Quick Summary
ProCD, Inc. (plaintiff) sells a software product, SelectPhone, containing detailed address directory information. They engage in price discrimination and enforce their pricing scheme through a license agreement that limits usage to non-commercial purposes.
Matthew Zeidenberg (defendant) purchased SelectPhone and sold the information to commercial users at a cheaper price than ProCD.
ProCD filed a lawsuit against Zeidenberg, alleging copyright infringement and breach of contract.
The court found that the telephone listings were non-copyrightable data and, therefore, Zeidenberg did not infringe ProCD’s copyright. The court also found the license agreement unenforceable as Zeidenberg needed an opportunity to review its terms before purchase. Therefore, the defendant did not infringe ProCD’s copyright, and the license agreement was deemed invalid.
Facts of the Case
ProCD, Inc. (the plaintiff) developed a comprehensive national directory called SelectPhone, which included over 95 million residential and business listings from approximately 3,000 publicly available telephone books.
ProCD sold SelectPhone on CD-ROM discs, which contained the telephone listings and software designed for accessing and retrieving this data. The software was copyrighted by ProCD, establishing their legal ownership, while the telephone listings themselves were considered non-copyrightable data.
ProCD implemented a pricing strategy that differentiated between commercial and non-commercial users, charging higher prices for the former. To ensure the software’s usage aligned with their pricing model, ProCD included a license agreement in the software package—this license agreement aimed to restrict the usage of the software to non-commercial purposes.
The terms and conditions of the license agreement were detailed in the user guide accompanying the SelectPhone product, specifying that any copying of the software or distribution of the telephone listings, either in whole or in part, was expressly prohibited.
Matthew Zeidenberg, the defendant, acquired a copy of SelectPhone, downloaded the data from the software to his computer, and subsequently initiated his own company, Silken Mountain Web Services, Inc. Zeidenberg’s business involved selling the information contained within SelectPhone to commercial users at a lower price than ProCD.
In this process, Zeidenberg disregarded the license agreement, believing it to be non-binding, and employed both the software and the data for commercial purposes.
Furthermore, Zeidenberg and his associates used the SelectPhone software to download data from the discs onto Zeidenberg’s computer’s hard drive. They created their own search program, allowing Internet users to access the SelectPhone database over the Internet, thereby using the data inconsistent with ProCD’s intended non-commercial restrictions.
Procedural History
- ProCD filed a lawsuit against Zeidenberg and Silken Mountain Web Services, Inc. in federal district court.
- ProCD alleged copyright infringement, breach of contract, violation of Wisconsin’s Computer Crimes Act, misappropriation, and unfair competition.
- Both parties filed cross-motions for summary judgment, seeking a resolution of their claims.
- The district court had jurisdiction under 28 U.S.C. § 1331 for the federal copyright claim and under 28 U.S.C. § 1332 due to the complete diversity of citizenship and the amount in controversy exceeding $50,000.
I.R.A.C. Format
Issue
Whether the defendant infringed the plaintiff’s copyright by copying SelectPhone software and distributing the telephone listings over the Internet.
Rule of Law
Copies permitted by § 117 of the Copyright Act must be made only for the owner’s personal use and not used in a manner inconsistent with the copyright. The protection under copyright law extends to software but does not cover non-copyrightable data, such as telephone listings.
Reasoning and Analysis
The Court first addressed the copyright infringement claim for the SelectPhone data. It followed the Supreme Court’s ruling in Feist Publications, Inc. v. Rural Telephone Service Co., holding that telephone listings are not protected by copyright law because they lack originality and creativity.
Thus, the defendants did not infringe plaintiff’s copyright by copying and distributing the non-copyrightable data. Regarding the SelectPhone software, the Court found that it was protected by copyright.
However, the defendants copied the software only for personal use and did not distribute it to third parties. They used the software to access and download the telephone listings, which were non-copyrightable data. Therefore, the defendants did not use the software in a manner inconsistent with the plaintiff’s copyright.
The Court also examined the enforceability of the license agreement. It concluded that the agreement did not bind the defendants because they did not have an opportunity to inspect or review its terms before purchasing SelectPhone.
The mere reference to the agreement on the packaging box was insufficient to incorporate its terms into the initial sales contract. Additionally, the defendants did not assent explicitly to the terms of the agreement after learning about them.
Conclusion
Defendants did not infringe the plaintiff’s copyright in the SelectPhone data or software. The license agreement was found unenforceable because the defendants were not given an opportunity to review its terms before purchase.
Key Takeaways
- Telephone listings are not protected by copyright law.
- Non-copyrightable data cannot be infringed upon.
- Shrinkwrap licenses may only be enforceable if buyers are given an opportunity to review their terms before purchase.
Relevant FAQs of this case
What determines copyright infringement in software cases?
Copyright infringement in software cases determines whether someone copies protected software elements, like code, without authorization. For instance, if a person duplicates software code without permission, it constitutes copyright infringement.
How can a shrinkwrap license be enforced in transactions?
To enforce a shrinkwrap license, the buyer usually needs an opportunity to review its terms before purchase and must explicitly agree.
- For example: If a buyer reads and accepts the terms before opening a software package, the license becomes enforceable.
Does the personal use exception protect against copyright infringement?
The personal use exception can protect against copyright infringement. If someone uses software solely for personal, non-commercial purposes and doesn’t share it with others, they typically don’t infringe on the copyright.
References
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