> The Threat Posed By the Proposed New Article 2B

> of the Uniform Commercial Code

> by

> Jonathan Band, Esq.

> Morrison & Foerster

>

>The National Conference of Commissioners on Uniform State Laws is in the

>process of drafting a new article for the Uniform Commercial Code, which

>forms the basis of contract law in most states. Draft Section 2B-308

>addresses mass market licenses, and would provide that in most instances

>"shrink-wrap" or "click-on" licenses would be enforceable. Under current

>law, such unilaterally imposed, take it or leave it licenses are generally

>viewed by courts as unenforceable contracts of adhesion.

>

>Making shrink-wrap and click-on licenses enforceable would severely harm

>consumer welfare, particularly in the copyright area. The "license"written

>by a software developer, for example, could state that by removing the

>software"s shrink-wrap packaging, a user agrees to waive all fair use

>privileges in the software . Likewise, the license written by a web page

>designer could provide that by clicking on the"next page" icon, the user

>agrees to refrain from copying any facts appearing in the web page. Because

>in the digital age most information will be available only on-line or via

>CD-ROM, the enforcement of shrink-wrap or click-on licenses will permit

>content providers to undercut dramatically the limitations contained in the

>Copyright Act.

>

>Additionally, new Article 2B-308 could apply to analogue as well as digital

>works. Thus, a telephone company could distribute White Pages with a

>"license" printed on the front cover stating that by opening trephone book,

>a user agrees not to copy any of the listings contained therein.

>

>Arguably, the enforcement of a shrink-wrap or click-on license which

>conflicts with the Copyright Act is preempted either by Section 301 of the

>Copyright Act or the U.S. Constitution. However, because preemption law is

>far from clear, one cannot rely on preemption law as it currently stands to

>protect users and the copyright law from encroachment by content providers.

>

>Fortunately, there remains time to influence the UCC revision process. The

>Article 2B drafting committee is still at work, and will not present its

>final draft to the Commission until the summer of 1997. Accordingly,

>concerns with Section 2B-308 need to be directed to the entire drafting

>committee, as well as the Commission itself, as soon as possible.

>

>

>Washington College of Law

>American University

>4801 Massachusetts Ave., NW

>Washington, D.C. 20016

>

>May 15, 1997

>

>Professor Raymond T. Nimmer

>University of Houston Law Center

>4800 Calhoun

>Houston, TX 77004

>

> Re: Section 308 of Article 2B

>

>Dear Dean Nimmer:

>

> Last year I sent you a letter on behalf of the Digital Future Coalition,

>expressing the general concern that some of the changes contained in the

>proposed revision to Article 2 of the UCC may disturb the balance

>established by Congress between the creators and users of copyrighted works.

>

> I noted particular concern that the changes might enable authors to

>restrict the fair use privilege. You responded by E-mail, stating that

>nothing in the proposed Article 2B alters fair use concepts. You observed

>that the basic thrust of Article 2B was contract, not copyright, and that,

>beyond the view that what parties agree to should be binding, you took no

>position on what effect an agreement had on fair use.

>

> In the quiet following the adoption of the WINO treaties, the members of

>the Digital Future have finally had the opportunity to consider carefully

>both proposed Section 308 and your E-mail. Moreover, Adam Eisgrau and I had

>the opportunity to speak with you about Article 2B at the informal gathering

>convened by Pam Samuelson at Stanford earlier this month. We remain

>extremely concerned. While we generally agree with your proposition that

>what parties agree to should be binding, we feel that Section 308 as drafted

>will have the practical effect of significantly diminishing the scope of

>privileges which now exist under the Copyright Act.

>

> In the March 21 draft, Illustration 2 to note 9 could be read, for

>example, as suggesting that a license term which limits a privilege or

>exception under the Copyright Act is a "refusal term" under Section

>308(b)(1) which becomes enforceable under Section 308(a) only if the

>licensor calls the term to the licensee's attention and the licensee

>manifests his assent. While in the analog environment such safeguards,

>assuming they were applicable, may be sufficient to protect the privileges

>granted by Congress to the public, these safeguards are woefully inadequate

>in the networked digital environment.

>

> Imagine, for example, that a high school student in rural Montana is using

>the Internet to research a term paper on William Faulkner. The student

>finds a Faulkner web site, which contains several articles available only at

>the web site. A message flashes on the screen, stating that the articles

>may be accessed only if the reader clicks on a box to indicate his agreement

>that he will not copy any portion of any of the articles in the web site.

>The student, desperate for secondary materials, clicks his agreement to the

>web site's terms. He accesses the articles, and finds one which directly

>supports his thesis. Under Section 308, and in light of the preemption

>analysis of ProCD v. Zeidenberg, he would not be permitted to quote even a

>brief passage from the article.

>

> In the future, progressively more information will be available only from

>web sites. Section 308, as currently drafted, will enable authors to

>condition access to the information contained in the web site on the user's

>waiver of privileges such as fair use. This will dramatically upset the

>carefully calibrated balance between creators and users which has permitted

>our intellectual property system to promote creativity while at the same

>time preserving a public domain which serves as the well-spring for future

>creativity.

>

> The drafting committee can avoid this baleful result by adding the

>following sentence as a new Section 308(h): "A term that is inconsistent

>with 17 U.S.C. Section 102(b) or with the limitations on exclusive rights

>contained in 17 U.S.C. Sections 107-112 and 117 cannot become part of a

>contract under this section." In addition, the potential conflict between

>Article 2B and copyright policy could be addressed through the inclusion of

>provisions for "fair breach" of information licensing agreements. See Jane

>C. Ginsburg, "Copyright Without Walls: Speculations on Literary Property in

>the Library of the Future," 42 Representations 53 (Spring 1993).

>

> The DFC is continuing to study the draft of Article 2B, and we may have

>comments to make on other provisions in weeks to come. Inclosing, however,

>I want to stress the depth of our concern with the issues to which this

>letter is addressed. For the past year and a half, the DFC, whose members

>include many of the nation's major high-technology industry groups, library

>and education associations, and consumer and privacy advocates, has fought

>hard to defeat amendments which would have eroded the privileges in the

>Copyright Act. We do not intend to allow amendments to state contract law

>to undermine our efforts to preserve these important privileges.

>

> Very truly yours,

>

>

> Peter Jaszi for the

> Digital Future Coalition