1998 Raymond T. Nimmer.

Leonard Childs Professor of Law, University of Houston Law Center; Counsel, Weil, Gotschal & Manges.

1. Compare Jerome Reichman, Privately Legislated Intellectual Property Rights: The Limits of Article 2B of the U.C.C. (Apr. 4, 1998) (unpublished manuscript) and David Nimmer et al., The Metamorphosis of Contract into Expand, 87 CALIF. L. REV. 19 (forthercoming 1999), with Maureen A. O'Rourke, Rethinking Remedies at the Intersection of Intellectual Property and Contract: Toward a Unified Body of Law, 82 IOWA L. REV. 1137 (1997).

2. The copyright paradigm is both over-inclusive and under-inclusive in the on-line world. It is hugely over-inclusive in that because technology operates the on-line world, virtually every action taken with respect to information in that context entails the making of copies and most information placed into the on-line world is copyrightable. Thus, the anomaly is that copyright might be said to give exclusive rights to the copyright owner over every action taken on-line with respect to its information. It is under-inclusive because many of the critical rights that might define value on-line, such as the right to allow or deny access to an information repository, are not covered directly under the copyright regime.

3. See, e.g., Digital Millenium Copyright Act, Pub. L. No. 105-304, 112 Stat. 2860 (1998). See generally Raymond T. Nimmer & Patricia A. Krauthaus, Information as Property: Databases and Commercial Property, 1 INT'L J.L. & INFO. TECH. 3 (1990).

4. See generally Nimmer, supra note 1. That view, as we see here, of course, ignores the dynamic interaction that has always existed with respect to property law, contract law and technology. That interaction, changing over time, in any event is an inevitable consequence of the intellectual property rights system placed in a dynamic market economy.

5. See, e.g., Playboy Enter., Inc. v. Webbworld, Inc., 968 F. Supp. 1171, 1175-77 (N.D. Tex. 1997) (holding that an operator of an Internet web-site was directly liable to a magazine publisher for infringement when it provided its subscribers with copyrighted adult images that were stored on its computers. Operator obtained material from adult news groups and had no control over the persons posting the infringing images to those news groups; it only had control over the images it chose to sell on its Web site.); Micro Star v. Formgen, Inc., 942 F. Supp. 1312, 1317-18 (S.D. Cal. 1996) (holding that author of a computer game did not waive copyright protection by allowing users to trade scenes and create new levels in game and to upload them to other users on the Internet. No implied license where game file contained restrictive license).

6. See Leatherman Tool Group, Inc. v. Cooper Indus., Inc., 131 F.3d 1011, 1014-15 (Fed. Cir. 1997).

7. This right not to distribute, of course, is part of the so-called intellectual property bargain and, indeed, a fundamental element of the right of free speech. See Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 149 (1989).

8. Winter v. G.P. Putnam's Sons, 938 F.2d 1033, 1035 (9th Cir. 1991) (citation omitted).

9. See RESTATEMENT (SECOND) OF TORTS 552 (1977) ("One who ... supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance on the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.").

10. 520 N.Y.S.2d 334 (N.Y. Civ. Ct. 1987).

11. See id. at 337-38. On a related issue, a federal district court similarly insulated the on-line provider in reference to liability for defamatory material made available through its service: "Technology is rapidly transforming the information industry. A computerized database is the functional equivalent of a more traditional news vendor, and the inconsistent application of a lower standard [enabling] liability [for] an electronic news distributor ... than that which is applied to a public library, book store, or newsstand would impose an undue burden on the free flow of information." Cubby, Inc. v. CompuServe, Inc., 776 F. Supp. 135, 140 (S.D.N.Y. 1991).

12. Daniel, 520 N.Y.S.2d at 337-38 (citation omitted).

13. 636 N.E.2d 665 (Ill. App. Ct. 1993).

14. See id. at 666.

15. See id..

16. See id. at 672.

17. See Lockwood v. Standard & Poor's Corp., 682 N.E.2d 131, 135 (Ill. App. Ct. 1997).

18. See U.C.C. 2B-404(b) (Apr. 15, 1998 Draft).

19. Many court decisions place software licensing in Article 2 even though software is licensed and not sold and even though the focus of the transaction centers not on the acquisition of tangible property, but on transfer of capability and rights intangibles. See Advent Sys. Ltd. v. Unisys Corp., 925 F.2d 670, 676 (3d Cir. 1991); RRX Indus., Inc. v. Lab-Con, Inc., 772 F.2d 543, 546-47 (9th Cir. 1985); Triangle Underwriters, Inc. v. Honeywell, Inc., 604 F.2d 737, 741 (2d Cir. 1979). But see Data Processing Servs., Inc. v. LH Smith Oil Corp., 492 N.E.2d 314, 318 (Ind. Ct. App. 1986); Micro-Managers, Inc. v. Gregory, 147 Wis. 2d 500, 509 (Ct. App. 1988).

20. See, e.g., ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1455 (7th Cir. 1996) (holding that license was limited to consumer use); Storm Impact, Inc. v. Software of the Month Club, 13 F. Supp. 2d 782, 791 (N.D. Ill. 1998) (holding that an on-line shareware license allowed copying and distribution except for resale).

21. See Microsoft Corp. v. DAK Indus., Inc., 66 F.3d 1091, 1095 (9th Cir. 1995) (concluding that a distribution agreement involving a lump sum payment and delivery of a master disk is more like a sale of the right to make the stated number of copies, than an executory license for purposes of characterizing claims under bankruptcy law).

22. 17 U.S.C. 101 et. seq. (1994 & Supp. II 1996).

23. In establishing a distribution system for the mass market, an informational property rights owner may elect to establish a transaction in which it gives its distributors either (1) ownership of a copy and a right to sell copies of its work to others, or (2) a license (permission) to license copies to others. Copyright and other intellectual property law supports either choice. It also provides that, if a license is created and the distributor exceeds the license, the eventual transferee (even if in good faith) is not protected under bona fide purchaser concepts. See Microsoft Corp. v. Harmony Computers & Electronics, Inc., 846 F. Supp. 208, 214 (E.D.N.Y. 1994); Major League Baseball Promotion v. Colour-Tex, 729 F. Supp. 1035, 1040 (D.N.J. 1990); Microsoft Corp. v. Grey Computer, 910 F. Supp. 1077, 1084 (D. Md. 1995); Marshall v. New Kids on the Block, 780 F. Supp. 1005, 1008-9 (S.D.N.Y. 1991).

24. Contract formation, of course, is a major issue in contract law. When it was first adopted, Article 2 of the U.C.C. was viewed as establishing highly permissive rules enabling the early formation of contracts despite the lack of precise agreement as to all specific terms. The "open term" or "layered" contract model is found in several provisions in Article 2. See, e.g., U.C.C. 2-204 (1996) (allowing formation in any manner); id. 2-207 (allowing formation even though offer and acceptance have varying terms); id. 2-311 (permitting formation with open terms even though one party retains the right to particularize the details of performance after the fact).

25. In most cases, these "default" rules are subject to contrary agreement. Article 2B, for example, provides expressly that with specified exceptions, the provisions of the statute are applicable only if the agreement of the parties does not otherwise so indicate. It lists a total of 13 provisions that are not subject to this general rule of contract choice. See U.C.C. 2B-106 (Apr. 15, 1998 Draft).

26. This particular limitation was originated in the development of the original Article 2 of the U.C.C. See U.C.C. 2-302 (1962). It has subsequently been incorporated into the common law of many states as applicable to contracts outside the U.C.C., but this adoption has not been universal. Article 2B adopts the literal language of existing Article 2 on the issue of unconscionable contracts or clauses. See U.C.C. 2B-110 (Aug. 1, 1998 Draft). This, of course, would uniformly extend this concept to all contracts within the new scope of the U.C.C.

27. See Randy E. Barnett, The Sound of Silence: Default Rules and Contractual Consent, 78 VA. L. REV. 821 (1992); Ian Ayres & Robert Gertner, Strategic Contractual Inefficiency and the Optimal Choice of Legal Rules, 101 YALE L.J. 729, 734 (1992); Charles J. Goetz & Robert E. Scott, The Limits of Expanded Choice: An Analysis of the Interaction Between Express and Implied Contract Terms, 73 CALIF. L. REV. 261, 266 (1985).

28. See Grant Gilmore, On the Difficulties of Codifying Commercial Law, 57 YALE L.J. 1341, 1341 (1957).

29. See, e.g., W. David Slawson, Standard Form Contracts and Democratic Control of Lawmaking Power, 84 HARV. L. REV. 529, 529-30 (1971) (stating that standard form contracts "account for more than ninety-nine percent of all the contracts now made" and that their "predominance ... is the best evidence of their necessity").

30. See supra section II(B)(3) for discussion of incentives to contract. There are incentives to do more in a contract than simply specify price and quantity.

31. Of course, tort products liability may override liability limitations in cases to which they apply. As a general rule, however, tort claims arise only in the event of personal injury or property damage. Contract law, including Article 2B, does not alter the range of product liability law.

32. See, e.g., Klos v. Polskie Linie Lotnicze, 133 F.3d 164, 169 (2d Cir. 1997) (holding that round trip air tickets were not contracts of adhesion); Fireman's Fund Ins. Co. v. M.V. DSR Atl., 131 F.3d 1336, 1339 (9th Cir. 1998) (finding forum selection clause in bill of lading enforceable and the fact that the contact was a contract of adhesion was irrelevant); C.H.I., Inc. v. Marcus Bros. Textile, 930 F.2d 762, 763-64 (9th Cir. 1991) (holding that a standard form confirmation was not an adhesion contract); Aviall, Inc. v. Ryder Sys., Inc., 913 F. Supp. 826, 831 (S.D.N.Y. 1996) (finding adhesion only when the party seeking to rescind the contract establishes that the other party used "high pressure tactics," or "deceptive language," or that the contract is unconscionable).

33. See, e.g., Klos, 133 F.3d at 168-69 ("The concept of adhesion contracts introduces the serpent of uncertainty into the Eden of contract enforcement. At the very least, it represents a serious challenge to orthodox contract law that a contract is to be interpreted in accordance with the objective manifestation of the parties' intent .... It may not be invoked to trump the clear language of the agreement unless there is a disturbing showing of unfairness, undue oppression, or unconscionability."); Fireman's Fund Ins.Co., 131 F.3d at 1339; Chan v. Society Expedition, Inc., 123 F.3d 1287, 1292 (9th Cir. 1997); Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1154-55 (5th Cir. 1992); Riggs Nat'l Bank of Washington D.C. v. Dist. of Columbia, 581 A.2d 1229, 1251 (D.C. Ct. App. 1990); American Bankers Mortgage Corp. v. Federal Home Loan Mortgage Corp., 75 F.3d 1401 (9th Cir. 1996) (contract of adhesion fully enforceable in the absence of showing of unconscionability); E.H. Ashley & Co. v. Wells Fargo Alarm Serv., 907 F.2d 1274, 1279 (1st Cir. 1990); Graham v. Scissor-Tail, Inc., 623 P.2d 165, 172 (1981). Compare Todd D. Rakoff, Contracts of Adhesion: An Essay in Reconstruction, 96 H ARV. L. REV. 1173 (1983).


35. Id.

36. As I discuss below, copyright law does not fully conform to this property law structure in that many of the rules it promulgates are stated as "default rules" which apply in the case of a transactional relationship between the parties or their transferees.

37. ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1454 (7th Cir. 1996).

38. 489 U.S. 141 (1989).

39. See id. at 144-45.

40. See id. at 168.

41. See id. at 157.

42. See generally Herbert Hovenkamp, Marginal Utility and the Coase Theorem, 75 CORNELL L. REV. 783 (1990); Jules L. Coleman, Efficiency, Exchange, and Auction: Philosophic Aspects of the Economic Approach to Law, 68 CALIF. L. REV. 221 (1980).

43. See Daniel Farber, Parody Lost/Pragmatism Regained: The Ironic History of the Coase Theorem, 83 VA. L. REV. 397, 406 (1997).

44. See, e.g., RICHARD POSNER, ECONOMIC ANALYSIS OF LAW 89-96 (4th ed. 1991); Richard Epstein, Unconscionability: A Critical Reappraisal, 28 J.L. & ECON. 293 (1975).

45. This, of course, is the function of rules such as the doctrines of unconscionability (See U.C.C. 2-302 (1994)), concepts of duress, fraud and related doctrines. See, e.g., Brower v. Gateway 2000, Inc., 676 N.Y.S.2d 569, 574 (App. Div. 1998) (holding that arbitration clause in standard form contract that was otherwise enforceable is unconscionable because it effectively deprived a computer buyer, through excessive costs, of the ability to pursue a claim); Intergraph Corp. v. Intel Corp., 3 F. Supp. 2d 1255, 1286 (N.D. Ala. 1998) (concluding provision in technology contract permitting termination on little or no notice held unreasonable as a matter of law).

46. Under current law, for example, a "first sale" of a copy of a computer program does not give the owner of the copy a right of public display or public performance or a right to rent the copy to third persons. The first two rights reflect traditional limitations on the copyright doctrine of first sale. The third was added more recently to respond to unique risks involved in digital technology and digital copies. When it was adopted, the transactional leverage of a vendor of copies of works offered for sale was altered. The impact of that change on actual transactions, however, filters through the various market factors and demand issues that shape transactions. If I do not desire to rent my copy to others, the fact that buying ownership of a copy does not give me that right is immaterial. If I desperately desire a right to rent the copy, the change increases what I may be willing to pay or agree to in any particular transaction.

47. Often, the least complex examples are the most telling. When you purchased the newspaper today, did the price you paid depend on your judgment about whether or not you could make multiple copies of the newspaper for distribution to your commercial clients? I think not.

48. See Feist Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 362-64 (1991).

49. The copyright doctrine works on a different premise. It assumes that information is placed into the public and rejects the existence, under copyright, of any exclusive or preclusive property right that can be asserted against parties in the absence of contract.

50. Modern law establishes that property rights in information come from an increasingly wide array of sources. Property rights related to information are characterized by a two-part equation: 1) the presence of specified conditions or circumstances that 2) yield particular rights in reference to identifiable information. See RAYMOND T. NIMMER, INFORMATION LAW 2-14 - 2-28 (1996). The rights come from criminal law, privacy law, and other sources. Writing with reference to this issue, the Ninth Circuit Court of Appeals noted that for a property right to exist in any situation, "first, there must be an interest capable of precise definition; second, it must be capable of exclusive possession or control; and third, the putative owner must have established a legitimate claim to exclusivity." G.S. Rasmussen & Assocs. v. Kalitta Flying Serv., 958 F.2d 896, 903 (9th Cir. 1992). The potential rights recognized in modern law include rights recognized under copyright law and patent law and also rights of commercialization, non-disclosure, control of access, and to prevent or authorize destruction of the information.

51. See, e.g., 17 U.S.C. 901-914 (1994) (semiconductor maskwork rights); id. at 104A (1994 & Supp. II 1996) (restored works); id. at 106(6) (1994 & Supp. II 1996) (digital audio rights); id. at 106A (1994) (providing special rights in works of visual art); id. at 1101 (1994) (fixation of live performance); Digital Millenium Copyright Act, H.R. 2281, 105th Cong. (1998). Some might view this expansion unwarranted, but regardless of the characterization, these developments clearly indicate an on-going policy judgment that the contours of the digital information era will be shaped, at least in part, by an expanded and different set of rights in information than existed during the industrial era. The pattern of expansion in the United States has international parallels. See generally NIMMER, supra note 50.

52. Cases suggest that interpretations of the scope of a license should be designed to protect the licensor's retention of rights. See generally SOS, Inc. v. Payday, Inc., 886 F.2d 1081 (9th Cir. 1989).

53. 972 F. Supp. 804 (S.D.N.Y.), reh'g denied, 981 F. Supp. 841 (S.D.N.Y. 1997).

54. See id. at 806.

55. See 17 U.S.C. 201(c) (1994).

56. See Tasini, 972 F. Supp. at 827.

57. See id. at 814.

58. See id. at 807.

59. See id.

60. See id. at 812.

61. The court observed: "[The electronic publication] strips away many of the elements present in the publishers' hard copy periodicals [and] carries a revised version of that magazine." Id. at 846.

62. Id. at 807.

63. Id. at 845.

64. See Everex Systems, Inc. v. Cadtrak Corp., 89 F.3d 673, 679 (9th Cir. 1996); Unarco Indus., Inc. v. Kelley Co., Inc., 465 F.2d 1303, 1335 (7th Cir. 1972); Harris v. Emus Records Corp., 734 F.2d 1329, 1333 (9th Cir. 1984); In re Alltech Plastics, Inc., 71 B.R. 686, 689 (Bankr. W. D. Tenn. 1987).

65. Everex Systems, 89 F.3d at 679.

66. See 17 U.S.C. 203(3) (1994).

67. See Rano v. Sipa Press, Inc., 987 F.2d 580, 586 (9th Cir. 1993) (holding that copyright law preempts state law regarding contracts (licenses) that are terminable at will because they contain no duration clause; applying 17 U.S.C. 203(a) (1994)).

68. See id. at 583.

69. See P.C. Films Corp. v. MGM/UA Home Video, Inc., 138 F.3d 453, 457 (2d Cir. 1998) (holding that "perpetual" license is enforceable during term of the copyright, but not deciding if it is enforceable after the term expires).

70. See, e.g., 17 U.S.C. 117 (1994).

71. See id. at 202 ("Ownership of a copyright ... is distinct from ownership of any material object in which the work is embodied."). Copy ownership is distinct from questions of whether the transaction creates a license. See, e.g., Applied Information Management, Inc. v. Icart, 976 F. Supp. 149, 153 (N.D.N.Y. 1997); DSC Communications Corp. v. Pulse Communications, Inc., 976 F. Supp. 359, 362 (E.D. Va. 1997).

72. See U.C.C. 2-401 (1994); Icart, 976 F. Supp. at 154.

73. See, e.g., Advent Sys. Ltd. v. Unisys Corp., 925 F.2d 670, 675-76 (3d Cir. 1991). Compare RRX Indus., Inc. v. Lab-Con, Inc., 772 F.2d 543, 547-48 (9th Cir. 1985) (holding that the determination of whether a software system is a good rather than a service should be decided on a case by case basis).

74. See U.C.C. 2-106, 2-401 (1994).

75. Article 2 provides that, unless there is contrary agreement, title to a good passes when physical delivery occurs. See id. 2-401.

76. See, e.g., DSC Communications Corp. 976 F. Supp. at 359.

77. 886 F.2d 1081 (9th Cir. 1989).

78. See id. at 1087-88.

79. See id.

80. See, e.g., Bourne v. Walt Disney Co., 68 F.3d 621, 626 (2d Cir. 1995). Proposed Article 2B adopts, to the extent permitted by federal law, this commercial interpretation rule and provides some assumptions about the attributes of an affirmative grant that assure that a licensee receives the capability to enjoy use of the expressly granted rights. See U.C.C. 2B-307(a) (Aug. 1, 1998 Draft).

81. Of course, nothing precludes Congress from enacting a third type of preemptive rule within the scope of its legislative competence: an express preclusion of particular terms of a contract. See Rano v. Sipa Press, Inc., 987 F.2d 580, 585-86 (9th Cir. 1993) (invalidating state rule on termination at will based on conclusion that it was preempted by express copyright statutory provision).

82. 17 U.S.C. 301(a) (1994).

83. The case to come closest to this result was the lower court decision in ProCD v. Zeidenberg, 908 F. Supp. 640, 657-59 (W.D. Wis. 1996). The District Court opinion, however, was expressly over-ruled on this point by the Seventh Circuit Court of Appeals. ProCD, 86 F.3d at 1447.

84. See, e.g., Benjamin Capital Investors v. Cossey, 867 P.2d 1388, 1391 (Or. App. 1994) (concluding damage claim as formulated was preempted by copyright).

85. 17 U.S.C. 301(a) (1994).


87. See generally National Basketball Ass'n v. Motorola, Inc., 105 F.3d 841 (2d Cir. 1997); United States ex. rel. Berge v. Board of Trustees of the Univ. of Alabama, 104 F.3d 1453 (4th Cir. 1997).

88. See, e.g., Computer Assocs. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 721 (2d Cir. 1992) (trade secret); National Car Rental Sys., Inc. v. Computer Assocs. Int'l, Inc., 991 F.2d 426, 431 (8th Cir. 1993) (contract); Data General Corp. v. Grumman Sys. Corp., 36 F.3d 1147, 1165 (1st Cir. 1994) (trade secret); ProCD, 86 F.3d at 1455 (contract).

89. 86 F.3d 1447 (7th Cir. 1996).

90. See id. at 1453-55.

91. Id. at 1454.

92. It can be argued that this might change if, in effect, no third party can avoid being bound by the contract terms in order to use the information. How or why this would affect a preemption analysis as compared to a misuse or antitrust claim is not clear. The fundamental fact is that the restrictions (whatever they might be) are grounded in a separately viable contractual relationship. If there is no such contractual relationship, of course, the issue is not one of preemption, but simply a question of how copyright affects the party's right to use the information.

93. 655 F. Supp. 750, aff'd, 847 F.2d 255 (5th Cir. 1988). The lower court had held that the underlying contract would have been invalid as a contract of adhesion under Louisiana law. See id. at 761. This result was reached with little or no analysis and represents one of the very few reported decisions relying on a theory of adhesion to invalidate a contract. See id. The more normal analysis of an adhesion contract is that, if the court encounters one, it more closely scrutinizes the terms of the agreement under standards of unconscionability and other contract law doctrines to protect the adhering party.

94. See Vault, 847 F.2d at 268-69.

95. See id. at 269.

96. See id.

97. See id.

98. U.S. CONST. art. VI, cl. 2.

99. See Sears, Roebuck & Co. v. Stiffel, 376 U.S. 225, 231 (1964); Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234, 237-38 (1964). During this period, the Court expressed in its decisions a hostility to intellectual property rights and their commercialization that it has seldom returned to since. See also Lear, Inc. v. Adkins, 395 U.S. 653, 674 (1969) (invalidating state common law doctrine of licensee estoppel based on conflict with alleged federal patent policy encouraging challenges to the validity of a patent). Compare Aaronson v. Quick Point Pencil Co., 440 U.S. 257, 265-66 (1979).

100. See Sears, Roebuck & Co., 376 U.S. at 231-232; Compco Corp., 376 U.S. at 238.

101. 416 U.S. 470 (1974).

102. See id. at 498-99.

103. See id. at 479.

104. See id. at 492-93.

105. 489 U.S. 141 (1989).

106. See id. at 143.

107. See id. at 159-62.

108. See id. at 162-64.

109. See id. at 160-61.

110. See id. at 150-51.

111. See id.

112. See id. at 151.

113. See id. at 142.

114. Id. at 160.

115. See DSC Communications Corp. v. DGI Techs., Inc., 81 F.3d 597, 601 (5th Cir. 1996) (dictum) (discussing the possible availability of a copyright misuse defense in forthcoming trial in decision on preliminary injunction issue); Lasercomb Am., Inc. v. Reynolds, 911 F.2d 970, 979 (4th Cir. 1990) (holding anticompetitive language in software licensing agreement to be a copyright misuse).

116. See U.C.C. 2B-105 Reporter's Note 2 (Apr. 15, 1998 Draft).

117. See Brulette v. Thys Co., 379 U.S. 29, 33-34 (1964). Compare Aaronson, 440 U.S. at 265-66.

118. See, e.g., Digidyne Corp. v. Data Gen. Corp., 734 F.2d 1336, 1344 (9th Cir. 1984) ("requisite economic power[, necessary to establish one element of an illegal per se tying claim,] is presumed when the tying product is patented or copyrighted"); cf. A.I. Root Co. v. Computer/Dynamics, Inc., 806 F.2d 673, 676 (6th Cir. 1987) (stating "we find the pronouncement in [United States v.] Loew's to be overbroad and inapposite to the instant case. Accordingly, we reject any absolute presumption of market power for copyright or patented product [sic].").

119. A recent illustration of this theme, although grounded entirely in antitrust law, comes in the appellate court ruling in the Kodak case. See generally Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992).

120. 314 U.S. 488 (1945).

121. See id. at 489.

122. See id. at 491.

123. See id. at 489.

124. See id.

125. See id. at 493-94.


127. 35 U.S.C. 271(d)(5) (1994).

128. Id.

129. 911 F.2d 970 (4th Cir. 1990).

130. See id. at 973.

131.See id.

132. See id. at 979.

133. See id. at 976.

134. See id. at 979.

135. See generally Reliability Research, Inc. v. Computer Assocs., Int'l, Inc., 793 F. Supp. 68, 69 (E.D.N.Y. 1992) (mem.) (denying copyright holder's pre-discovery motion to strike licensee's affirmative defense of misuse as issue is a disputed issue of law); Broadcast Music, Inc. v. Hearst/ABC Viacom Entertainment Servs., 746 F. Supp. 320, 328 (S.D.N.Y. 1990). In most reported cases in which the doctrine is raised, its application is rejected. See generally James A.D. White, Misuse or Fair Use: That is the Software Copyright Question, 12 B ERKELEY TECH. L.J. 251 (1997).

136. 81 F.3d 597 (5th Cir. 1996).

137. See id. at 601.

138. See id. at 599.

139.See id.

140. See id.

141.See id.

142. Id at 601.

143. See id. at 599.

144. The patent misuse statute was enacted in the 1980s, before the doctrine of misuse was first applied to copyright claims in the Lasercomb decision, thus explaining the omission of a copyright misuse statute.

145. See, e.g., In re Independent Serv. Org. Antitrust Litig., 989 F. Supp. 1131, 1135 (D. Kan. 1997).

146. See, e.g., Atari Games Corp. v. Nintendo of Am., Inc., 975 F.2d 832, 846 (Fed. Cir. 1992) (holding that defense not available where defendant had unclean hands because of fraud on Copyright Office).

147. 395 U.S. 653 (1969).

148. See id. at 673-74.

149. See id. at 662-68.

150. See id. at 673.

151. See id.

152. See id.

153. See Brulette v. Thys Co., 379 U.S. 29, 33-34 (1964).

154. See id. at 31.

155. See Aaronson v. Quick Point Pencil Co., 440 U.S. 257, 265-66 (1979).

156. See id. at 266.

157. U.C.C. 2-302 (1962).

158. Id. at 2-302, cmt. 1.

159. See generally Arthur Leff, Unconscionability and the Code-The Emperor's New Clause, 115 U. PA. L. REV. 485 (1967) (setting out ideas of procedural and substantive unconscionability);

160. U.C.C. 2-302, cmt. 1 (1962).


162. See James J. White, Form Contracts Under Revised Article 2, 75 WASH. U. L.Q. 315, 324 n.17 (1997).


164. See generally White, supra note 162.

165. RESTATEMENT (SECOND) OF CONTRACTS 211, cmt. f (1981).

166. Id.

167. Id.

168. See generally White, supra note 162.

169. See U.C.C. 2B-110 (Aug. 1, 1998 Draft).

170. Id. 2B-208, cmt. 3(b).

171. See, e.g., U.C.C 2B-208 (Nov. 1, 1997 Draft).

172. See Comments of various parties on this issue posted on <http://www.2bguide.com> (visited Nov. 15, 1998).

173. See U.C.C. 2-206 (July 25-Aug. 1, 1997 Draft).

174. See U.C.C. 2B-102 (Aug. 1, 1998 Draft).

175. See U.C.C. 2-206 (Mar. 1998 Draft).

176. In Article 2B, a subcommittee of the American Bar Association recommended that the concept be deleted and replaced with a refund right applicable to mass market transactions where terms are proposed after the initial payment. The Drafting Committee adopted that proposal, but added express language about the relationship between negotiated terms and terms of the standard form that responds to the policy issue underlying the Restatement rule. See U.C.C. 2B-208(a) (Aug. 1, 1998 Draft).

177. The theory invalidates only terms that the party has reason to believe would make the contract unacceptable if they were known to the adhering party. Obviously, one way to defeat a claim of reason to know of the adverse impact of a term is to make the party aware of it and rely on the fact that it, in fact, did not refuse the contract.

178. See RESTATEMENT (SECOND) OF CONTRACTS 211, cmt. b (1981).

179. See U.C.C. 2B-208 (Aug. 1, 1998 Draft).

180. See RESTATEMENT (SECOND) OF CONTRACTS 211, cmt. f (1981).

181. See, e.g., 11 U.S.C. 365(c) (1994).



184. See id. 179, 186-88, 192-96 (1981).

185. See, e.g., Application Group, Inc. v. Hunter Group, Inc., 61 Cal. App. 4th 881, 908 (1998) (invalidating contract choice of law because of conflict with fundamental California policy on non-competition clauses expressed in state statute).

186. See RESTATEMENT (SECOND) OF CONTRACTS, 178, cmt. b (1981).

187. See U.C.C. 1-103(b) (1994).

188. See U.C.C. 2B-105(a)(b) (Aug. 1, 1998 Draft).

189. See 17 U.S.C. 102(b) (1994). The only case squarely dealing with the issue has held that this statutory exclusion does not bar the creation of contracts regarding such subject matter, a conclusion that is a relatively obvious inference from the fact that such contracts have been used commercially for generations under the realm of trade secret law and from the general right of a person to not disclose information that it holds unless it receives adequate contractual support for the disclosure. See ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996).

190. See 17 U.S.C. 109 (1994).

191. See id. 117.

192. See 17 U.S.C. 107.

193. See Applied Info. Management, Inc. v. Icart, 976 F. Supp. 149, 152-53 (E.D.N.Y. 1997).

194. 17 U.S.C. 301(b) (1994).

195. That being said, at least one commercial publisher has for years attempted to place quasi-contractual restrictions on the right to quote from a published source. The Consumers Union magazine contains a statement, arguably binding, that the user of the magazine is not allowed to quote data or rankings for commercial purposes without written consent. The enforceability of the clause is suspect on both contractual grounds (there is no effort to call it to the attention of the magazine buyer) and First Amendment grounds. See Consumers Union v. General Signal Corp., 724 F.2d 1044, 1046 (1983).

196. Indeed, after this was written, the point was seemingly confirmed in the court's discussion of infringement of free shareware in Storm Impact, Inc. v. Software of the Month Club, 13 F. Supp. 2d 782, 787-91 (N.D. Ill. 1998), where despite an enforceable term that precluded commercial use, the court engaged in a full fair use analysis on the infringement (as compared to contract breach) claim.

197. See discussion at notes 154 to 163.

198. See U.C.C. 2B-105(b) (Aug. 1, 1998 Draft).

199. In a statement of the obvious, Article 2B expressly acknowledges that preemptive federal law controls over state law. See U.C.C. 2B-105 (Aug. 1, 1998 Draft).

200. Indeed, there is an ironic twist and internal contradiction in some of the arguments for controls. The fundamental social policy pertaining to free speech may seem to mean, for example, that the soap box speaker in a park whose purpose is to reach and affect the largest possible audience, should not be able to use contract to prevent his listeners from repeating what he said. It may seem to mean that the book publisher whose profits thrive on a book being discussed and cited should not be allowed to use contract or property rights to prevent that from occurring. But of course, these illustrations (and others that readily come to mind) prove the converse point. The risk they assume is that the public speaker who has elected to make an open forum use of information may tomorrow invoke a format that specifically prevents exactly what the speaker desires (that people will discuss her expression and ideas). The risk is that the publisher whose market values a right to discuss and quote from its published product will elect to market its works in a way that specifically precludes that value from being realized. Neither is likely to occur in an actual, as compared to a law school hypothetical, marketplace.