The Shrinkwrap Snafu: Untangling the "Extra Element" in Breach of Contract Claims Based on Shrinkwrap Licenses

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In the midst of the software boom, and with so much at stake, computer software developers scrambled to protect their products from blatant copying and unscrupulous takeoffs. Ultimately, they responded by imposing restrictive licenses (shrinkwrap licenses1) upon everyone who would purchase and use their computer software. The enforcement of these licenses has fueled a great debate. Courts and commentators alike have questioned whether these licenses strip federally granted rights from the public and bestow these rights upon software developers. Courts have yet to reach a consensus on whether shrinkwrap licenses, backed by state contract law, should be preempted by federal copyright law.

However, an analysis of § 301 of the Copyright Act,2 read in light of the purposes of copyright law, shows that breach of contract claims based on shrinkwrap licenses should be preempted by copyright law. Courts denying preemption under § 301 distinguished copyright claims from contract claims by applying the "extra element" test.3 Under this test, a contract claim is not equivalent to (and thus not preempted by) a copyright claim if the contract claim requires the accuser to prove additional elements superfluous to the copyright claim. Courts have found that shrinkwrap licenses are not preempted by improperly distinguishing the contract claim with the extra element of bargain-an element that is not present in shrinkwrap licenses because the consumer has no option but to accept the license or return the software to the developer. Preemption of shrinkwrap licenses is also proper because it does not leave software developers unprotected. Under the current test for fair use found in § 107 of the Copyright Act,4 the economic interests of computer developers can be respected while allowing the public fair use of digital materials (digital fair use5). Further, the Digital Millennium Copyright Act6 (DMCA) serves the interests of software developers by prohibiting the circumvention of technological measures that developers chose to employ in protecting their software.7

Precluding preemption of breach of contract claims based on shrinkwrap licenses presents significant problems. The copyright doctrine of fair use-which permits consumers to freely use copyrighted materials for limited personal, noncommercial purposes such as archival copying, developing interoperability, or modifying computer programs-will be eviscerated if copyright law wields no preemptive power over breach of contract claims based on shrinkwrap licenses. This problem arises because while fair uses cannot constitute copyright infringement, these same uses are not insulated against breach of contract claims.8 Therefore, even though a particular use of copyrighted software is a fair use, this public right will not be a valid defense to a breach of contract claim.9 Thus, allowing breach of contract claims based on shrinkwrap licenses sets at naught the fair use doctrine and the purposes of Congress. By weighing the practical effects of the shrinkwrap licensing provisions against the purposes of copyright law, courts should be moved to invalidate such provisions.

This Comment begins by introducing the foundational principles of copyright law, including the copyright infringement standard, digital fair use, and reverse engineering, a category of fair use. Part II discusses several reasons why software developers may have been displeased with the protection available to them under copyright law, as well as the consequent advent of shrinkwrap licenses. Part III analyzes the shrinkwrap licenses under § 301 of the Copyright Act, concluding that breach of contract claims based on shrinkwrap licenses should be preempted by copyright law because these claims are substantively equivalent to copyright claims. Although some courts have distinguished breach of contract claims based on shrinkwrap licenses from copyright claims using the extra element test, these courts have inappropriately relied on the element of bargain, which is not present in shrinkwrap licenses. …