sidered sufficiently famous and distinctive. Although Toro provided evidence of extensive advertising and that the mark TORO was the dominant brand within professional lawn care markets over a long time, the Board opined that The Toro Company "does not provide evidence of how effective its advertising has been." The Board said that it needed to find proof in the record that the public almost always associates the mark "Toro" with the lawn care company. Such proof could come in the form of surveys or evidence of intense media attention.
This decision makes it unlikely that a dilution cause of action will create any undue concern for trademark owners facing an opposition. For the small cadre of organizations that own a truly famous and distinctive trademark, the decision details the type of evidence necessary to show that their mark has become primarily a source indicator within the minds of the general public.
UCITA is coming! UCITA is coming! (One if by land, two
if by C)
By Eugene F. Friedman
The Illinois General Assembly has recently witnessed the introduction of the Uniform Computer Information Transfer Act ("UCITA"), 1999 Illinois Senate Bill 1309. Supported by the software industry, UCITA has received the opposition of the Federal Trade Commission, the attorneys general of 25 states including Illinois, major software users, librarian organizations, and virtually everyone else on the face of the earth. Virginia, nonetheless, has enacted this one-sided measure.
UCITA would have the effect of removing what little protections are provided software purchasers and users by the copyright laws and even various guarantees of the United States Constitution. The National Conference of Commissioners on Uniform State Laws ("the Commissioners"), stung by criticism that it could not propose a statute more unfair to the public than Article III of the Uniform Commercial Code (related to banking), set out to show that, with UCITA, it could do just that. The Commissioners may well have succeeded in this effort. A primary issue involved with the commercialization of software is what exactly does the consumer obtain when paying for the product at the store or Web site. Does the purchaser buy a copy of the software which means that the copyright laws apply?
Or, does the customer merely obtain a license to use the software? In the latter case, called a "shrinkwrap license," the license may only exist inside the box containing the software or on the computer monitor when the purchaser seeks to install the program. In this view, none of the copyright law provisions apply. Rather, the terms of the so-called license apply. Thus, for example, the copyright act, at 17 U.S.C. § 109, gives the purchaser of a copy of a work the right to sell it to another person (the so-called "first-sale" doctrine). A license may prohibit that very activity.
A purchaser of a work not entitled to copyright protection may freely make copies of that work, Feist Publication, Inc. v. Rural Telephone Service Co., 499 U.S. 340 (1991). In that case, Feint simply copied a telephone book originally put together and published by the telephone company. The lower courts held Feist guilty of infringing Rural Telephone's copyright in the telephone book. The Supreme Court held that the phone book, notwithstanding the tremendous effort required to put it together, lacked the minimal originality required by the U. S. Constitution for copyright protection; a lot of pedestrian work, the "sweat of the brow," simply did not earn copyright protection. As a consequence, Feist was free to copy the book.
The Seventh Circuit Court of Appeals, with Judge Easterbrook writing, says that a shrinkwrap license takes away the right to copy works that do not qualify for copyright protection under the Constitution. ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996). Although the Supreme Court in Feint decided that the Constitution forbids copyright protection for the telephone directories involved in that case, comparable protection may be sought using a license theory. Judge Easterbrook, in ProCD, says that cleverly relabeling the article's transfer as a license rather than a sale avoids the Constitution's prohibition against forbidding the copying of such mundane items as a telephone book in electronic form.
Software producers clearly fear that other circuit courts of appeal might follow the lead of the Fourth Circuit rather than agreeing with ProCD. That court struck down an agreement with a purchaser not to attempt to create any software that might independently implement the idea of the licensed program, Laserconb Am., Inc. v. Reynolds. 911 F.2d 970 (4th Cir. 1990). The court concluded that the agreement prohibited activity clearly permitted by the copyright laws and could not stand. UCITA attempts to make certain that all such agreements avoid any attack based on state, federal, or Constitutional law.
The proposed UCITA also permits the vendor and purchaser of software to "agree" on a choice of law and forum in the event of a dispute between them. No connection of either party with the forum is required. The shrinkwrap licensor may, and clearly will, pick a location having law and convenience most favorable to it. The due process guarantees of International Shoe Co. v. Washington, 326 U.S. 310 (1945), disappear. A Maine resident purchasing (i.e., receiving a license for) a copy of a program in a neighborhood store may well have to respond to a suit for violating a provision of the "license" in a San Diego court.
And, that court may well have to apply the law of Virginia. States such as Illinois could lose the ability to protect its citizens from overreaching by a distant software producer. Other questionable, malodorous provisions of UCITA include:
(a) Software vendors would have the right to remotely disable software already in use if the vendor believes that the purchaser has violated the contract terms and it may do so without court approval and without liability for any harm, foreseeable or not, resulting from the shut-down;
(b) The software producers may prohibit the transfer of the software from one company to another even in the course of a merger or acquisition;
(c) Companies are bound by the terms for a software purchase by an employee even if the employee had no authority to buy the software or to bind the employer;
(d) Software producers escape liability for defects in the software even if the producers know of the defect at the time of the sale (i.e., license); and
(e) The software vendors may change the terms of the license unilaterally after the sale (i.e., license) by e-mail;
(f) UCITA eliminates the "fair use" provision (17 U.S.C. § 107) so carefully written by Congress into the copyright code, 17 U.S.C. §~101 et seq; and
(g) The use of UCITA's nondisclosure provision can be used (and similar provisions of shrinkwrap licenses have been used) to prevent adverse comment on the product notwithstanding the First Amendment.
In addition to the foregoing, UCITA may prevent reverse engineering of products incorporating software, a practice currently condoned by the courts. Additionally, it may apply to products, such as books and other writings, not commonly thought of as "computer information."
The Federal Trade Commission, in a strongly worded letter dated October 30, 1998, to the Commission and to the (then Commission partner) ALI has stated the following in opposition to UCITA (citations omitted):
I. Protection of mass-market purchasers: licensing provisions
C. Pre-transaction disclosure for certain types of license terms
* * * * *
We believe that is important for consumers to be able to compare different products, make choices, and purchase the products that best suit their needs. A consumer's ability to shop wisely and compare products may be seriously impaired if the consumer must buy a product, take it home, and attempt to install it on a computer before he or she can see the material terms of the license. Consumers often need the opportunity to make side-by-side comparisons at the time and place of purchase. Accordingly, we agree with the ABA Section on Science and Technology that [UCITA] should:
maximize the likelihood that the detailed terms of the mass market license comport, to the maximum extent possible, with the "basis of the bargain" reached between the licensor and the licensee at the time that payment is made.
* * * * *
E. Additional provisions relating to the use of self help
* * * * *
[W]e recommend that [UCITA] restrict the use of self-help where the self-help might intrude on a consumer's reasonable expectation of privacy. For example, many consumers might not expect that a software developer would use electronic means to monitor the contents of a consumer's disc drive in order to ensure compliance with license terms forbidding copying or alteration of the software ...
Second, we recommend that in the context of enforcing mass market licenses, self-help be restricted to instances where there has been adequate warning to the consumer. Requiring clear and conspicuous pre-sale disclosure of a licensor's intent to use self-help, and a clear explanation of what that means to the mass-market purchaser of software, would significantly help in this regard. Additionally, where electronic means of self-help are used, (UCITA] also should require a disclosure of the licensor's intention to use self-help in some means proximate in time to the potential breach of the license. ...
F. Creating and disclaiming warranties
We are also concerned about [UCITA's] default provision that a manufacture does not create a warranty when it "illustrates the aesthetics, market appeal or the like" and makes statements "purporting to be merely the licensor's opinion or commendation of the information." We would hope that licensors be held to their promises and, further, that they not be permitted to override promises expressly made or implied by the licensor' s words or deeds in a boilerplate post-sale warranty disclaimer.
II. Protection to mass-market purchasers: recognition of electronic signatures and records
The [FTC] staff is concerned that this legal presumption [that an electronic record at issue is attributable to consumer sending party and is accurate] could subject consumers to significant liability if they are the victims of fraudulent, unauthorized or erroneous transactions. Consumers are often the parties least able to assess and absorb the risk of fraud or error in transactions. Under [UCITAJ, a consumer could be held liable for the actions of a third-party, bad actor who sends electronic records in the name of that consumer.
* * * * *
Specifically, we note that existing consumer protection laws limit the liability of consumers using other forms of payment systems. ... We are concerned, however, that these statutory protections would not extend to existing and developing Internet-based payment systems ...
III. Balance of innovation and competition incentives in [UCITA]
The staff is concerned that [UCITA], as currently drafted, is inconsistent with existing intellectual property and antitrust laws and policies. Some provisions in [UCITA] implicitly endorse a contracting/licensing structure that allows software and other information to be distributed with significant restrictions on user's rights to compete ... [These] restrictions could unreasonably restrain trade in violation of the antitrust laws, constitute misuse of intellectual property, and/or violate state trade secret statutes.
* * * * *
C. [UCITA'S] effects on the balance of incentives in antitrust and intellectual property law
The broad scope of "contractual use restriction" endorsed by [UCITA] could inhibit innovation and competition in the markets for computer software and other products containing information programming. For example, an innovator who sought to create and market a good or service complementary to a software product, the development of which required making one copy of the software to which modifications are made or which is disassembled, could be blocked by a license term that "prohibit[s] the licensee or others from using for commercial purposes ..." Despite the possible illegality under the antitrust or copyright laws if such a term were imposed, [UCITA] declares that the restrictive term "... would be enforceable." This presumptive validity could chill licensees from asserting rights under federal and state intellectual property and antitrust law.
* * * * *
As a practical matter, however, a purchaser/licensee may not know the extent of his rights under federal antitrust and intellectual property laws or may lack the substantial resources and time necessary to litigate his rights in court. In these industries, time is especially critical to the ability to compete. Thus, [UCITA's] permissive default terms could have a chilling effect on second-generation innovation, even if those default terms would not pass muster if litigated in federal court.
The attorneys general of 14 states, writing in a letter to the FTC Commissioners dated July 23, 1999, gave the following scenario that, under UCITA, "will become legally sanctioned" (with emphasis added).
Jane Consumer purchases a piece of software that promises analysis and advice concerning various investment options. When she installs the software, she learns from a message displayed during the installation process that she must also subscribe to a proprietary information service to use it, rather than the competing service that she already uses to obtain such information. Even though other similar software packages are available which do not impose such requirements, Jane is loathe to begin the shopping process over again in order to decide which of those packages to purchase, so she accepts the new terms. Jane subscribes to the new information service, selecting a discounted one-year agreement rather than a full price month to month agreement, and logs onto the system for the first time. When she does, she is presented a screen that contains a hyperlink in the upper left hand corner labeled "important information." She is also presented with a flashing icon calling her attention to a hot stock tip. She decides to check out the tip before reviewing the information. After deciding the tip was not something she wants to pursue, she returns to the main screen, but the "important information" hyperlink is gone.
She continues to use the service for a period of months. About six months later, a package arrives in the mail. It is an upgrade to her investment analysis software. Because she did not order the upgrade and there is nothing in the package advising her otherwise, she assumes it is a free bug fix upgrade. After a couple of weeks, she installs it and logs onto the service to try it out. When she does she sees the "important information" hyperlink. Because this hyperlink eluded her before, she decides to immediately review the information and discovers that the software upgrade was not free, but was sent to her on a negative option basis. She learns that she will be billed $49.95 for the software because she failed to return in within seven days of receipt as required by the upgrade service of her original contract.
Confused because she was never aware of any such provision, she calls the software company's customer service line for an explanation. She is told that the term was conspicuously displayed behind the "important information" hyperlink when she first logged onto the service and that the company has no refund policy. She is somewhat condescendingly told that she should read her contracts before she agrees to them. She asks where on the service a copy of the contract is available for her review, but is told that is only available during the initial session of use. She angrily asks to cancel the service, but is told that she cannot do so until her 12-month term expires.
The next month, she reviews her credit card statement and discovers not only the $49.95 charge for the software, but also that the monthly fee has increased by $5. She logs onto the service and goes to the customer service area to see if she can find any information about the fee increase. In the customer service area, she finds a lengthy letter from the president of the company explaining that its former business model was flawed and that the company had to choose between raising its prices or going out of business. The letter closes with a reminder that customers should periodically check the customer service area for notice of such fee changes, as required by the company's standard contract. She again calls customer service and asks to cancel the service because of the price increase, but is again told that she cannot do so until her 12-month term expires.
Jane writes to her credit card company asking for charge-backs in the amount of the unexpected fees, but when provided a copy of the agreement by the software company, her credit card company declines the charge-back, saying that the charges were appropriate under the agreement. Jane angrily uninstalls the software and decides that she will return to the expensive but relatively trustworthy stockbroker that she had used before.
The letter includes this rather cheerful hope for the consumer:
Certainly, the Attorneys General hope that even if UCITA were enacted, Jane Consumer's experience would be atypical, if only because merchants would realize that consumer goodwill would be damaged by such practices. However, in our experience as law enforcement officials, we have found that there is a substantial element in our society unconcerned with matters such as consumer goodwill, who will exploit any method to gain advantage in their dealings with others. As it currently stands, UCITA is an open invitation to those persons to exploit our citizens. (Emphasis added.)
The attorneys general are people in a position to know.
The words of UCITA's supporters prove even more chilling than those of its opponents. Mark Uncapher, a vice president at the Information Technology Association of America has said, "Parties in particular situations are always free to modify the contract. This is just a fail-safe of fallback set of provisions." So, if Joe wants to modify the shrinkwrap terms on the copy of Microsoft Office that he just brought for his home, whom does he call at Microsoft to do this, Bill Gates?
The Software Information Industry Association's Summary of Benefits statement encouraging UCITA's adoption includes the following, with the present writer's comments in brackets:
1. UCITA provides a unified body of law applicable to software and information license transactions. Currently, there is no body of law, either statutory or common, directly applicable to transactions in digital products. [Actually, there are several bodies of such law, including federal patent, trademark, copyright, internet, antitrust, and unfair competition law and state trade secret and unfair competition law. The software people just do not like the law that applies to everyone else.]
2. UCITA will clarify that shrink-wrap and click wrap license agreements are enforceable. [That's just the problem.]
3. UCITA rejects the "perfect tender" rule for commercial licenses. One of the problems of Article 2 [of the U.C.C.] is that it requires delivery of goods that conform to the contract. [Emphasis added. This is actually a direct quotation, believe it or not.]
4. UCITA provides choice of law/choice of forum:
... UCITA contains provisions that generally provide that "choice of law" and "choice of forum" clauses are enforceable... UCITA goes so far as to provide a beneficial default rule on choice of law. [Beneficial to whom? One can see why the software producers are eager to have UCITA adopted.]
5. UCITA contains a comprehensive scheme dealing with electronic commerce. There are sections dealing with legal recognition of electronic records and authentication, attribution procedures, allocation of risk for electronic errors, the timing of contracts, and the effectiveness of messages in the contract formation process. [And every one of the terms disfavors the consumer.]
6. UCITA provides implied warranties for informational content. UCITA provides an implied warranty that there are no inaccuracies for custom developed informational content, and provides that this warranty may be disclaimed or modified. With regard to published informational content, there is no such implied warranty. [Emphasis added. No comment necessary.]
7. UCITA contains provisions dealing with the licensors (sic) electronic control of the license. [Big brother will be watching, -- very closely.]
Much of the proposed UCITA should and obviously does cause concern to many. The Illinois State Bar Association is considering creating a task force on UCITA. The reader may wish to encourage fellow ISBA members to support the creation of this task force. Those wishing to participate in this effort can contact the writer.
UCITA was originally proposed as Article II.B. of the U.C.C. The answer to the frequently asked Shakespearean question of "II.B. or not II.B." is not II.B.--and not UCITA.
_______________
Eugene Friedman is an attorney with Friedman & Friedman, Ltd., Chicago, Illinois who specializes in intellectual property law.
Originally published in the September 2000 issue of Antitrust & Unfair Competition Law, the newsletter of the Section on Antitrust and Unfair Competition Law of the ISBA. Reprinted with permission.
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