SoftMan is a Los Angeles-based company that sells software
primarily from its web site, buycheapsoftware.com. Adobe sued
SoftMan, claiming that the retailer was infringing its copyright
and breaching licensing obligations by unbundling Adobe
“Collections” and selling the component parts.
Adobe’s “Collections" are sets of individual Adobe products,
such as Adobe Photoshop, Pagemaker, Acrobat or Illustrator on
separate disks, that are sold together in a larger Adobe retail
box. These Collections are offered by Adobe at a discount from the
individual retail products comprising the Collection.
Each piece of Adobe software is accompanied by an End User
License Agreement (EULA), which sets out the terms of the license
between Adobe and the end user for that software. The EULA is
electronically recorded on the disk and customers are asked to
agree to its terms when they attempt to install the software.
Such licences are variation on so-called “shrinkwrap” licences.
The term refers to the fact that the license begins when the
purchaser reads its terms and tears open the transparent plastic
wrapping, or shrinkwrap, that often encloses a box containing
disks. While the early practice was to make shrinkwrap licenses
visible prior to purchase so they could be read before the
purchaser tore open the software's wrapping, current practice is to
place the licence on the disk itself. This requires the user to
click acceptance before becoming bound by the licence. This
variation is known as a “clickwrap” licence.
The validity of shrinkwrap and clickwrap licences has been the
subject of many court cases, but the current position in the US is
that such licences are deemed enforceable on end-users as a matter
of contract - unless their terms are objectionable on grounds
applicable to contracts in general.
However, the court ruled that SoftMan was not bound by the EULA
because it had not consented to the terms of the licence –
basically, SoftMan had not installed the disks to be given the
opportunity of expressing consent to the terms.
The court went further and said that the EULA could not bind
SoftMan’s customers because its provisions were unreasonable.
According to the decision:
”The Court finds that the provisions
contained in Adobe's EULA purport to diminish the rights of
customers to use the software in ways ordinarily enjoyed by
customers under copyright law. Therefore, these restrictions appear
to be inconsistent with the balance of rights set forth in
intellectual property law. Commentators have noted that the
arguments for enforcing this balance are particularly persuasive in
the context of shrinkwrap licenses because the balance of rights in
intellectual property law is already tilted heavily in favour of
the intellectual property owner.”
Before ruling in favour of SoftMan, the court concluded:
"This is an area fraught with conflicting
policy considerations. Software publishers are desirous of
augmenting the protections offered under copyright law. In this
case, through the use of licensing, Adobe seeks a vast and
seemingly unlimited power to control prices and all channels of
distribution. On the other hand, in the absence of copyright law
violations, the market can often best regulate prices and all
subsequent transactions that occur after the first sale. Sound
policy rationales support the analysis of those courts that have
found shrinkwrap licenses to be unenforceable. A system of
'licensing' which grants software publishers this degree of
unchecked power to control the market deserves to be the object of
careful scrutiny."
