ProCD, Inc. v. Zeidenberg

Facts

ProCD compiled information from more than 3,000 telephone directories into a computer database. It sold the database on CD-ROM discs as SelectPhone. The database cost more than $10 million to compile. ProCD charged the general public a low price, approximately $150 for the set of five discs, and charged the trade more. To keep that pricing system working, ProCD turned to contract. Every box said the software came with restrictions stated in an enclosed license. The license was encoded on the discs, printed in the manual, and appeared on the user's screen every time the software ran. It limited use of the application program and listings to noncommercial purposes. Zeidenberg bought a consumer package in 1994 from a retail outlet in Madison, Wisconsin, but decided to ignore the license. He formed Silken Mountain Web Services, Inc., to resell the information in the database. The corporation made it available on the Internet to anyone willing to pay its price, which was less than ProCD charged its commercial customers. Zeidenberg bought two more packages, each with an updated database, and used the latest information the same way. The licenses in all three packages were identical. The court assumed that the database could not be copyrighted.

Issues

1. Is a shrinkwrap license, whose terms are inside the box and not printed on the outside, an enforceable contract when the buyer uses the software after having a chance to read the terms and to return it?
2. Does § 301(a) of the Copyright Act preempt a state-law contract that limits how a buyer may use software and data, so that the license cannot be enforced?

Holding

ProCD's license bound Zeidenberg. He accepted it by using the software after having an opportunity to read the terms and to reject the goods. The simple two-party license was not preempted by § 301(a). The court remanded with instructions to enter judgment for ProCD.