The brief
| Citation | 86 F.3d 1447 (7th Cir. 1996) |
|---|---|
| Court and year | U.S. Court of Appeals for the Seventh Circuit, 1996 |
| Procedural posture | ProCD sought an injunction against dissemination exceeding its license. The district court rejected the license on contract and copyright-preemption grounds. The Seventh Circuit reversed and remanded with instructions to enter judgment for ProCD. |
| Facts | ProCD assembled SelectPhone from telephone directories. Consumer and commercial access carried different prices. The consumer package announced an enclosed license restricting use. The manual and screen supplied the terms. They limited use to noncommercial purposes and offered a refund for rejection. The software required an indication of acceptance before the user could proceed. Zeidenberg bought a consumer package and charged for online access to its listings through Silken Mountain Web Services. Later purchases supplied updated information for that service. ProCD sued to enforce the use restrictions. |
| Issue | Was the shrinkwrap license limiting use to non-commercial purposes an enforceable term of the contract? |
| Rule | Under UCC 2-204(1), conduct can establish agreement. On these facts, the vendor could specify use after an opportunity to review and reject the license as acceptance. Ordinary defenses, including unconscionability or a conflicting rule of law, still apply. Acceptance of an offer and acceptance of delivered goods are distinct inquiries. |
| Holding | The license bound Zeidenberg, and Copyright Act 301(a) did not preempt enforcement of this agreement. The court ordered judgment for ProCD rather than treating the license as ineffective because its full text was inside the package. |
Reasoning
The box announced a license. The buyer could review its terms after purchase and reject them for a refund, or proceed by using the software in the way the vendor had identified as acceptance of the proposed restrictions. Checkout can form a contract. The court rejected the further premise that payment must always settle every term at that moment.
Acceptance of an offer and acceptance of delivered goods remained distinct. Section 2-606 supplied an analogy about inspecting and rejecting goods, while section 2-204 supplied the formation rule for agreement by conduct; the opinion expressly separated acceptance of delivered goods from acceptance of the seller's offer. Section 2-207 did not govern this one-form transaction. Step-Saver involved an exchange of incompatible forms.
The pricing structure explained the commercial purpose. ProCD sought to distinguish consumer use from commercial exploitation, but that objective did not make every possible license restriction enforceable. Ordinary contract defenses still applied. No one had argued that these particular terms were objectionable on an ordinary invalidity ground beyond their location inside the package, so the opening qualification preserved unconscionability and conflicting-law objections without deciding such a defense against this license.
Copyright preemption required separate analysis. Assuming the directory database lacked copyright protection, a purchaser's agreement could still impose an obligation between its parties without creating a right to stop strangers from independently using the same information. The court upheld this contract against the section 301(a) objection. Other agreements might interfere with federal objectives. The opinion reserved that possibility instead of making the contract label conclusive in every preemption dispute.
Why it is assigned
Locate acceptance first. If the seller proposes assent through use after an opportunity to inspect and return the product, an answer must examine that sequence before treating the enclosed license as either part of the accepted bargain or a later proposed addition. Then test enforceability separately. Copyright preemption concerns what obligation the agreement creates and against whom it operates; establishing assent does not automatically resolve that federal question or eliminate other contract defenses.
Limits of the holding
This decision applies Wisconsin contract law to the described consumer transaction. Its distinction of Step-Saver depends on the formation sequence and forms, and its preemption holding concerns this license. It does not establish that all software terms, hidden charges, or restrictions on public information are enforceable.
Two changed-facts hypotheticals
The buyer first learns of a use restriction after paying and installing, and the seller refuses every refund request.
Show the analysis
The opportunity to reject on which ProCD relied is missing. Examine prior notice and the actual formation sequence instead of assuming that installation alone accepted the restriction. ProCD does not decide that altered transaction.
A stranger independently transcribes the same public telephone directories without buying or assenting to ProCD's product.
Show the analysis
The license does not bind that stranger merely because the resulting information overlaps. The opinion distinguishes a contracting party's promise from rights against the world. Copying ProCD's copyrighted application would raise a separate question.
Quick answers
What did ProCD hold?
That a software license in the box, accepted by use after a chance to return the product, was an enforceable contract term.
How ProCD used the two Code provisions
ProCD invoked both UCC 2-204 and 2-606. Which statement best keeps their roles distinct in the opinion?
Answer and explanations
Correct answer: D.
Authority: ProCD opinion: the formation sequence and two acceptance inquiries
- A. The court treated 2-207 as inapplicable to this one-form transaction and distinguished Step-Saver's incompatible forms. The analysis rested on the formation sequence and the acceptance the vendor invited, not a mandatory subsection (3) route.
- B. The court rejected a rule that payment must always settle every term at checkout. In this arrangement, outside notice, later review and an opportunity to reject supported the specified acceptance by use. That does not validate every later term in every transaction.
- C. Accepting delivered goods is not simply the same legal question as assenting to an offer's terms. The opinion expressly distinguished the inquiries; its use of an inspection analogy did not equate them.
- D. Section 2-204 supported agreement through conduct, including the invited use after an opportunity to review and reject. Section 2-606 supplied an analogy about inspection and rejection of goods. The court kept that analogy separate from deciding acceptance of the offer.