RE: Commentary on your article: Microsoft Risks Copyright Impotence

On May 2, John Peterson took issue with my article at

http://interactionlaw.com/interactionlaw/id12.html (Microsoft Risks

unimpressed by the fact that I cited only one case in support of my

position. On Sunday, Mr. Peterson sent a terse e-mail chiding my

failure to respond. I do so now, with apologies to non-lawyers for the

length and the legalese.

Mr. Peterson seeks to re-frame the question as "Does requiring

difference licenses for different operating systems constitute misuse of

Microsoft purports to license a particular use, it must be a use it has

a right to license. In this case, Microsoft is attempting to license

the private performance of its works, but that's like me licensing

people to use the sidewalk in front of my house. I may find people

willing to pay, but that does not mean I have the right to license such

use, nor that anyone who walks along the sidewalk without paying me is

doing anything illegal. The law doesn't change just because I happen to

be Microsoft and say "you can only use my software if you promise to not

walk on the sidewalk in front of Bill gates' house."

Of crucial importance here is the fact that no one - not even a thief or

a pirate - can infringe upon any of the exclusive rights of a copyright

owner by making a non-public performance of a work. Copyright owners

enjoy an exclusive right to perform a work publicly, but have no right

to exclude anyone from performing a work privately. Twentieth Century

Music Corp. v. Aiken, 422 U.S. 151, 155 (1975). A few years earlier,

the Supreme Court had explained: "The Copyright Act does not give a

Instead, [Section 106] of the Act enumerates several 'rights' that are

made 'exclusive' to the holder of the copyright. If a person, without

authorization from the copyright holder, puts a copyrighted work to a

use within the scope of one of these 'exclusive rights,' he infringes

the copyright. If he puts the work to a use not enumerated in [Section

106], he does not infringe." Fortnightly Corp. v. United Artists

Television, Inc., 392 U.S. 390, 393-95 (1968) (footnotes omitted).

In his dissent in the Betamax case (where the videocassette recorder

survived a legal challenge), Justice Blackmun explained: "Section

106(4) grants a copyright owner the exclusive right to perform the work

'publicly,' but does not afford the owner protection with respect to

private performances by others. A motion picture is 'performed'

whenever its images are shown or its sounds are made audible. ÃÂ§ 101.

Like '[singing] a copyrighted lyric in the shower,' Twentieth Century

Music Corp. v. Aiken, 422 U.S. 151, 155 (1975), watching television at

home with one's family and friends is now considered a performance.

Home television viewing nevertheless does not infringe any copyright -

but only because ÃÂ§ 106(4) contains the word 'publicly.'" (Sony Corp. of

America v. Universal City Studios, Inc., 464 U.S. 417, 468-69 (1984),

Blackmun, J., dissenting (footnotes and citations omitted).) And you

can watch those programs on the television of your own choosing!

The private performance of a lawfully reproduced copy of Microsoft

software is not an infringement of any of the exclusive rights of the

control over the public's rights. "A copyright owner may not enforce

its copyright to . . . use it in any manner violative of the public

policy embodied in the grant of a copyright." Tricom, Inc. v. Electronic

Data Systems Corp., 902 F. Supp. 741 (E.D. Mich. 1995) (citations

omitted). Leveraging copyright power to control behavior which Congress

intended remain outside of the copyright owner's control is the type of

conduct condemned in United States v. Paramount Pictures, Inc., 334 U.S.

131 (1948); Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488 (1942);

Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502

(1917), and Lasercomb Am., Inc. v. Reynolds, 911 F.2d 970 (4th Cir.

1990).

The public policy granting copyrights "excludes from it all that is not

embraced" in the original copyrighted work, and "equally forbids the use

of the copyright to secure an exclusive right or limited monopoly"

beyond the scope of the Copyright Act and which is "contrary to public

policy to grant." (Lasercomb America, Inc. v. Reynolds, 911 F.2d 970,

977 (4th Cir. 1990) (quoting with revisions from Morton Salt, 314 U.S.

at 492) (brackets omitted).) Mr. Peterson has suggested that this

Fourth Circuit decision is not good enough, so I have relied more on

Supreme Court cases. Let's see a little more of where the Supreme Court

stands.

In 1917, the Supreme Court took on the issue of private enlargement of

owner of an intellectual property monopoly - in that case a patented

motion picture film projector - could not lawfully use a "licensing"

mechanism like Microsoft is using to obligate purchasers of the machine

to use it solely with motion pictures containing another patent which

the company also owned. (Motion Picture Patents Co. v. Universal Film

Mfg Co., 243 U.S. 502.) On page 519, the court stated: "A restriction

which would give to the plaintiff such a potential power for evil over

an industry which must be recognized as an important element in the

amusement life of the nation . . . is plainly void, because wholly

without the scope and purpose of our patent laws, and because, if

sustained, it would be gravely injurious to that public interest, which

we have seen is more a favorite of the law than is the promotion of

private fortunes." This position was followed in Carbice Corp. of Am.

v. Am. Patents Dev. Corp., 283 U.S. 27 (1931) (owner of a patented

package that used solid carbon dioxide could not obligate licensees to

use its own solid carbon dioxide).

The relevance of the Supreme Court's analysis in Motion Picture Patents

Co. is inescapable. If it is unlawful to extend the statutory monopoly

by limiting the use of a patented motion picture projector to films

containing other intellectual property owned by the licensor, then it

stands to reason that it is equally unlawful to license only on

condition that it not be used in conjunction with an operating system of

choice.

In Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488 (1942), the

Supreme Court examined the use of the patent monopoly in a machine for

depositing salt tablets to force licensees to use only salt tablets

manufactured by the patent holder. The court said: "The public policy

which includes inventions within the granted monopoly excludes from it

all that is not embraced in the invention. It equally forbids the use

of the patent to secure an exclusive right or limited monopoly not

granted by the Patent Office and which it is contrary to public policy

to grant. (Id. at 492.)

And this line of reasoning is not limited to patent and trademark law.

Morton Salt itself noted with approval the application of this doctrine

to copyrights. (Id. at 494.) In United States v. Paramount Pictures,

Inc., 334 U.S. 131 (1948), the Supreme Court further explained the

limitations on copyright power in the context of "block booking" - "the

practice of licensing, or offering for license, one feature or group of

features on condition that the exhibitor will also license another

feature or group of features released by the distributors during a given

period." (Id. at 156.) Like patent law, the exclusive right granted

under the Copyright Act does not include any privilege to "add to the

monopoly of the copyright in violation of the principle of the patent

cases involving tying clauses." (Id. at 158.)

>From these foundations, the doctrine of copyright misuse has developed

both as a violation of antitrust law and as an affirmative defense

against copyright infringement when the copyright holder, by means of an

over-reaching license or other method of control, tries "to secure an

exclusive right or limited monopoly not granted by the [Copyright]

Office and which it is contrary to public policy to grant." (Lasercomb

Am., Inc. v. Reynolds, 911 F.2d 970, 976 (4th Cir. 1990), quoting from

Morton Salt, 314 U.S. at 491.) Moreover, copyright misuse is such a

violation of public policy that some courts will not require that the

person against whom the misuse is directed be a party to the litigation.

"[T]he fact that appellants here were not parties to one of Lasercomb's

standard license agreements is inapposite to their copyright misuse

defense." Lasercomb, 911 F.2d at 979.)

United States courts have a long history of recognizing that licensing

terms which have the purpose and effect of voiding the boundary around

the exclusive rights of the copyright holder, thereby enlarging the

and should be void as against public policy. The same should be true

where EULAs are used to the same end. "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." (Softman Prods. Co. v. Adobe Sys., Inc.,

171 F. Supp. 2d 1075, 1091 (C.D. Cal. 2001).) The Softman court was

quite critical of Adobe's efforts to compel third-parties to relinquish

the rights they enjoy under the Copyright Act through use of an end-user

license agreement - in that case, a "license" that purported to make the

third party waive its rights under Section 109 to resell lawfully made

copies without Adobe's consent. "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." (Id. at 1090

(footnote omitted).)

Indeed, a contrary result would be untenable, for it would manage "to

transform a contractual term that software purveyors unilaterally

include in their contracts into a binding provision on the world - even

on parties who are not in privity of contract - and one that, moreover,

undoes the dictates of Congress by undermining an essential feature of

the Copyright Act!" 2 M. Nimmer & D. Nimmer, NIMMER ON COPYRIGHT ÃÂ§

8.12[B][1][d][i] (2002) (exclamation point in original).

The United States is not alone in this. In the United Kingdom, the

Commission on Intellectual Property Rights recently concluded that

"Where suppliers of digital information or software attempt to restrict

'fair use' rights by contract provisions associated with the

distribution of digital material, the relevant contract provisions may

be treated as void." (Commission on Intellectual Property Rights,

Integrating Intellectual property Rights and Development Policy:

Executive Summary, September 2002, at 22.)

In Australia, the Copyright Law Review Committee recommends that the

Australian Copyright Act "be amended to provide that an agreement, or a

provision of an agreement, that excludes or modifies, or has the effect

of excluding or modifying, the operation of [certain limitations upon

the rights of copyright holders] has no effect." (Recommendation 7.49,

Australia 2002.)

It is not my custom to go into this much detail when I'm not "on the

meter," but I feel deeply that it is not just developers who may lose

out if these bogus licenses are allowed to prevail. It is also the

public, that stands to gain from the innovative new works and uses

created by the developers, who would suffer as well. But one

disclaimer: Mr. Peterson will likely soon be licensed to practice law,

and he obviously has an opinion different from mine, so don't take this

as legal advice - check with a lawyer whose judgment you trust before

thumbing your nose at an offensive EULA.

John

__________________

John T. Mitchell

http://interactionlaw.com

-----Original Message-----

From: John V. Petersen [mailto:John.V.Petersen@comcast.net]

Sent: Friday, May 02, 2003 8:15 AM

To: John@interactionlaw.com

Cc: profox@leafe.com

Subject: Commentary on your article: Microsoft Risks Copyright Impotence

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