Contracts: Clickwraps and Idea Submissions

1
Contracts Clickwraps and Idea Submissions

• Intro to IP Prof Merges
• 4.16.09

2
Agenda

• Shrinkwrap/clickwrap contracts
• K law
• Preemption
• Idea submission cases implied K and preemption
  issues

3
ProCD v. Zeidenberg
4
Judge Frank Easterbrook
5

• SELECT PHONE is on 5 CDs, contains 90 million
  listings from both White and Yellow Pages of 77.8
  million residential and 13.8 million businesses.
  You can search for listings on any field name,
  address, city, state, ZIP, area code, business
  heading and SIC code. It offers reverse search
  capability, matches addresses or phone numbers
  with names and provides counts by business
  heading or SIC code. And its fast - just a second
  or two to search for the listing you want. In
  addition you have unlimited downloading of
  listings into a database, word processor,
  spreadsheet or contact management program. The
  value and utility of this should be apparent to
  any salespeople, fundraisers, research and market
  testing firms, . . .

6

• SMALL FRY GO ONLINE 11/1995
• Technology lets even tiny businesses outmarket
  the giants
• Pro CD Inc., Database America, Cole Publications
  (a unit of MetroMail), and Dun Bradstreet all
  sell nationwide telephone listings on compact
  disks, including names and addresses, for as
  little as 175. The CDs let you search by name,
  zip code, and, in some, by income or business
  type

7
Matthew Zeidenberg
8
District court holding

• Was there a K?
• What were its terms?

9
What term is at issue in ProCD?
10
What term is at issue in ProCD?

• No commercial use

11
7th Circuit Holding

• When is K formed?
• Who is offeror? What is mode of acceptance?

12
Easterbrook why is this good policy?

• Business motive
• Freedom of K
• Consumer benefits

13
Price Discrimination
Price
5
3
Total Revenue
D
100
170
Quantity Demanded (000s)
14
Price Discrimination
Price
Softcover
5
3
Hardcover
D
100
170
Quantity Demanded (000s)
15
Total Revenue
16
Price Discrimination
Price
Non-commercial Users
5
Commer-cial Users
3
D
100
170
Quantity Demanded (000s)
17
Price Discrimination
Price
5
Arbitrage!
Commer-cial Users
3
D
100
170
Quantity Demanded (000s)
18
Perfect Arbitrage
Price
Arbitrageurs profits
5
3
Total Revenue
D
100
170
Quantity Demanded (000s)
19
Freedom of Contract in ProCD

• What happens if we prohibit rolling K formation?

20
Freedom of Contract in ProCD

• What happens if we prohibit rolling K
  formation?
• ? All sorts of beneficial Ks will be prohibited
  inconvenience for many buyers will result

21
K Analysis

• UCC 2-204 policy K may be formed in any manner .
  . .
• 2-606 acceptance of goods (shows that terms in
  form Ks may not be the final step in acceptance)
• UCITA draft not persuasive for Easterbrook

22
Preemption analysis

• K involves only 2 parties . . .
• Not good against the world

23
Judge Sonia Sotomayor
24
(No Transcript)
25
Ancillary Issues

• Agreement to arbitrate
• UCC vs. common law of contracts
• Sale vs license crucial distinction
• UCC vs. IP licensing law
• 1st sale/exhaustion doctrine

26
Netscape assent issues

• Communicator (browser) required assent before
  downloading
• SmartDownload (plug-in) did not

27
Specht v. Netscape Communications Corp., 306 F.3d
17 (2d Cir.2002).

• We rule against Netscape and in favor of the
  users of its software because the users would not
  have seen the terms Netscape exacted without
  scrolling down their computer screens, and there
  was no reason for them to do so. The evidence did
  not demonstrate that one who had downloaded
  Netscape's software had necessarily seen the
  terms of its offer.

28
Online Assent

• We recognize that contract offers on the Internet
  often require the offeree to click on an I
  agree icon. And no doubt, in many circumstances,
  such a statement of agreement by the offeree is
  essential to the formation of a contract . . .

29
Hill v. Gateway

• Terms inside Gateways box stand or fall
  together. If they constitute the parties
  contract because the Hills had an opportunity to
  return the computer after reading them, then all
  must be enforced.

30

• ProCD is about the law of contract, not the law
  of software. Payment preceding the revelation of
  full terms is common for air transportation,
  insurance, and many other endeavors. Practical
  considerations support allowing vendors to
  enclose the full legal terms with their products.

31

• The question in ProCD was not whether terms were
  added to a contract after its formation, but how
  and when the contract was formedin particular,
  whether a vendor may propose that a contract of
  sale be formed, not in the store (or over the
  phone) with the payment of money or a general
  send me the product, but after the customer has
  had a chance to inspect both the item and the
  terms. ProCD answers yes, for merchants and
  consumers alike

32
Notice of terms?

• Gateways ads state that their products come with
  limited warranties and lifetime support. How
  limited was the warranty30 days, with service
  contingent on shipping the computer back, or five
  years, with free onsite service? What sort of
  support was offered? Shoppers have three
  principal ways to discover these things ask,
  request K terms, or wait for the product to
  arrive.

33
Netscape holding

• We hold that a reasonably prudent offeree in
  plaintoffs position would not have known or
  learned, prior to acting on the invitation to
  download, of the reference to SmartDownloads
  license terms hidden below the Download button
  on the next screen. p. 881

34
Nadel v. Play-by-Play

• Facts
• Toy industry structure
• Causes of action here
• Breach of K quasi-K unfair competition

35
(No Transcript)
36

• The toy industry is a 30 billion dollar-a-year
  business. It's also the last frontier for
  aspiring independent inventors, with an annual
  new product turnover of 60 percent and plenty of
  opportunities for the creative mind. Here, one of
  the most recognized and successful toy and game
  inventors in the business teams up with the
  former head of research and development at Hasbro
  to bring clear, comprehensive information to
  aspiring toy and game inventors...who just might
  bring us the next hula hoop!

37
(No Transcript)
38
(No Transcript)
39
(No Transcript)
40
(No Transcript)
41
Facts

• Nadel meets with Wasserman
• Nadel sends prototype
• The secretarys testimony killer for Wasserman!

42
Doctrine

• Specific to NY State law the role of novelty in
  theft of idea cases
• General (vs. specific) novelty applied by
  District Court to bar Nadels claims
• District Court true for (1) misappropriation and
  (2) breach of K causes of action

43
Apfel (NY Case)

• Distinguished novelty to the buyer from
  originality
• Consideration argument rejected

44
Property vs contract

• Cases on property-based vs.
• Contract-based causes of action

45
Held

• Reversed and remanded
• Question of novelty to be determined below