, indicates some recognition that physical harm is not the
only kind of harm threatened by unilateral acts of private enforcement.57
Article 2B makes clear, however, that the drafters are far
more concerned with intangible harms to commercial interests than with intangible
harms to individuals. Thus, section 2B-715 includes special protections
for the licensee whose trade secrets become entangled with information "belonging
to" the licensor, but includes no such protections for the licensee whose
diary or great American novel meets a similar fate.58
The Reporter's Notes to sections 2B-310 and 2B-715 do not even acknowledge that
the law of privacy exists, or that "privacy" is a state or characteristic
that has independent value for individuals and for society.
Determining whether and how privacy concerns should influence the law of electronic
self-help requires defining the interests that "privacy" protects
and the senses in which it is subject to invasion. Volumes have been written
on this subject, and the exact provenance of privacy is still unsettled. For
purposes of this article, however, it is sufficient to note that privacy is
broadly acknowledged as having decisional, informational, and spatial dimensions.59
Plainly, the self-help rights provided by Article 2B do not directly implicate
privacy concerns related to intimate personal decision-making.60
Self-help might entail collection and revelation of information about an individual
licensee's activities. The privacy implications of such monitoring are clear,
and are thoroughly treated elsewhere; I will not repeat that analysis here.61
My concern here is with the new kind of self-help that
digital technologies allow-self-help that consists solely of "dumb,"
hard-wired prevention of unauthorized conduct. Although this kind of self-help
does not appear to raise informational privacy concerns, that does not end the
inquiry.62 Whether such self-help
implicates privacy in the spatial sense remains to be considered.
The common law of privacy protects only those expectations of privacy that
are "reasonable."63
One possible understanding of "reasonableness" in the context of assertedly
private spaces is that the state of the art of self-help technology determines
(and limits) the expectations of privacy that consumers can reasonably have.
This is not entirely far-fetched; technology plays an important role in shaping
privacy-related rules and norms.64
Yet if reasonable expectations are defined solely by the
limits of technological possibility, privacy has a bleak future. Individuals'
legal entitlement to privacy will simply recede as the technologies of intrusion
advance. This approach also rests on an important, and misguided, assumption
concerning the unidirectional nature of technological progress. Technology can
evolve in privacy-destroying or privacy-protecting ways. The actual path of
technological evolution will depend on many factors, including the priorities
of stakeholders and the processes by which stakeholders are identified and consulted.65
To say that electronic self-help is legitimate because it is possible ignores
the degree to which both "privacy" and "technology" are
normative as well as positive constructs-functions of the laws and mores of
society as well as the laws of physics.
Another possible interpretation of "reasonableness," suggested by
cases involving alleged intrusion upon seclusion via remote listening and viewing
devices, is that an intrusion into private space is actionable only if it renders
the space accessible, or potentially so, to a human observer.66
This answer also is unsatisfactory, however, because it depends, ultimately,
on informational privacy concerns. Privacy protects certain
spaces not only to shield personal behaviors from observation by others, but
also to preserve a zone of autonomy from interference by others.67
Freedom from observation means little without freedom from outside control.
Because autonomy interests may be violated even if informational interests are
not, whether a human observer gleans any direct information from an autonomy-destroying
intrusion is irrelevant. It is worth noting, too, that "dumb" intrusions
are not divorced from human agency, but only separated from it in time. In
a sense, the intrusion (or at least its but-for cause) occurred much earlier,
when the licensor determined that consumers in their private homes and offices
would be allowed to take certain actions but not others.68
It is true that "dumb" self-help is a different kind of intrusion
than that caused by human perception. Yet to characterize it as "merely"
a communication surely would go too far. A dinnertime telemarketing phone call
may annoy, but a spurned telemarketer cannot turn off software that happens
to be running on a personal computer in one's study, or deny access to copies
of digital works stored there. Electronic self-help is a communication that
suspends or restricts preexisting access to stored digital information; as such,
it is qualitatively different than an unwanted telephone call that has no further
effect.69
Telephone, electric, and gas companies supply a somewhat closer parallel.
These entities have the undisputed power to disconnect service to private homes
and offices. However, they do not have the power to reach inside the home or
office and disable lawfully acquired products, such as lamps, stoves, and telephones,
merely because they require electricity, gas, or telephone wire to function.
In addition, public utilities' power to exercise self-help is limited in other
ways. The telephone company may not disconnect a consumer for making fun of
the company, nor for taking apart the telephone to try to build a better one;
it may do so only for nonpayment, and only after providing notice and a grace
period.70 In contrast, section
2B-310 and (depending on judicial interpretation) possibly section 2B-715 authorize
intrusion into private individuals' homes, offices and computer systems for
a wide variety of misconduct, without prior notice, as a matter of routine business
practice. Thus, to decide whether the intrusions-by-communication authorized
by Article 2B are reasonable based on a public utility analogy, we also must
consider whether their subject matter justifies their scope.
B. Self-Help, Notice and "Materiality"
Self-help historically has been understood, and rightly so, as a drastic
remedy. For this reason, existing commercial law requires that the range of
conduct that will trigger self-help behavior be clearly defined. For leases,
the language of Article 2A sets these initial limits. A lessor of tangible property
may engage in self-help only if the lessee "wrongfully rejects or revokes
acceptance of goods or fails to make a payment when due or repudiates"
all or part of the contract, or otherwise "substantially impairs"
its value.71 The language
of Article 9, in contrast, is relatively open-ended; it allows self-help repossession
by the holder of a security interest upon the debtor's "default."72
Because Article 9 does not define "default," courts have required
that the events alleged as default be defined as such in the security agreement.73
Moreover, courts in a number of states have cabined contractual events of default
by imposing objective limits on "catchall" belief-in-insecurity clauses;74
by restricting the use of insecurity-acceleration clauses and requiring clear
notice of acceleration in all relevant documents;75
by limiting the use of demand clauses if the contract also contains enumerated
events of default;76 and
by applying principles of estoppel to bar repossession or acceleration by creditors
in some circumstances notwithstanding the contract language.77
In U3C jurisdictions, these restrictions are codified; a creditor may not accelerate
the debt, but instead must afford both notice and an opportunity to cure the
deficient installment(s), and may proceed with self-help repossession only upon
objective evidence of "significant impairment of the prospect for payment
or realization on the collateral."78
These restrictions are designed to mitigate the severity of the self-help remedy
by ensuring that self-help will not follow minor or debatable infractions, and
by alerting consumers to the kinds of conduct that create risk.
Measured against existing law and practice, the self-help provisions of proposed
Article 2B require much less advance notice, and authorize self-help in an even
broader range of circumstances. Section 2B-310, in particular, allows electronic
regulation of any behavior considered inconsistent with the contract, without
contractual notice in many cases.79
In contrast, although the Article 2B drafting committee had previously approved
post-cancellation self-help provisions without any materiality restriction,
the new version of section 2B-715 requires either that the breach be "material"
or that the license expressly define it as grounds to cancel.80
Even these restrictions, however, do very little to bring Article 2B in line
with the existing law of self-help repossession.
First, as described above, existing law requires written notice of the possibility
of electronic self-help in all cases, not just some. This is true for electronic
self-help as well. Every court that has considered a challenge to electronic
self-help repossession of licensed software has indicated that in view of its
drastic nature, electronic self-help requires prior contractual authorization.81
The Reporter's Notes to sections 2B-310 and 2B-715 do not mention these decisions
at all.82 The omission is
hard to fathom. Given the severity
of the consequences and the inability of most consumers to evade them, lack
of written notice of the possibility of electronic self-help is simply unfair.
(If a creditor considered itself entitled to "beam" your sofa
out of your living room, or to prevent you from installing new cushion covers,
you almost certainly would prefer to know this up front.) It
is worth noting, too, that none of the cases concerning electronic self-help
has involved a non-negotiated, mass market contract; thus, no court was required
to consider whether the "notice" afforded consumers by standard-form
provisions is enough to validate electronic self-help. It is at least an
open question whether the severity of the remedy justifies heightened notice
requirements.83
Second, even apart from the issue of notice, the self-help rights afforded
by Article 2B are extremely broad. In part, this is the result of specific drafting
decisions; even section 2B-715's materiality restriction is virtually meaningless
because Article 2B's definition of "material" breach is so broad that
it encompasses almost any breach.84
In part, however, it is a consequence of the open-ended nature of "informational
rights" as conceived by licensors and the Article 2B drafting committee.
Both Article 2A and Article 9 inherently concern a narrower range of potential
transgressions than Article 2B. The typical Article 2A lease or Article 9 security
agreement is concerned only with behaviors that bear on the debtor's financial
soundness or on the availability of the collateral to satisfy the debt.85
In practice, a default most often will consist of failure to make required payments.
Article 2B, in contrast, contemplates a seemingly limitless range of restrictions
on the uses that licensors may make of creative and informational works, and
appears to contemplate electronic enforcement of most such restrictions-which,
in turn, exacerbates the notice problem still further. An expansive conception
of breach need not, however, automatically translate into an expanded scope
for self-help. At minimum, before adopting this robust conception of private
ordering, we should weigh its merits and demerits and consider other possible
approaches.
Affording licensors such broad powers of self-help is enormously problematic,
for several reasons. First, the determination of breach (or, as in section 2B-310,
behavior "inconsistent with" the license) is not always as clear-cut
as sections 2B-310 and 2B-715 imply. Deciding whether a consumer has failed
to pay is relatively easy; for other license provisions, however, the determination
of breach may require resolution of difficult questions of fact or law.86
Appointing the licensor judge, jury, and executioner on these questions seems
singularly unwise. Second, the alleged inconsistency or breach may consist of
conduct that copyright law permits. A licensee might trigger digital policing
mechanisms while trying to fix bugs in licensed software, or using the licensed
information to create a classroom handout or critical commentary.87
In such a case, the licensee has a defense-copyright preemption-that is unavailable
to the person who simply has failed to pay for goods received, and the outcome
may turn-as the drafters themselves note-on the resolution of difficult questions
of federal law.88
One obvious solution to the overbreadth problems in sections 2B-310 and 2B-715
is to authorize self-help only for the same kinds of misconduct that have traditionally
warranted it: failure to pay and other conduct that substantially impairs the
value of the covered property based on an objective standard.89
In the case of section 2B-715, courts could simply interpret "materiality"
this way. Neither approach appears to have occurred to the drafters, for reasons
that also are self-evident: such restrictions would diminish Article 2B's utility
as a vehicle for private ordering of rights in information. Yet at the same
time, the drafters' decision to impose some sort of materiality restriction,
however vague, on self-help under section 2B-715 suggests a recognition, however
murky, that wholly unrestrained private ordering might be bad policy. A narrow
understanding of "materiality" makes the most sense, both in terms
of fairness to consumers and in terms of broader societal concerns about the
rule of law. Section 2B-310, however, contains no express materiality restriction,
and as we have seen, there are other significant differences between the self-help
powers conferred by section 2B-310 and those conferred by 2B-715. Thus, to finish
the project undertaken in this Part, we must consider the drafters' implicit
assumption that "regulation of performance" ex ante is fundamentally
different than "self-help" ex post.
Sections 2B-715 and 2B-310 diverge markedly with regard to materiality
and notice; this suggests that the drafters see an important difference between
the two types of self-help. This difference follows fairly straightforwardly
from the libertarian notion of freedom of contract. From this perspective, it
is conceivable that wholly unfettered rights of "repossession," or
post-breach self-help, might unacceptably blur the line between the rule of
law and the state of nature. A central purpose of the social contract, after
all, is to eliminate the chaos and uncertainty that would arise in a society
without formal systems of dispute resolution. Electronic regulation, however
(or so the argument goes), invokes the law of the market, not the law of the
jungle. "Regulation of performance" is simply a high-tech way of describing
the licensor's right to determine the features of its product. The restrictions
become part of the product, which consumers can take or leave.90
The freedom of contract argument for unfettered electronic
regulation of performance is simple and elegant-and breathtakingly sophomoric.
First, it conflates choice with submission and product capabilities with control
of behavior. Your vacuum cleaner cannot fly, or clean your oven, and you have
no particular right to one that can. However, except in special cases governed
by the patent laws, within private spaces you may use or modify a lawfully-acquired
vacuum cleaner in any way you see fit. There might be questions about liability
for injuries arising from unintended uses, but that is a separate matter well
within the scope of existing contract and tort law concerning warranties, warnings,
and disclaimers. Second, the freedom-of-contract argument conflates digital
code with "contract," and calls the result a purely private form of
ordering exempt from public policy limits-although "contract" is not
and never has been exempt from such limits.91
Section 2B-310 sanctions the control of people, not products; it negates agency,
and calls the result freedom.
Theory aside, consider (again) your living room sofa. Suppose, first, that
the purchase agreement states that no more than three people may sit on the
sofa at a time. When a fourth person (say, perhaps, the small child of an adult
sofa-sitter) attempts to join the others, the sofa vanishes, dumping its erstwhile
occupants onto the floor. This is repossession, swift and (largely) bloodless.92
Now suppose, instead, that the child's approach activates an invisible force
field, such that the child may not sit while all three adults remain. There
is no repossession (the sofa remains) and no loss of "use" (as defined
by the licensor), but only regulation of use. There is little risk of physical
injury, and little need for invasion of privacy in the informational sense.
Yet I suspect most readers will feel that from the standpoint of personal autonomy
within a space hitherto conceived as private, there is not much difference between
the two scenarios.93 Article
2B stands for the proposition that intellectual property is different enough
from sofas that licensors can, with straight faces, propound and demand acceptance
of precisely the latter sort of regime.94
Is there any consideration that might justify broader rights of private ordering
and self-help repossession, and a correspondingly restricted sense of individual
autonomy, as to information products than as to tangible articles of commerce?
The answer, according to the drafters of Article 2B, seems to be that unauthorized
use is reconceived as an invasion of the information provider's "property"
interests in the work, as distinct from the particular copy the licensee happens
to possess.95 It is true
that intellectual property and sofas are not entirely the same-sofas are not
public goods, and cannot be costlessly copied-but the need to prevent market-destroying
appropriation is a very different sort of argument, and it is far from clear
that it justifies the full range of autonomy-destroying practices that section
2B-310 would allow.96 Moreover,
the fact that the licensor may have "informational rights" in the
licensed subject matter also cuts the other way, because "informational
rights" are limited by law in ways that rights in chattels are not. A copyrighted
work is not "property" in the same sense as land or consumer goods,
because the public has protectable interests in certain public-domain aspects
of copyrighted works at the outset.97
Even the common law of property historically has recognized
certain public rights of access to or across the property of another.98
Most closely analogous is the public trust doctrine, which preserves a right
of access across privately-owned land when necessary to reach beaches and other
areas that the law considers to be commonly-owned.99
Similarly, the exceptions and exclusions in copyright law preserve public access
to the linguistic, cultural, and scientific commons. The common law of property
also recognizes public rights of privacy while on the property of another; for
example, landlords may not use listening devices or trick mirrors to spy on
their tenants, or install viewing devices in public restroom stalls.100
In short, the fact that something is "property" does not, without
more, confer on its owner rights of absolute, unqualified control.101
The scope of permissible private ordering of others' behavior within private
spaces should be a subject of conversation for society generally, not a unilateral
decision for information providers.
In sum, Article 2B proposes to arrogate to private information
providers the power to reach into customers' homes and offices and literally
shape their behavior-in many cases without even the courtesy of express contractual
notice. Even if self-enforcing digital contracts did not implicate federal
copyright law, these new technological methods for regulating the use of information
products and effectuating self-help repossession would raise important questions
about the permissible scope of private enforcement activity. Ultimately, Article
2B requires us to decide whether "self-help" as a legal construct
exists solely for the narrow purpose of protecting vendors and consumers from
avoidable financial harm, or also for the broader purpose of allowing vendors
to shape the behavior, even within private spaces, of those with whom they deal.
That such self-help concerns intellectual property makes it more, not less,
troubling, because private ownership of intellectual property traditionally
has been conceived as less complete than private ownership of chattels. These
questions deserve far more careful consideration than they appear to have received.
Platitudes about the need for enforcement of contracts are simply inadequate
to justify such a radical reallocation of authority to monitor and control individual
conduct.
IV.
Theory: Consent, Efficiency, and Norms
The electronic regulation and self-help provisions of Article 2B also
cannot be justified under any of the prevailing scholarly accounts of self-help
and its role in the fabric of commercial exchange. Although these theories run
the gamut from freedom of contract to economic efficiency, they share a common
failing. All of the theories ignore or assume away the structural peculiarities
of the consumer mass market, and thus fail to recognize that neither consent
nor efficiency can be judged in the abstract. In addition, theoretical approaches
that privilege allocative efficiency to the exclusion of all other considerations
are inappropriate given the public good nature of creative and informational
works. When mass market transactions in information products are considered
in context, theoretical justifications for unfettered private electronic ordering
become difficult to sustain.
Several legal scholars and at least one court have sought to justify enforcing
contract terms governing use of creative and informational works by reference
to individual freedom of contract. Consumers, the theory posits, are free to
accept or reject the terms offered in the market. If they consent to license
agreements that abrogate the user privileges established by copyright law, it
must be because they find such agreements desirable.102
In the mass market context, however, the argument from
consent is far too simple. The market system established by the U.C.C. bears
little resemblance to the atomistic market of the neoclassical, libertarian
paradigm, which presumes perfect information and fully-informed consent
as to every term of the deal.103
The U.C.C. was designed to allow commercial transactions to proceed without
exact specification of every term, and in particular to obviate the need for
bargaining over the allocation of product-related risks.104
Article 2B's mass market license provisions continue this approach; they are
designed (among other things) to facilitate market exchange in the absence of
complete information. Particularly for complex products (or "ordinary"
products that have been subjected to complex contract terms) the argument that
the structure of the typical mass market transaction enables voluntary, informed
exchanges with respect to most terms other than price is sheer fantasy.105
This is especially true for implicit contract terms, such as the electronic
"regulation" of behavior "inconsistent with the agreement"
authorized by section 2B-310.106
This is not to say (yet) anything about the legitimacy of particular mass market
terms expressly or implicitly authorizing self-help, but only that a meaningful
justification for broad powers of self-help must proceed without reliance on
a hypothetical state of affairs that bears no resemblance to reality.
At the other end of the epistemological spectrum lie efficiency-based arguments
of varying degrees of sophistication.107
The simplest economic rationale for allowing self-help repossession turns on
the seller's opportunity cost. Creditors seeking expanded self-help powers typically
have argued that requiring them to incur litigation costs, or to charge off
as losses items of collateral too small to justify litigation, will raise the
price of credit for other, law-abiding consumers.108
This "lost-value" justification for self-help does not apply as
neatly to intangible intellectual property, however, both because of the public
good nature of creative and informational works and because of the broad scope
of self-help contemplated under Article 2B. First, the
"lost value" attributable to a product whose value lies chiefly in
its public good aspect is inherently speculative. Failure to recover a car after
the buyer defaults precludes the secured creditor from recovering a portion
of its investment; failure to recover a copy of a creative or informational
work does not preclude the information provider from realizing a profit on the
work.109 Particularly in
the case of digital works, the supply of copies is infinite and virtually costless,
and there is no necessary or inevitable relationship between the price charged
to consumers and the value invested in each copy. The point is not that
information providers have no claim to remuneration for copies of works-plainly,
they do and should-but only that "lost value" arguments are less compelling
in this context; thus, it seems odd that information providers should demand
greater powers of self-help than are available to purveyors of tangible goods.110
Second and more important, Article 2B authorizes self-help in a wide variety
of circumstances unconnected to failure of payment or financial insecurity-for
example, unauthorized modification of software or copying of content for educational
purposes.111 Even if lost
profits warrant electronic self-help when consumers fail to pay, that does not
justify using lost profits to bootstrap electronic self-help rights in other
cases. Here again there is a gray area, though: if the information provider
wishes to charge a fee for every use of a work, or to charge different users
different types of fees, may not any case be converted into one of failure to
pay? The answer is complicated. In a recent essay, Terry Fisher argues that
allowing information providers the freedom to price discriminate may benefit
society-except when ceding greater control to information providers threatens
other important social values.112
Plainly, price discrimination will benefit marginal consumers; plainly too,
there will be difficult cases involving marginal sellers for whom the extra
profit would make the difference.113
But the need to consider other social policies-discussed at greater length below-means
that information providers cannot be the ones to decide when certain uses may
be restricted, or when electronic self-help may follow. Decisions about privatizing
information policy must be based on more than the licensor's desire for additional
profit.
Other economic theorists focus on the general deterrence value of self-help
rules and practices. Robert Scott argues that the threat of self-help plays
an important role in inducing non-defaulting consumers to pay their debts.114
He characterizes the right of self-help repossession as an economic hostage
offered by the debtor in a game-theoretic bargaining environment to signal the
debtor's commitment to pay.115
In turn, the creditor signals its commitment to enforce the debtor's promise
by precommitting to "a sequence of discrete steps ¼ each act escalating
incrementally."116
Scott contends that self-help remedies as a class are important to a creditor's
ability to maintain a reputation as an enforcer of promises. The
challenge, then, is to "design a pattern of reciprocal commitments that
effectively constrains the debtor without unduly tempting the creditor."117
If we accept Scott's argument as sufficient in principle to justify some self-help
practices, the question still remains how Article 2B's electronic regulation
and self-help provisions fare under his "unduly tempting" standard,
which acknowledges that some forms of self-help may create unacceptably high
risks of abuse.118 There
are good reasons to think that electronic self-help would create such risks.
As Part I discussed, section 2B-310 would authorize intrusion at the licensor's
sole discretion; in this, it resembles the "confession of judgment"
clauses that Scott condemns as offering too great a temptation "to evade
contractual risks."119
Once again, this concern is especially great for self-help unconnected to payment,
and intended solely to regulate unacceptable behavior as defined by the licensor.
In addition, Scott notes that distributional concerns might justify some regulation
of otherwise efficient creditor self-help practices.120
To the extent that copyright's user privileges reflect such concerns, as this
article argues they do, they might well justify a ban on licensor self-help
that takes the form of direct electronic control of user behavior.121
A different sort of justification for creditor self-help remedies is supplied
by theories that marry consent and efficiency rationales for commercial rules.
Starting from essentially libertarian premises, Randy Barnett argues that rules
about contract enforcement must be premised on individual consent.122
To avoid the pitfalls of subjectivism, however, Barnett contends that consent
should be presumed when legal rules mirror social conventions.123
Barnett's "conventionalist" analysis resonates with the norm-based
approach to commercial law, which emphasizes the interplay between law and extra-legal
social ordering among groups. To these theorists, the "new law merchant"
should reflect a decentralized, bottom-up approach to lawmaking that seeks to
affirm existing commercial practices.124
An initial problem that confronts the use of norm theory to justify electronic
self-help is that such self-help is not, as a factual matter, the ordinary practice-yet.
Whether it becomes the norm will depend, in part, on how the law chooses to
treat it; norms and law constitute each other in important and complex ways.125
More fundamentally, however, the notion that commercial law should be premised
on market norms is deeply problematic when applied to the consumer mass market.
Norms presuppose communities, and analysis of contracting behavior in the consumer
mass market suggests that the community that drives the evolution of mass market
norms is the community of providers. Norms also presuppose a sense of shared
benefit, and community satisfaction is not necessarily the most appropriate
measure for rules that affect relationships between community members and outsiders.126
Certainly, such norms cannot be said to be freely chosen by the outsiders whom
they affect.127 In addition,
they may be inefficient when assessed in terms of their effect on the larger
society within which the community exists.128
The fact of the larger community also should cause us to question our initial
identification of provider practice as the relevant norm; if, instead, we chose
the community of consumers as the baseline, we probably would discover that
existing social norms militate in favor of copyright user privileges.129
Historical evidence suggests that Karl Llewellyn, who first conceived the
Uniform Commercial Code, sought to establish the Article 2's merchant-nonmerchant
distinction precisely so that the rules governing merchants could be regularized
without placing individual consumers at a disadvantage or constraining courts'
equitable powers in merchant-consumer disputes involving sales of goods.130
For similar reasons, Article 9 contains provisions that afford heightened protection
for individual consumers in the context of secured transactions.131
Arguably, Article 2B's distinction between negotiated and mass market licenses
is more appropriate for information markets; many small businesses that Llewellyn
might consider "merchants" are nonetheless consumers of mass marketed
information products.132
However, Article 2B turns Llewellyn's point on its head by according less protection
to mass market licensees than to parties to negotiated agreements, and the least
protection to individuals who use licensed information products for personal,
non-business purposes.133
This approach is consistent with the hypothesis that Article 2B reflects provider
norms. That information providers as a group feel Article 2B would put them
at an advantage in their dealings with consumers hardly constitutes a compelling
case for its adoption.134
Still needed, then, is a standard by which to evaluate the desirability of
the particular self-help regime embodied in Article 2B. Economic analysis of
commercial law posits that the law of commercial transactions should focus primarily
on establishing default rules that are "efficient." For some legal
scholars, this means that legal rules for resolving disputes should reflect
the ex ante bargains that a majority of the parties would have reached.135
Others contend that the law should sometimes set default rules differently,
to encourage one or both parties to reveal information in the course of bargaining
around them.136 Once again,
however, the notion that a rule should mirror or encourage "bargaining"
is less than useful in the mass market context, where bargaining typically does
not occur on a term-by-term basis. In the mass market,
consumers are contract takers; they can refuse to buy, or hold out for a lower
price, but they generally cannot demand a particular package of contract terms
or product characteristics.137
Thus, if the default rule under Article 2B allows electronic regulation and
self-help, we would not expect to see consumers bargain around that rule in
most cases-even if the rule were structured as a "penalty default"
requiring actual disclosure to consumers.138
The opposite rule, disallowing electronic self-help unless
authorized in a separately-negotiated agreement, probably would encourage more
"bargaining," in that information providers most likely would offer
lower prices to consumers willing to agree to electronic monitoring. But
information providers also might offer non-monitored products at such high prices
that most consumers could not or would not purchase them.139
Thus, under either rule, electronic regulation might become the prevailing approach
without consumers having any real say in the matter. The
problem here is not lack of "bargaining" per se, or even lack of knowledge,
but rather lack of consent and inability to affect the options on the table.140
One may say many things about the results of such a system-that they reduce
transaction costs, or that they promote freedom of contract for information
providers-but one cannot say that they are reliable measure of what consumers
want.
Another way to approach the question of private ordering of rights in creative
and informational works is by asking whether such private ordering creates unacceptable
costs, either for consumers or for society generally. If so, we might decide
that a prohibition on the use of electronic regulation and self-help-or on their
use in certain categories of disputes-should be an immutable rule.141
The answer to the question depends largely on how overall or social welfare
is defined. From a purely allocative standpoint, the mass market behavior predicted
above suggests that banning electronic private ordering would be inefficient.
If most consumers would submit to self-help that negates their copyright privileges,
that would mean that they do not value these privileges as highly as licensors
value their absence. Allocative efficiency is a poor measure
of social welfare, however. Social welfare is in part a function of nonmonetizable
values, external effects, and distributional concerns, all of which the allocative
criterion ignores.142
To decide whether the law should permit or forbid contractual exit from copyright,
we must consider the particular social goals that copyright is intended to promote,
and whether market transactions in private-law "usage rights" will
promote them as effectively.
As I have demonstrated elsewhere, the copyright
system promotes the social goals of creative progress and public access to creative
works in important ways that the market cannot measure.143
Because it is difficult to assess creative potential ex ante, because there
is no necessary relationship between creative potential and ability to pay,
and because current information providers may perceive some works by second-comers
(for example, parodies) as detrimental to their interests, there is no reason
to think that giving information providers control over all uses of their information
products would result in more or better creative progress.144
Even under a well-functioning regime of contractual usage rights, moreover,
second-comers whose works produce substantial shared social benefits would be
unable to appropriate the full value of their contributions, and would be unwilling
to pay the prices demanded by existing content owners.145
In this respect, the enhanced accessibility of creative and informational works
under copyright law produces important external benefits that most likely would
be underproduced by a private-law, market-based regime.146
Copyright's access and use privileges, which distribute the "costs"
of uncompensated uses broadly among all consumers, attempt to correct for this
market failure-or, more accurately, for this failure of markets.147
In short, the copyright regime of limited rights and user privileges not only
serves nonmonetizable and distributional concerns,
but those concerns also are central to a particular understanding of creative
and social "progress." This suggests
that overall or social efficiency may well require an immutable rule prohibiting
electronic regulation and self-help in at least some circumstances where private
ordering threatens to disrupt the copyright balance. At the very least, the
case for unfettered electronic private ordering is resoundingly inconclusive.
V. The U.C.C., Copyright, and the Public-Private Distinction
We turn now from Article 2B's doctrinal and theoretical antecedents
to the question of its validity as a matter of federal copyright law and policy.
Whether the self-help provisions of Article 2B implicate copyright law, or the
limits imposed on copyright law by the First Amendment, turns on interpretation
of the public-private distinction in the particular context of the laws that
govern ownership of creative and informational works. For Article 2B's electronic
rights management and self-help provisions to be valid, Article 2B must be seen
to establish merely a neutral background or framework for private exchange.
Indeed Article 2B is intended to establish a background framework; however,
the framework is not neutral. To the extent that Article 2B is intended to give
information providers the tools and the authority to contract around their limited
entitlements under copyright law and into more robust entitlements of their
own design, its adoption threatens to subvert completely the statutory and constitutional
underpinnings of federal intellectual property law. Moreover, the process that
produced Article 2B has been dominated by information provider interests to
such a degree that the public-private distinction cannot credibly be invoked
to shield their conduct.
A. Preemption and the "Dormant Intellectual Property Clause"
The public-private distinction mediates
the relationship between copyright and contract in several different ways. First,
as discussed in Part II, it helps to define the scope of preemption under section
301 of the Copyright Act. Section 301 preempts state-created rights in the subject
matter of copyright that are "equivalent" to the rights afforded by
copyright.148 It is fairly
clear that Congress did not intend section 301 to preempt many private contracts
relating to works falling within the subject matter of copyright-for example,
agreements authorizing book publication and distribution, or authorizing the
public display of copyrighted films.149
That does not end the matter, however. Some "contracts" closely resemble
universally-applicable proprietary rights. In particular, standard-form, mass
market "licenses" for creative and informational works elide the boundary
between property and contract.150
Any state that adopts the electronic regulation and self-help provisions of
Article 2B should recognize that it is authorizing the implementation of quasi-proprietary
regimes that will affect thousands and even millions of consumers.
Even if contracts as a class are outside the scope of section 301, though,
the electronic regulation and self-help provisions of Article 2B fall afoul
of the general principle, embodied in the Supremacy Clause, that a state-created
regulatory regime cannot undermine federal law.151
Here, the federal law in question is both statutory and constitutional.
The Supreme Court has issued conflicting pronouncements as to whether it will
find implied preemption when the federal statute in question contains an express
preemption provision that does not cover the challenged action.152
Most recently, however, it has suggested that a narrow preemption provision
merely establishes a rebuttable presumption of Congress' intent not to preempt.153
The conflict between Article 2B and the Copyright Act presents a strong case
for finding such a presumption rebutted. It is clear that when Congress enacted
section 301 as part of the Copyright Act of 1976, it did not consider the possibility
of state legislation designed to enable self-enforcing digital contracts that
would enable the wholesale displacement of copyright.154
And, as discussed above, authorizing information providers to define the scope
of their entitlements would materially undermine the social objectives that
the Copyright Act is intended to promote. The Court's preemption decisions establish
as much. Although the Court has held that states may grant protection to potentially
copyrightable works that Congress has not chosen to protect,155
it has also held that they may not grant property-like
rights in unprotectable inventions, although they may afford a lesser
level of protection.156
On the same reasoning, nor may they confer property-like rights in unprotectable
(as opposed to merely unprotected) works, or in unprotectable aspects or components
of otherwise copyrightable works.
Ultimately, however, the determination of conflict is not Congress' to make.
Neither the copyright objectives nor the limitations on copyright ownership
designed to promote them are legislatively-determined. Both are required by
the language of the Intellectual Property Clause of the Constitution, which
authorizes Congress to grant "exclusive Right[s]" only to "Authors
and Inventors" for "their respective Writings and Discoveries,"
and only for "limited Times."157
To qualify as a patentable invention under this standard, an innovation must
represent a nonobvious advance over the prior art; to qualify as a copyrightable
"writing," an expression must attain a minimal level of originality.158
Consistent with these requirements, the Intellectual Property Clause prohibits
copyright protection for facts, ideas, methods of operation, and other elements
of "writings" that do not in themselves constitute original expression.159
Congress, of course, has other sources of power. In particular, it may use
its commerce power to grant certain types of rights in intellectual creations;
the Lanham Act is one such example.160
However, the commerce power is plenary only up to a point; it may not be exercised
in a manner that ignores other, more specific constitutional constraints.161
Thus, Congress may not invoke the commerce power to do what the Intellectual
Property Clause bars it from doing: granting "exclusive Right[s]"
in unpatentable or uncopyrightable subject matter.162
Nor may it invoke the commerce power to authorize the states to grant such rights.163
Congress, in short, could neither enact nor authorize the provisions of Article
2B that allow information providers to grant themselves exclusive rights in
uncopyrightable content, and to extend their exclusive rights in copyrightable
expression for unlimited times.
Where Article 2B is concerned, the relevant question is how these limits on
Congress' power bear on what the states may do on their own. Here the plot thickens,
for the Court has held that the Intellectual Property Clause does not bar states
from enacting their own forms of intellectual property protection, even for
works otherwise patentable or copyrightable.164
But it has never held that the states may offer protection that conflicts with
the constitutional scheme, and indeed, on the terms of its own preemption decisions,
it could not. The statutory limits that required preemption in those cases are
positive constitutional mandates as well. The Intellectual Property Clause denies
protection to certain subject matter precisely so that it may remain in the
public domain, available to all comers.165
It follows that where unpatentable know-how and uncopyrightable facts or principles
are concerned, the same restrictions that bind Congress also bind the states.166
Any state adopting Article 2B should recognize that it effectively allows information
providers to opt out of those restrictions, thereby frustrating constitutional
policy.
B. Speech Harms and the First Amendment
The public-private distinction also demarcates the boundary between
private disputes about infringement and public regulation of speech. This observation
is commonplace as to tort law. Private parties may sue for defamation, but the
state may not structure its law of defamation to chill speech on matters of
public concern.167 Because
copyright also implicates First Amendment concerns, the same analysis applies.
Private parties may sue for infringement, but neither Congress nor the courts
may define the law of infringement in a way that tramples on speech. In particular,
the Court has indicated that the idea-expression distinction and the fair use
doctrine-and the public domain that these limitations on copyright ownership
guarantee-are necessary adjuncts of a statute that creates proprietary rights
in expression.168
Even if the Intellectual Property Clause did not constrain Congress' power
to grant "exclusive [r]ights" in intellectual creations, Congress
could not erase these First Amendment-based limitations on copyright's reach.
Similarly, even if no "dormant Intellectual Property Clause" binds
the states, no state could establish a regime of proprietary rights in information
that ignored First Amendment boundaries. Sections 2B-310 and 2B-715, in contrast,
appear to stand for the proposition that private information providers may use
non-negotiated, digital standard forms to enforce prohibitions on a broad range
of speech activity, ranging from the traditional (criticism, educational discussion,
and commentary on the news of the day) to the less so (reverse engineering of
software).169 Any state
adopting Article 2B should recognize that widespread adoption of these practices
would significantly undermine the First Amendment's guarantees.170
C. Private Enforcement and Due Process
Finally, the public-private distinction determines what procedures
may be used to enforce contract rights. The Supreme Court's procedural due process
decisions make clear that a state-aided seizure of licensed information products,
as authorized under section 2B-715 of Article 2B, would require certain pre-deprivation
safeguards.171 Yet in Flagg
Brothers, Inc. v. Brooks,172
the Court held that a private warehouse that had been storing the plaintiff's
household goods was not required to provide a hearing before selling the goods
to satisfy her account, even though a provision of the U.C.C. adopted by the
state authorized the sale. Private self-help repossession, in short, does not
involve "state action" and thus is subject to fewer procedural constraints
than enforcement via judicial process.
As Flagg Brothers suggests, the argument that Article 2B merely will
establish neutral background rules for private exchange comports with a well-established
(though much-criticized) understanding of the public-private distinction.173
However, sections 2B-310 and 2B-715 do far more than simply reshape the private
law of contract to accommodate the unique characteristics of information products.
Any state adopting Article 2B should recognize that the proprietary regimes
Article 2B authorizes likely will rely heavily on electronic self-enforcement,
and even more heavily on electronic "regulation of performance" ex
ante. As a result, the definition of "informational rights"-which,
until now, has occurred largely via the judicial enforcement process-will be
insulated from public oversight. Article 2B does not merely provide default
rules for the private sector; rather, it works a radical reconceptualization
of what "private" encompasses.
D. Private Interests and Public Acts
Finally, it is worth noting that Article 2B in fact constitutes a hybrid
species of action, both public and private, that the conventional understanding
of the public-private distinction does not contemplate. Article 2B is (or will
be, if enacted) public action at the behest-and, some would argue, the direction-of
particular private interests.174
Public-choice analysis of Article 2B is complicated by the involvement of the
National Council of Commissioners on Uniform State Laws and the American Law
Institute in the U.C.C. drafting and approval process. However, pioneering efforts
to model the decision-making patterns of "private legislatures" such
as the NCCUSL and the ALI suggest that their involvement makes the U.C.C. process
more, not less, subject to capture.175
Systematic exploration of whether and how the phenomenon of legislative capture
should affect judicial characterization of state laws modifying traditionally
private-law regimes is well beyond the scope of this article. Nonetheless, one
of the primary rationales for the public-private distinction-that laws governing
private transactions merely establish a neutral, background framework for private
bargaining-is significantly weakened when public power is coopted to serve a
private agenda. The resulting law is neither "neutral" nor "background;"
it is a partisan instrument undertaken to serve a specific purpose. The realist-inspired
challenge to the conventional understanding of the public-private distinction
holds that the state always chooses.176
One need not accept that conclusion to see that when the state enters a private
dispute as captive or agent of an affected interest, rather than as "neutral"
arbiter, there is a much stronger argument that it should bear responsibility
for the result.
The question that Article 2B poses is this: May the states reshape their law
of contract to allow automatic, self-enforcing foreclosure of conduct privileged
by copyright law and, ultimately, by the Intellectual Property Clause and First
Amendment, given that they may not reshape their tort law or their trade secrecy
law to produce a similar result? I have suggested that the answer must be no.
Whatever the force of arguments that private enforcement of private contracts
does not constitute state action, the same arguments cannot apply to state legislation
designed largely to authorize private information providers to opt out of the
framework of proprietary rights and exceptions established by federal copyright
law and mandated (in broad brush) by the Constitution. Put differently, the
states should not be able to set default rules that invite information providers
to override exceptions that lie at the core of the federal copyright balance.177
By conferring on information providers the authority to displace federal copyright
law, sections 2B-310 and 2B-715 of Article 2B constitute a deliberate usurpation
of Congress' role in defining and enforcing the scope of protection in creative
and informational works. By any standard-and certainly if the limitations on
copyright ownership are to continue to have any meaning in the market for digital
works-this is a public act that the Intellectual Property Clause and the First
Amendment should not permit. Part VI contends, instead, that copyright law and
policy require quite a different approach to electronic self-help in information
markets.
VI. Restoring the Balance: the Case for Licensee Self-Help
Courts may, and should, apply principles of preemption and freedom
of speech to invalidate license terms authorized by Article 2B that are inconsistent
with copyright limitations.178
Because of the self-enforcing nature of digital rights management technologies,
however, relying exclusively on these principles to cure Article 2B's excesses
would be unwise. The restrictions authorized by sections 2B-310 and 2B-715 are
intended to operate automatically, and in many cases without advance disclosure.179
These provisions shift the burden of initiating litigation to the licensee,
who in many cases will be poorly equipped to bear it. It is not clear, moreover,
what copyright-based cause of action a licensee could assert.180
Restoring the copyright balance requires procedural as well as substantive measures.
Specifically, it requires that rights of self-help be extended to licensees.181
Of course, Article 2B does not leave information consumers wholly without
recourse to challenge information providers' electronic regulation and self-help
practices. Electronic regulation of performance "that prevents use permitted
by the agreement" constitutes a breach, as does electronic self-help repossession
in violation of the restrictions imposed by section 2B-715.182
If a consumer wishes to file suit, Article 2B provides the usual assortment
of contract remedies.183
In addition, in any case involving electronic self-help repossession, section
2B-715 affords the licensee the right to an expedited post-seizure hearing.184
Nonetheless, Article 2B is not a consumer protection statute, and plainly,
the drafters do not intend it to be one. Edward Rubin has criticized the U.C.C.
for establishing remedial processes that systematically disadvantage consumers.185
Rubin decries the U.C.C.'s use of a common-law institutional model for enforcement
of consumer remedies as inappropriate given the expense and complexity of litigation,
and given the incentives created for merchants, as repeat players in the litigation
process, to litigate disputes aggressively for strategic reasons.186
In a similar vein, Jean Braucher suggests that the uncertainty that surrounds
judicial application of the "breach of the peace" standard and the
minimal damages typically awarded to successful debtor plaintiffs deter lawyers
from agreeing to represent debtors in wrongful repossession suits.187
Both Rubin and Braucher argue that effective consumer protection requires inexpensive,
accessible procedures and incentive-shifting remedies such as statutory damages
and attorneys' fees.188
One avenue of recourse for consumers of mass marketed information products
might be the Federal Trade Commission, which has broad jurisdiction over "unfair
or deceptive acts or practices in or affecting commerce."189
Licenses for information products, which implicate federal copyright interests
as well as interstate commerce, fall squarely within the class of transactions
with which the FTC is properly concerned. Thus, for example, we might expect
the FTC to take an interest in Article 2B's provisions and information providers'
practices relating to disclosure and disclaimer of warranties-and, if necessary,
to request that Congress extend the specific protections afforded under the
federal Magnuson-Moss Warranty Act to information products.190
In the case of electronic self-help, we would expect the FTC to take an interest
in licensor practices relating to disclosure of terms, and to care whether consumers
are given adequate notice of the possibility of electronic self-help and the
conduct that will trigger it.191
The FTC, however, has neither the jurisdiction nor the expertise to preserve
the substantive balance mandated by federal copyright law. Here, Rubin's analysis
hints at another option for consumers. Rubin suggests that the law might partially
"correct[] the imbalance" inherent in the civil litigation process
by allowing consumers to use certain self-help remedies, thereby shifting to
merchants the burden of initiating litigation.192
His analysis applies with even more force to Article 2B, because the addition
of self-enforcing technological restraints to information providers' arsenal
of enforcement measures produces an even greater imbalance.
In the case of sections 2B-310 and 2B-715, the greater worry is not that information
providers will breach their "contracts" with licensees, but that they
will honor them, thereby stripping licensees of the privileges they enjoy, and
have come to expect, under the public law of copyright. Jane Ginsburg has suggested
that in some circumstances the law might afford licensees who engage in contractually-prohibited
conduct that is permitted by copyright a "right of fair breach."193
That is fine as far as it goes, but an abstract right of breach may count for
little in the face of self-enforcing technological protection. I propose to
extend Ginsburg's suggestion even further: If the user privileges established
by copyright, and necessary to ensure that proprietary rights in expression
do not frustrate First Amendment freedoms, are to mean anything, users must
be afforded affirmative rights to protect themselves. A "right
of fair breach" is meaningless unless it includes a right to effectuate
the breach-a right to hack the digital code that implements and enforces the
challenged restriction.
Larry Lessig has characterized digital code as "privatized law"-"law
that need not fit with, or respect, public law," but instead may undermine
values that public law has attempted to protect.194
With respect to rights management code, at least, this is both true and false.
Code constitutes itself as an inexorable arbiter of permissible conduct.195
In this, as Lessig observes, it is not really "contract" at all; rights
denominated "contract" are themselves subject to public policy limits.196
Yet rights management code is, at the same time, simply the physical instantiation
of desired contract restrictions.197
If information providers may not contract around copyright- and First Amendment-based
limits on information ownership, it follows they also may not invoke code as
an independent legal basis for avoiding those limits.198
To the extent that copyright overrides inconsistent contract provisions, it
supplies a defense for licensees who disable the protective code in order to
commit electronic breach. The corollary to Lessig's observation, in short, is
that public law need not respect inconsistent code.199
Licensees who hack, of course, face the prospect that they will be sued and
their actions judged infringing.200
But this is the ordinary rule; the right to challenge a rule of law by violating
it is sacred, but the individual disobeys the law at his or her peril. In the
case of digital rights management systems, recognizing a right of self-help
for licensees simply reaffirms the balance between authors and users, and between
information ownership and the public domain-a balance that Article 2B threatens
to distort beyond recognition.201
The electronic rights management provisions of Article 2B represent
bad policy, bad theory, and bad law. Allowing electronic intrusion into private
homes and offices, and into private computer systems maintained there, would
grossly violate established principles of privacy; would empower private information
providers to decide a dangerously broad range of factual and legal disputes;
and would enable complete displacement of the copyright framework of limited
entitlements and user privileges. There is no tenable theoretical justification
for according information providers such sweeping authority. To the contrary,
copyright's user privileges are constitutionally mandated. A state law that
seeks to enable information providers to opt out, en masse, from the copyright
system cannot, and should not, be saved by ritual invocation of the public-private
distinction. For the same reasons, the technologies that implement this exit
cannot, and should not, be protected against private acts of resistance designed
to preserve the copyright balance.