Article Summaries

Copyrights – Misuse Doctrine:
Reversing Copyright Misuse: Enforcing Contractual Prohibitions on Software Reverse Engineering, by Jeffrey A. Andrews - 41 Hous. L. Rev. 975 (2004)

This article focuses on the debate about “ the proper scope of intellectual property rights available to owners and developers of computer software,” and explores the issue of whether the doctrine of copyright misuse is viable. The Article explains “misuse doctrine, including its basis in patent law and later application to copyright law. . . [and] argues that the doctrine of misuse has been misapplied to copyright law and that - even based on a proper rationale - it is unnecessary for the protection of the policy underlying the Copyright Act.”
The author discusses how Bowers v. Baystate Technologies, Inc. “may demonstrate the existence of a disagreement among the circuits regarding the [scope and] viability of copyright misuse as a doctrine,” and concludes that “reverse engineering should be preventable through a licensing agreement, except in a case in which reverse engineering is absolutely necessary for the interoperability of software.”

Contract Law Doctrines that Limit License Terms – Unconscionability:
Music Contracts Have Musicians Playing in the Key of Unconscionability, by Omar Anorga – 24 Whittier L. Rev. 739 (2003)

This Article examines the doctrine of unconscionability, focusing on the test for unconscionability derived from the Code's section 2-302. The Article focuses on “standardized music contracts and the provisions [in those contracts] that have generated the most controversy,” and applies “the judicially developed test for unconscionability to these provisions.” It suggests “changes to foster equitable agreements between musicians and their labels.”
The author argues that “some of the provisions present in [music contracts] are inherently unfair, and should either be removed entirely, or equitably reconstructed.” He concludes that “provisions that do not necessarily "shock the conscience" are woven into the mix for good measure,” and that “courts should refrain from the temptation to use a heavy hand in rewriting contractual language.”

Response: Valuing Modern Contract Scholarship, by Ian Ayres - 112 Yale L.J. 881 (2003)

“[Eric] Posner has leveled three different criticisms at the modern economic analysis of contracts: a descriptive critique that the scholarship fails to describe or predict the content of current law, a normative critique that the scholarship fails to ‘provide a solid basis for criticizing and reforming contract law,’ and an implicit evolutionary critique that the scholarship has run out of things to say.” This Article argues that “Posner's descriptive critique is misplaced” and that he “distorts reality by claiming that the leading scholars have been engaged in an attempt to use economic theory to predict the content of current legal rules.”
This Article gives extended attention to “Posner's normative claim that modern scholarship fails ‘to provide a basis for criticizing or defending those rules.’” The author “concede[s] that much of the modern scholarship is either based on reductive models or yields normative results that are contingent on particular parameter values of the underlying environment. But [he] see[s] much more normative value in the contributions of the last two decades [than Posner does].”

Contract Formation:
“Terms Later” Contracting: Bad Economics, Bad Morals, and a Bad Idea for a Uniform Law, Judge Easterbrook Notwithstanding, by Roger C. Bern - 12 J.L. & Pol’y 641 (2004)

This Article argues that “Judge Easterbrook's imposition of the "terms later" contracting rule in ProCD and Hill was [] devoid of legal, economic, and moral sanction [, and that] his opinions in those cases provide no legitimate support for other court decisions or for any uniform law that would validate "terms later" contracting. The Article discusses cases that have followed ProCD/Hill's ‘terms later’ rule.
The Article argues that “a rule sanctioning "terms later" contracting increases information asymmetry, increases transaction costs, enhances hold-up and opportunistic behavior by vendors, and results in inefficiencies and distributional unfairness by systematically redistributing wealth from consumers to vendors.” The author claims that "terms later" contracting “fails to protect the reasonable expectations of buyers while at the same time protecting the unreasonable expectations of vendors, thus abandoning the only moral justification for courts to enforce promises.” He also argues that this rule “abandons the principle of impartial treatment of the parties (vendors are favored) and abandons achieving justice between the parties in order to achieve some perceived greater societal good.”

Federal Bankruptcy and Licenses:
Bankruptcy & Entertainment Law: The Controversial Rejection of Recording Contracts, by Jennifer A. Brewer - 11 Am. Bankr. Inst. L. Rev. 581 (2003)

This Note “examine[s] both the positive and negative aspects of bankruptcy in the entertainment industry, with a specific focus on its impact on the recording industry,” and advocates for bankruptcy reform “to ensure that "abuse" of the system is reduced to a minimum and proper debtors truly in need of the protections of bankruptcy may be afforded protection.”
This Note examines automatic rejection of executory contracts under chapter 7 bankruptcy, as well as, “the judicial processes of rejecting the recording contract under a chapter 11 bankruptcy proceeding. The discussion [summarizes] . . . the requirements for artist-debtors under the current system and the dangers of abuse that accompany this system.”

Contract Breach and Limitations:
Oasis or Mirage? Efficient Breach as a Relief to the Burden of Contractual Recapture of Patent and Copyright Limitations, by Daniel R. Cahoy - 17 Harv. J. Law & Tec 135

This Article explores “whether the application of efficient contract remedies may alleviate the apparent tension between the private contract and intellectual property limitation regimes. It explores effect of “efficient breach” on the conflict between private contract and statutory intellectual property rights limitations.” It discusses the use and enforceability of contracts to constrain intellectual property limitations and court rulings dealing with contractual waivers, adhesion contracts, and federal preemption. The author “use[s] a modeling technique influenced by experimental economics theory to further consider the consequences of contractual breach,” and “provide[s] recommendations that would ensure the most efficient merging of federal intellectual property law and state contract law.”

On-Line Licensing – International:
Moving Beyond the Conflict Between Freedom of Contract and Copyright Policies: In Search of a New Global Policy for On-Line Information Licensing Transactions: A Comparative Analysis Between U.S. Law and European Law, by Jacques de Werra - 25 Colum. J.L. & Arts 239

This Article explores the issue of “whether and to what extent the basic principle of freedom of contract is or should be limited in the context of international copyright licensing agreements on the basis of essential copyright policies, which define the conditions and the scope of protection of the works, for the benefit of the users of the works. In other words, [it attempts] to decide to what extent "private legislation" resulting from contracts can displace the public policy defined by copyright law.”
The Article “focus[es] on a comparative analysis of U.S. and European laws, . . . [and] formulate[s] global rules based on a synthesis of the two systems. . . . [It] present[s] the different legal doctrines and scholarly proposals that have been respectively evoked and formulated in order to solve the conflict between the principle of freedom of contract and the respect of copyright policies both in the U.S. and the European legal systems . . . [, and] formulate[s] a proposal for a global information licensing policy.”

Breach of Contract – Damages:
Optimal Penalties in Contracts, by Aaron S. Edlin & Alan Schwartz - 78 Chi.-Kent L. Rev. 33 (2003)

Contract law protects parties’ interests in case of contract breach, but prohibits penalties. This Article “reviews the literature from 1977 to the present [and argues] that the liquidated damage rules actually are without justification.” The Article asserts that unlike the early models, in which “neither party invested in the subject matter of the contract,” but rather “analyzed the parties' incentives to trade or to breach,” modern models “ask whether parties can write contracts that will ensure efficient ex post trade and efficient ex ante investment that would either reduce the seller's costs or increase the buyer's value (or both).” The Article concludes that “penalties often are necessary to induce efficient investment,” and that [p]arties thus could choose damage multipliers that exceed one for efficiency reasons.” The Article argues that “the courts' review of liquidated damage clauses should change,” and that courts “should [not] focus on the size of the contract's damage multiplier . . . [, which] can be efficient or inefficient, depending on the function they were set to serve.” The analysis implies that “parties may choose high multipliers for bad reasons--to exploit promisors or to deter entry--or for good reasons--to encourage efficient investment . . . [or] low multipliers [] for bad reasons--to exploit a consumer's lack of sophistication--or for good reasons--to screen efficiently over buyers.” The Article concludes that “a promisor no longer should be permitted to defend a suit on a liquidated damage clause by asserting that the clause is a penalty. Rather, the promisor should be limited to the traditional defenses of unconscionability and restraint of trade.”

Disclosure:
Disclosure in Contract Law, by Melvin A. Eisenberg* - 91 Calif. L. Rev. 1645 (2003)

This Article explores the “disclosure problem” – whether a seller, who knows of a material fact concerning the commodity he is selling, must disclose that relevant fact to the buyer. The author “develops the basic principle that should govern the disclosure problem,” under which “the law should require disclosure of material facts except in those classes of cases in which a requirement of disclosure would entail significant efficiency costs. This [p]rinciple is intended not as a rule to decide individual cases, but as a guide to the formulation of a more specific, multi-stranded rule concerning when disclosure is or is not required in given classes of cases.”
There are five “strands” to the rule of disclosure developed in this Article: (1) “Disclosure should be required if the relevant information was acquired adventitiously, rather than deliberately”; (2) “Disclosure should be required if the relevant information consists merely of foreknowledge, even if the information is acquired deliberately”; (3) “Sellers should always be required to disclose”; (4) “Disclosure should be required if the relevant information was acquired through improper means”; and (5) “Disclosure should be required if the parties are in a relationship of trust and confidence.” The author also considers exceptions to the proposed rule.

Warranties:
Text and Circumstance: Warranty Disclaimers in a World of Rolling Contracts, by Stephen E. Friedman - 46 Ariz. L. Rev. 677

“The law of warranty disclaimers has failed to keep pace with the proliferation and growing acceptance of ‘rolling’ or ‘layered’ contracts. This failure has resulted in great uncertainty. Courts have struggled, unsuccessfully, to reconcile a restrictive view of disclaimers of the implied warranty of merchantability with a permissive and evolving conception of contract formation that permits sellers to fully disclose some contract terms after the purchase.” The author of this Article proposes a “flexible test for assessing the circumstances under which a disclaimer is presented. This test would enable a trier of fact to find a disclaimer ineffective if the nature of the transaction is such that it puts the buyer off guard as to the existence or effect of a disclaimer. To illustrate the value of this test, [the author] appl[ies] it to the critical issue of disclaimers in rolling contracts involving consumer purchases.”

Small Business and the False Dichotomies of Contract Law, by Larry T. Garvin - 40 Wake Forest L. Rev. 295

Modern contract law is characterized by status driven dichotomies, such as consumer versus non-consumer and merchant versus non-merchant. When these dichotomies “collapse,” they usually result in “loose consumer rule[s] and a stiff non-consumer rule[s] on the theory that non-consumers are largely merchants who can take care of themselves.” This Article argues that “these dichotomies - consumer versus non-consumer, merchant versus non-merchant, and, worst of all, consumer versus merchant - are false, because small businesses do not fall cleanly into any of these categories.” The Article argues that “small businesses most resemble consumers and non-merchants in their abilities to deal with risk, . . . to secure and process information, and to fend for themselves in the market.” It further argues that “[b]y putting small businesses on the wrong side of each dichotomy, the law may thus promote inefficiency, burdening small businesses on the one hand and failing to protect them on the other.
The Article “considers why consumers, on the one hand, and merchants, on the other, are treated specially,” focusing on issues of risk spreading, information, and cognition, and concludes that small businesses are more like consumers, rather than large business “with which they are legally grouped.” The Article “look[s] at how the law could deal with small businesses, given their status between consumers and merchants,” and offers some suggestions: “treat all businesses like consumers - put otherwise, use a uniform rule designed primarily for consumers . . . [, or] treat small businesses like consumers . . . [, or] divide the merchant category into small and not-small subparts, with the small merchant treated more like a consumer . . . [, or] abandon the bright-line distinctions, [] and use a market basket of standards to give contracting parties greater or lesser protections case by case.” The Article analyzes the strengths and weaknesses of each of the proposed methods, and “suggests areas in which these approaches might be useful.”

Copyrights – What Law Applies?:
Stop Mucking Up Copyright Law: A Proposal for a Federal Common Law, by Llewellyn Josesph Gibbons - 35 Rutgers L.J. 959

“Unlike other copyrighted works, software is often "sold" with strings attached. . . which often do not reflect accepted copyright norms. . . . These strings occur in what is commonly called a shrink-wrap license or end user license agreement (EULA). Tying these strings into a coherent body of contract law to govern copyright transactions has been a source of frustration to courts and scholars alike.” To solve this problem, the author proposes that “federal courts create a common law of contract in order to create a coherent body of law to govern copyright transactions.”
The Article analyzes “sections of the Copyright Act where state contract law governs the legal copyright relations of the parties.” The author “compare[s] the ownership provisions of the copyright (those intangible legal rights granted by the Copyright Act) with selected sections of Article 2 of the Uniform Commercial Code (UCC), and conclude[s] that some of the sections of Article 2 conflict with provisions of the Copyright Act.” The author argues that “[t]hese conflicts make Article 2 a questionable source on which to build a body of law governing copyright transactions.” He states that “existing attempts to create a uniform law governing information rights such as the Uniform Computer Information Transaction Act (UCITA) have failed because they took place at the state level . . . [, and are], therefore, inadequate to address the preemption question or to provide a basis on which federal courts could build a body of contract law.” The article concludes that “federal courts should be free to develop new doctrines or interpretations of contract law that further the policies underlying the Copyright Act.”

Copyrights – New Use Doctrine:
To Whom Does a New Use Belong?: An Analysis of the New Use Doctrine and the Protection it Affords After Random House v. Rosetta Books, by Megan M. Gillespie - 11 Wm. & Mary Bill of Rts. J. 809

“New uses for old works have always been constitutionally protected under the Copyright Clause. Unless the rights to a new use are granted to another party, the creator of the original work maintains the breadth of rights in that use. The dilemma courts face today is determining when those rights have been contractually granted to another party and when they still belong to the creator of the work.” This note “proposes contract-based solutions to new use issues that may avoid the uncertainty of the doctrine as it currently stands.”

Contract Formation:
Rolling Contracts as an Agency Problem, by Clayton P. Gillette – 2004 Wis. L. Rev. 679 (2004)

Rolling contracts (RCs) “are criticized for imposing on buyers terms that they could not be expected to have read and to which they did not assent.” The Article suggests that if “the issue of assent [is viewed] instrumentally, [] then other mechanisms can be used to approximate the function of ensuring that nonreading buyers' interests are represented in the contract.” The Article argues that lack of an individual’s own participation in the process of negotiation “is an inevitable cost of any system of representation, in which agents always have motivations that deviate from those of their principals.” The author suggests that “[i]f we are to secure the benefits of standardization and of marketing practices that allow sellers to present terms with goods, then the best we can do is to find a mechanism that reduces those agency costs.”
The Article suggests “that the propriety and the validity of RCs are best resolved by examining them (and [standard-form contracts] generally) as principal-agent problems.” The author argues that “[c]ontracts worthy of enforcement are those from which each party reasonably predicts that it will enjoy gain.” He concludes that “a party's assent to contractual terms serves as a proxy for the determination that the contract will generate gains for that party and is thus worthy of enforcement.”

Contract Formation:
Getting Serious About User-Friendly Mass Market Licensing For Software, by Robert W. Gomulkiewicz - 12 Geo. Mason L. Rev. 687

“[T]the article summarizes the heated debate about the use of mass market licenses in software transactions . . . describes the typical contract-drafting process that leads to the creation of an unfriendly [end user licenses ‘EULAs’ . . . [and] argues that although software users and publishers share an interest in user-friendly licenses, serious obstacles get in the way.”
”First, the article explores the ways that lawyers and the software publishers that they work for can craft more readable EULAs. Second, it addresses the positive role that law school education could play in training lawyers to craft more user-friendly EULAs. Third, it describes how technology such as ‘shopbots’ and XML can make EULAs more user-friendly by helping software purchasers find EULAs with the terms they want. Fourth, it comments on the advisability of applying ‘plain language’ legislation to EULAs as a way of inducing software publishers to improve EULAs.
The article concludes that the most powerful way to improve the user-friendliness of licensing is through new public interest non-government organizations (‘EULA NGOs’) which use the mass communications capabilities of the World Wide Web. Using the Web, a EULA NGO could provide objective, expert, easy-to-read commentary on the pros and cons of particular EULAs to assist users in their purchasing decisions. A EULA NGO could also provide constructive feedback to software publishers about how to improve their licenses and describe and promote licensing best practices. Moreover, a EULA NGO's commentary would create a valuable record of public comment about individual EULAs. This record could be used by a court in the event a user challenges or a software publisher attempts to uphold the enforceability of a EULA.”

Contract Formation:
Viral Contracts or Unenforceable Documents? Contractual Validity of Copyleft Licenses, by Andres Guadamuz Gonzales - E.I.P.R. 2004, 26(8), 331-339

“Copyleft is free software [that] maintains the general freedoms awarded to [free software] users, but by acquiring a copyleft program, the user has to agree to a licence agreement that states that that the software will not be used to develop proprietary applications derived from it.” This article explores the issue of “whether copyleft free software licences constitute valid legal contracts, in particular with regard to the fact that they may create obligations through a distribution chain. There is increasing interest in the non-proprietary licence model expressed in popular documents such as the general public licence ("GPL"), but not enough work has been done in asking perhaps the most important question of all: are these contracts enforceable?”
The Article “[d]iscusses whether the GNU General Public Licence for software can be transmitted through a distribution chain and legally enforced under [European Community] law. It [c]ompares the licensing arrangements for free software and open source software [and] [e]xamines whether provisions regulating the distribution of derivative software contravene EC law against unfair contract terms or the privity of contract.”

Breach of Contract – Good Faith Doctrine:
The Doctrine of Good Faith in Contract Law: A (Nearly) Empty Vessel?, by Emily M.S. Houh - 2005 Utah L. Rev. 1

“This Article addresses both the positive question of what the good faith doctrine does require and the normative question of what it should require. More specifically, this Article attempts to assess and evaluate the ways in which courts are currently employing the good faith doctrine in contract disputes as part of a larger project. This project's goal is to reconceive and reinvigorate the private law doctrine of good faith as one that might assist in effecting the public law norm of equality.”
This Article “explains the good faith doctrine and explores in some depth the theoretical differences between the Summers/excluder-analysis and Burton/foregone-opportunities approaches to good faith. By demonstrating how courts have employed the two leading approaches as rhetorical frameworks for analyzing underlying breach of contract claims and the doctrine of material breach, [the Article] argues that breach of good faith claims have transformed into stand-ins for underlying breach of contract claims in contemporary decisions. . . . [The Article] examines exemplary cases involving less equal bargaining power in the contexts of franchisor/franchisee and dealer/distributor cases, lost commissions cases, at-will employment, and consumer contracting. [The analysis] demonstrates that courts, by applying different models of good faith analyses, are not primarily motivated by the articulated theory behind those models . . . [but use the doctrine of good faith] to supplement and refine arguments relating to the basic underlying breach of contract claims. Thus, [the author believes that the] good faith doctrine remains, substantively, a nearly empty vessel whose condition is attributable in part to the limitations inherent in the leading theories that aim to give the doctrine life.
In conclusion, [the Article] proposes that the good faith doctrine might be given new life in two different ways: first, vis-a-vis its applicability to bad faith conduct in contract formation and negotiation . . . ; and second, with respect to performance and termination, vis-a-vis its applicability in the employment context.”

Contract Interpretation:
The Economics of Form and Substance in Contract Interpretation, by Avery Weiner Katz - 104 Colum. L. Rev. 496

“Interpretation is an essential aspect of all fields of law – statutory, common law, and constitutional – but it looms especially large in the area of contracts.” This Essay criticizes the “traditional scholarly approach to form and substance,” and advocates allowing private contracting parties to choose the interpretative modes to be used in a potential conflict. The author argues that “[f]rom an efficiency viewpoint, the information available at the general level at which courts and legislatures must operate is inadequate to determine the relative magnitude of the relevant transaction costs.” He believes that the traditional approach of the court system “neglects the possibility that different parties in different contexts might prefer . . . one interpretive approach over [the] other.”
The Essay develops “an account of how it is possible for private contracting parties to choose between form and substance ex ante, catalog[s] the main considerations relevant to that choice, and then explore[s] how the parties can use their local knowledge regarding such considerations to improve the efficiency of their agreements.” The author argues that legal scholarship in the area of contract interpretation should “focus on addressing private transactional lawyers, not public decisionmakers such as courts and legislators.” He discusses “transactional problems such as costly information, risk allocation, rent-seeking, agency costs, and the protection of relational investments, [] explains how these problems relate to the form/substance distinction . . . , [and] offers some general principles regarding how these problems might be addressed in contractual planning.”

Contract Formation – Unconscionability:
Bounded Rationality, Standard Form Contracts, and Unconscionability, by Russell Korobkin - 70 U. Chi. L. Rev. 1203 (2003)

“Economic theory suggests that, in most circumstances, market forces will ensure that standard form contracts contain terms that are not only socially efficient but also beneficial to non-drafting parties as a class compared to other possible combinations of price and terms. This analysis in turn suggests that courts should enforce all form terms or, at a minimum, all form terms that non-drafting parties read and understand. Relying on social science research on decisionmaking, this Article argues that non-drafting parties (usually buyers) are boundedly rational decisionmakers who will normally price only a limited number of product attributes as part of their purchase decision. When contract terms are not among these attributes, drafting parties will have a market incentive to include terms in their standard forms that favor themselves, whether or not such terms are efficient. Thus, there is no a priori reason to assume form contract terms will be efficient. The Article then argues that the proper policy response to this conclusion is greater use of mandatory contract terms and judicial modification of the unconscionability doctrine to better respond to the primary cause of contractual inefficiency.”

Contract Interpretation:
Common Sense Principles of Contract Interpretation (And How We’ve Been Using Them All Along), by Adam Kramer - 23 Oxford J. Legal Stud. 173 (2003)

“A contract lawyer is in the business of arguing about the best interpretation of a document, and so needs to understand what he or she is arguing about.
To this end, this article contains a brief outline of an account of contractual interpretation as a special application of the method of everyday interpretation. It shows that 'common sense principles of interpretation', 'the matrix of fact' and 'the parties' reasonable expectations' are all versatile and useful concepts with a sound theoretical basis, rather than fig-leaves to cover unprincipled decisionmaking.”

Information Assets:
Remote Control: Revised Article 9 and the Negotiability of Information, by Jonathan C. Lipson - 63 Ohio St. L.J. 1327

“This article considers the effect that rules on the continuity of security interests and proceeds under Article 9 of the Uniform Commercial Code will have on the negotiability (i.e., free alienability) of information assets, such as data and biotechnologies.” It identifies the problem of remote control: “the unique power created by Article 9 to assert rights in assets in the hands of parties far removed from the original debtor, in a transaction that is likely undiscoverable by that remote party.” The article suggests “that courts can mitigate the problem of remote control by relaxing the definition of property in this context. [It argues that if] data and biotechnology assets are property at all[,] it is not clear that they should be treated as such for the benefit of remote, prior secured parties in disputes with later bona fide purchasers.”
The Article “considers models and theories of negotiability, with a special emphasis on the treatment of bona fide purchasers (BFPs),” with a focus on “restraints on negotiability outside and within Article 9.” The author presents arguments “against Article 9's restraint on the negotiability of information,” and “offers a solution to the problem of remote secured party control.”

Copyright – Misuse and DMCA:
The Law of Unintended Consequences: The Digital Millennium Copyright Act and Interoperability, by Jacqueline Lipton - 62 Wash & Lee L. Rev. 487

This Article explores “the potential for the DMCA to be used to quash commercial competition in contexts . . . where a copyright work--usually software code incorporated into a replacement product such as a toner cartridge or garage door opener--is a purely incidental facet of the product in question.” The article “argues for the development of a legislative ‘presumption’ against DMCA liability that covers situations where a complainant is attempting to utilize the anti-circumvention or anti-trafficking provisions, or both, against a commercial competitor in relation to the manufacture and distribution of competing physical goods that incorporate copyrightable software code incidentally.” This presumption would “operate by placing the burden of proof on the complainant to establish that the protection of a copyright work against piracy is a central commercial concern in the dispute. Thereafter, the burden would shift to the defendant to raise any applicable defenses.” The author draws this suggestion “from ideas underlying the Uniform Computer Information Transactions Act (UCITA) . . . [, which] incorporates provisions that distinguish computer information transactions from transactions that incidentally involve computer information.”
The Article “examines the relevant provisions of the DMCA and their intended operation and also surveys the ways in which they have been applied in recent cases involving interoperable physical goods. . . . [It] proposes an exception to the DMCA's anti-circumvention and anti-trafficking provisions for situations involving interoperable physical goods.” The Article places “this discussion in a broader context and considers the place of the above suggestion within copyright law more generally with particular reference to the relationship between the DMCA's anti-circumvention and anti-trafficking provisions and copyright's fair use, first sale, and copyright misuse doctrines.” The author “offers conclusions on these issues and summarizes some ideas for future law reform of the DMCA.”

Contract Formation:
Reconstructing the Software License, by Michael J. Madison - 35 Loy. U. Chi. L.J. 275

This Article proposes to describe how “the regime of software licensing of digital information works - or fails to work - in legal terms.” The discussion addresses “the emergence of ‘open source’ licensing and the conceptual problems underlying software-licensing-as-governance from ‘conventional’ negotiated, bilateral software licenses; to shrinkwrap, click-through, and click-wrap license forms in the mass market (for both computer programs and for other digital information works); and to technologies for ‘Digital Rights Management’ and laws, such as the anti-circumvention provisions of the Digital Millennium Copyright Act (‘DMCA’), designed to protect them. The Article “aims to explore the conceptual conflicts of all three of these legal forms.” The author questions “whether and when licenses are enforceable legal artifacts” and “what is the source of the legitimacy of software licensing.”
The Article concerns and examines licensing as it operates at several levels simultaneously: (1) at the level of the individual license, (2) at the level where “‘the’ license for a given program governs not only the relationship between the copyright owner and a particular licensee but also the relationship between the owner and all ‘users’ of that program,” (3) at the level where all computer programs are subject to licenses and where “the world of software is effectively governed by the very concept of the license,” and (4) at the level where the “licensing norm itself is internalized by the reader, listener, and user communities such that the world of information production and consumption is regulated informally, even in the absence of formal ‘legal’ enforcement of particular licenses and of norms exogenous to the license itself.” The author concludes that there is not a complete and effective legal support for the software license, “particularly as background distinctions between computer ‘software’ and ‘hardware,’ on the one hand, and the world of legal regulation, on the other, are eroding.” He suggests that “the foundational problems with licensing-as-governance mean that it may be time to jettison, at least in some contexts, licensing as a conceptual framework.”

Standard Term Contracts – International:
Standard-Terms Contracting in the Global Electronic Age: European Alternatives, by James R. Maxeiner - 28 Yale J. Int’l L. 109

“The issue of standard terms in contracts is a roadblock on the road to reform of American contract law in the era of electronic commerce.” This Article presents a “systematic comparative stud[y] of foreign standard terms laws from an American perspective. Its aims are at the same time both highly practical - facilitation of compliance with foreign law - and highly scientific - improved comprehension of the issues and approaches available to deal with standard terms.”

Software Licenses:
The Paradoxes of Free Software, by Stephen M. McJohn - 9 Geo. Mason L. Rev. 25

“This [A]rticle identifies the questions that open source software poses for intellectual property theory and doctrine, and concludes that open source software may have a considerable influence on the law of developing technologies – perhaps a greater effect than the law will have on software practices.” The article explores the challenges that software movement poses “to the way that software is made and distributed,” and discusses the key differences between open source software and other proprietary software.
The author outlines the legal structure of open source software, and discusses how “open source developers are affected by patents as possible inventors or infringers.” He explores the economic theories of intellectual property law that are “fueling the current open source movement,” namely the incentive, property, and spartan theories. He also discusses the issues of prior art, fair use in copyright, and direct regulation of software through dispersal, monitoring, and norms.

Contract Breach – Affirmative Defenses:
Undermining the Initial Allocation of Rights: Copyright Versus Contract and the Burden of Proof, by Thomas A. Mitchell* - 27 Hastings Comm. & Ent. L.J. 525 -

This Note explores the issue of whether the initial allocation of rights to authors is nullified when they enter into contracts with publishers, and advocates for a shift in the burden of proof in copyright infringement cases. The Note argues that under the current system, due to the superior bargaining power of the publishers, authors have no method of insuring that they receive a benefit for relinquishing their rights in a contract. In a typical author-publisher breach situation, the author exercises a right which he may not believe he has transferred to the publisher, and the publisher alleges contract violation. The author must in turn assert the affirmative defense of unfair practices, claiming that he did not agree to the transfer of the entire bundle of rights, but only some separate rights (i.e., publication).
The Note argues that placing the burden of proof on the author to determine whether the additional compensation was voluntarily relinquished results in the usurpation of the congressional intent to give authors the ability to receive compensation for each of their rights, and diminishes incentives for the promotion of progress of the arts. It discusses the evolution of contract jurisprudence and concludes that Congress has the authority to regulate contracts involving copyright infringement and to shift the burden of proof from the author-defendants to the publisher-plaintiffs. It also argues that the shift would result in a relatively small burden for the publishers, who have better access to the necessary information to show that they did not engage in unfair practices, while relieving authors of a great burden.

Exclusive Licenses - Copyrights:
A Brief History of Author-Publisher Relations and the Outlook for the 21st Century, by Maureen A. O’Rourke - 50 J. Copyright Soc’y U.S.A. 425 (2003)

“[T]he relationship between authors and their publishers even in the self-publishing era of electronic technology, largely determines who creates what types of copyrighted works and whether those works' distribution promotes the public welfare.” This Article discusses the issue of “distribution of the (by all accounts) large copyright "pie" between authors and publishers” and considers whether “copyright law is, in fact, achieving its aims.”
The Article explores “the timeless nature of both debates about the appropriateness of the level of authors' compensation and the relative lack of success of regulatory measures intended to enhance authors' bargaining power. . . . [The Article] address[es] the question [of] whether [the]consolidation [of the copyright industries] has adversely affected authors' compensation by limiting competition for their services. . . . [It] then consider[s] some of the proposals suggested by others to help authors better their bargaining position [and] conclude[s] that the best course for authors in the immediate future is to rely not on Congress' enacting new legislation but rather enforcement of antitrust and contract law. [The author] propose[s] that courts refuse to enforce contractual terms that transfer rights to distribute works in media yet to be developed. Additionally, [she argues,] the U.S. should monitor how a new German law designed specifically to provide minimum returns to authors fares in that country. [The Author argues that d]epending on how it works there and how markets develop domestically, Congress may, in the future, find it appropriate to enact not copyright legislation but rather an antitrust exemption that permits certain authors' and publishers' representatives to set minimum contracting standards. [Finally, she concludes that r]egardless of what legal steps are or are not implemented, authors should engage in self-help both by educating themselves about their rights under copyright law and continuing to explore the alternatives electronic technology offers.”

International Electronic Contracts:
Electronic Commerce Legislation: An Analysis of European and American Approaches to Contract Formation, by Christopher Poggi - 41 Va. J. Int’l L. 224,

“The U.S. and EU governments have consistently stated that coordination of e-commerce law on an international level is necessary in order to encourage development of industry online.” This Note “examines to what extent coordination of basic contract formation issues has taken place in . . . electronic commerce legislation in the U.S. and EU,” particularly after the enactment of UETA, UCITA and Federal Electronic Signature Act in the U.S. and the Model Law on Economic Commerce promulgated by the United Nations Commission on International Trade Law (UNCITRAL). This Note evaluates the efficiency of this legislation and concludes that “although the legislation proposed by the U.S. and EU will afford some degree of certainty to those engaged in e-commerce, an international convention standardizing national rules is probably necessary.”

Economic Analysis of Contract Law After Three Decades: Success or Failure?, by Eric A. Posner - 112 Yale L.J. 829 (2003)

This Article “argue[s] that economic analysis has failed to produce an "economic theory" of contract law, and does not seem likely to be able to do so. By this, [the author] mean[s] that the economic approach does not explain the current system of contract law, nor does it provide a solid basis for criticizing and reforming contract law.” He argues not that “the economic approach has not produced any wisdom, but that the nature of its accomplishment turns out to be subtle and will become clear only after an extended discussion.”
“This Essay has two purposes: to document the failures of economic models to explain contract law or to justify reform, and to provide an explanation for these failures. The explanation centers on the difficulty of developing a model of contractual behavior that can be tested and that does not make unreasonable assumptions about the cognitive abilities of contractual parties.” The conclusion that the author wishes to communicate is that “skepticism about how much additional value economics has to offer to understanding contract law today” is essential. The author’s “critique rests on empirical and methodological judgments about the contracts literature, [and] judgments that do not necessarily apply to, say, torts or property.” The focus of the Article is “on the original aspirations of the economic analysis of contract law: to provide an explanation of existing legal rules, and to provide a basis for criticizing or defending those rules.”

Contract Interpretation:
The Law and Economics of Contract Interpretation, by Richard Posner - 83 Tex. L. Rev. 1581

The author believes that contract interpretation is an understudied topic in the economic analysis of contract law. The article analyzes “the tradeoffs involved in interpretation” and the “applications to the principal doctrines of contract interpretation, including the ‘four corners’ rule, mutual mistake, contra proferentum, and . . . [the] rule of ‘extrinsic nonevidence’ [or the ‘best guess’ rule].” The article distinguishes and rejects the idea of judicially adopted gap filling, and emphasizes the “relativity of interpretive doctrines to the interpretive medium – jurors, arbitrators, and judges in different kinds of judicial systems.”

Contract Formation – Assent:
Humans, Computers, and Binding Commitment, by Margaret Jane Radin - 75 Ind. L.J. 1125

The author distinguishes between two models of contract: the “contract-as-consent” model, which “involves the meeting of the minds between two humans,” and the “contract-as-product” model in which “the terms are a package deal,” and represent a “take-it-or-leave-it” choice. She points out a “disjunction between transactional practice and the traditional picture of contract-as-consent.” Because “contractual terms have come to be considered . . . as part of the product, a package deal, rather than something separate,” she argues that “[t]he choice to buy [a] product blends into the ‘choice’ to ‘assent to’ the terms it comes with.” The Article concludes that “our ordinary understandings” of disclosure, consent, private and public parties, and eminent domain may not “change quickly enough to avoid the problem.” The author believes that policymakers may need to implement “regulation” of on-line contracting in order to preserve buyers’ autonomy, and that, at the very least, this “problem should be on everyone’s radar screen.”
The Article outlines three emerging forms of contract formation in electronic commerce: “click-wrap” contracts, “machine-made” contracts, and “viral” contracts, and their relationship to traditional contracting. The author analyzes standardized contracts in the context of the legal infrastructure, and the need for technical standardization. She suggests that standardization could be achieved through authoritative technical bodies, such as the Institute of Electrical and Electronic Engineers, through the legislature, or through industry-agreed standardization.

Limitations Grounded in Property Law:
A Contract by Any Other Name is Still a Contract: Examining the Effectiveness of Trade Secret Clauses to Protect Databases, by Sharon K. Sandeen - 45 IDEA 119 (2005)

“Dubbed ‘private ordering’ and ‘privately legislated intellectual property rights’ by some scholars, the practice of using contracts to expand protection for intellectual property has received significant attention in recent years. . . . While many of the issues that are discussed in this [A]rticle relate generally to the propriety of overly-broad definitions of rights and restrictions on use clauses, it focuses on a particular type of definitions of rights clause: the ‘trade secret clause.’ Through the use of these clauses, database owners assert that all or a portion of their compilations are trade secrets.” The Article concludes that “with respect to databases that enjoy some semblance of secrecy, this contention has merit. With respect to databases that are accessible on the Internet, however, the strategy is highly suspect.”
The Article provides “a discussion of the limits of trade secret law, beginning with an examination of the secrecy requirement.” The author considers “details of contract law that limit the potential effectiveness of trade secret clauses,” such as “the principle of privity of contract and limits on the availability of injunctive relief, i.e., specific performance.” The article examines in greater detail “the law prohibiting unreasonable restraints of trade and the doctrine of preemption,” and finds that “when trade secret clauses are utilized in online terms of use agreements or other widely-distributed form agreements they have a much broader impact than the parties to a contract because such clauses purport to control the activities of multitudes of individuals and companies. Based upon a review of U.S. Supreme Court cases on the issue of preemption, this [A]rticle highlights the need to differentiate between a preemption analysis conducted in the abstract and one that focuses on the actual relief sought.”

Contract Formation:
Rolling Contract Formation Under the UN Convention on Contracts for the International Sale of Goods, by Rob Schultz – 35 Cornell Int’l L.J. 263 (2002)

This Note “examin[es] the formation of a rolling contract under the [UN Convention on Contracts for the International Sale of Goods (CISG)],” and “explore[s] the purpose and limits of its prohibition as well as the nature of the silent acceptance shrinkwrap forms prescribe. Drawing its conclusions on the CISG's text, scholarly writings, and international case law, this Note argues that the CISG's prohibition on acceptance by silence or inactivity in itself will not prevent the parties from forming a rolling contract if they so intend. [The Note argues that if] the buyer solicits the seller's standard shrinkwrap form, that form can constitute a binding offer or an enforceable contract modification.” However, the Note concludes, “the CISG's prohibition on acceptance by silence or inactivity in itself will help to prevent a seller from imposing a rolling contract on a buyer who did not solicit it.”
The Note “provides background on the CISG . . . [, and] creates two hypothetical scenarios based on the leading cases in the United States, where courts applying the Uniform Commercial Code (U.C.C.) have split in their approaches to rolling contract formation.” The Note “also summarizes the U.S. courts' approach to each case and then explores how the CISG's rules of contract formation would apply to the facts. Finally, because [the author] remains suspicious of the potential for unfairness to the buyer in a shrinkwrap sale, [the Note] addresses the policing of rolling contracts under the CISG and applicable domestic law.”

Contract Enforcement and Interpretation:
Contract Theory and the Limits of Contract Law, by Alan Schwartz, Robert E. Scott - 113 Yale L.J. 541 (2003)

“The creation of a contract law has become an important priority in many countries that have made a new (or renewed) commitment to markets, for there is a consensus that a good contract law is a necessary condition for a modern commercial economy.” This Article explores the issue of “just how such a law is supposed to function,” and “addresses concerns that have global implications.” The authors develop a theory of contract that “applies in a limited domain - to contracts between firms that do not create externalities.”
The Article “defends the welfare-maximization norm as applied to the contracts of sophisticated actors . . . [and] describe[s] commercial parties' first-order preference to have the state enforce contracts in order to protect relation-specific investments and to guard against especially disruptive market movement. . . . [The Article] argues that firms want the state to supply a theory of interpretation, but not the theory currently advanced by the UCC and the Restatement (Second) of Contracts. Rather, [the authors] defend a textualist theory of interpretation as the optimal default approach for business contracts. [The Article] develop[s] the restrictive conditions under which the state can create default terms that satisfy typical party preferences . . . [,] analyzes a set of unjustifiable mandatory rules - rules that rest on a misplaced view of the parties' interests[, and] conclude[s]. . . that today's contract law is a series of category mistakes.” The authors argue that “[c]ommercial law for centuries has drawn a distinction between mercantile contracts and others,” but that “[m]odern scholars have not systematically pursued the normative implications of this ancient distinction. [The authors] attempt to cure this neglect by setting out the theoretical foundations of a law merchant for our time.”

Contract Formation:
Relational Contracts and the New Formalism, by William C. Whitford – 2004 Wis. L. Rev. 631 (2004)

“This Comment originated as a response to the article by Professors Robert Scott and Paul Stephan that applies contract theory to international agreements.” The author believes “that Scott and Stephan have made a plausible case that providing for coercive enforcement in international agreements can deter --crowd out--reliance on self-enforcing remedies, with deleterious consequences.” But he “counsel[s] care in applying lessons from international agreements to most commercial agreements,” and in drawing analogies between international and commercial agreements.” He cautions that there are too “many differences in the contexts in which the two kinds of agreements take place.”
Scott and Stephan have argued “that efficiency goals would ordinarily be best served if contractual parties specified with precision contractual terms at the time of formation,” and that “formalist contract doctrine[s], including a plain meaning rule, a strict parol evidence rule, and revival of the indefiniteness doctrine, will provide contractual parties with incentives so to specify terms.” In response, the author counters that “with respect to relational contracts between firms, this argument overlooks a fundamental insight into contracting practices.” He argues that “[f]irms are sensibly more interested at the time of contract formation in performance planning and building trust between themselves than they are in planning or specifying what rules should be applied in the event their relationship should terminate in litigation.” He argues that “[m]anipulating rules applied only in the event of litigation is simply not an effective way to provide contractual parties an incentive to do much of anything at the time of contract formation.” He favors the “application in litigation of the contextualist and gap-filling contract rules that Scott and other new formalists have criticized.” He concludes that “[t]hese rules enable a court to approximate more closely the results the parties probably would have agreed to at the time of formation if they had thought about it and taken the time to specify their conclusion.”

Terms of the License - Assignability:
Considerations by the Patent Holder: The Transfer of Patent Licenses in the Context of a Merger, by Sung Yang - 42 IDEA 515

The author analyzes the issue of whether the transfer of property by operation of law constitutes a transfer for purposes of a patent transfer. Although the author argues that federal law should govern patent cases, many courts still apply state contract law, creating inconsistent decisions regarding the right of a patentee to exclude others from his or her invention. The Article discusses cases from different jurisdictions that ruled inconsistently on the issue of license assignability pursuant to a merger. The author notes that a company that has been excluded by a patentee, and cannot seek a license through an assignment or sublicense from an existing licensee, is nevertheless potentially able to circumvent this barrier by merging with a company that already possesses a license.
In cases that deal with restraints on real property, courts are usually reluctant to enforce anti-assignment clauses when a transfer occurs by operation of law. However courts will enforce such clauses when the parties stipulate that transfers pursuant to a merger will constitute an assignment in violation of an anti-assignment provision. By analogy, the author predicts similar outcomes in patent cases and suggests that prudent patent holders should include additional language in their anti-assignment clauses, specifying that a merger will constitute a transfer in violation of the contract.

Breach of Contract – Damages:
A Unifying Theory of Contract Damage Rules, by David W. Barnes & Deborah Zalesne - 55 Syracuse L. Rev. 495

The Article “discusses the failings of present approaches to contract damages. It focuses on the unnecessary multiplicity of rules that obscure the law's purposes and on conflicts in terminology that hamper the law's straightforward application.” The Article “summarizes and critiques the attempts to reconcile and simplify the modern understanding of contract damages,” and offers the Shadow Code as a solution.
“[T]he Shadow Code, which unifies the strains of legal literature, reconciles approaches to different types of contract breaches, and simplifies damage rules. It avoids the confusing interest-based language of the Restatement and resolves the ambiguities found in the U.C.C. The Shadow Code enables calculations incorporating both the reliance and expectation measures of the Restatement and recharacterizes the dominant remedial theory as one that restores ‘lost surplus,’ rather than the one that awards expectations or net expectations. There is only one basic rule in the Shadow Code and the principle underlying the calculation of damages is explicit in that rule. The result [, the author argues,] avoids the conflicting definitions employed in the two sources of law and the impression that these two sources are engaged in different tasks, rely on different premises, and have different underlying goals.”
The Article argues “that applying the Shadow Code generally yields results equivalent to application of the U.C.C. and Restatement formulas. It [also] discusses the few circumstances where divergence from this equivalence (and from the well-recognized goals of compensation) may occur.”

Contract Formation:
The European Decision on Standard Contractual Clauses for the Transfer of Personal Data to Third Countries: An Effective Solution?, by Alexander Zinster - 3 Chi.-Kent J. Intell. Prop. 24 (2003)

“The idea behind Standard Contractual Clauses is to ensure that data exporters and data importers signing such model contracts can be sure that their transfers will be deemed to have an adequate protection. . . . Basically, the clauses should fulfill the following requirements in order to reach the status of adequacy: a) ensuring a high degree of compliance; b) assisting and helping data subjects; and c) gaining compensation in cases of violations of the clauses.”
This Article discusses the historic development of “contractual clauses as a means to regulate international data transfer,” the “Decision on Standard Contractual Clauses,” adopted by the European Commission in 2001, and the “Frequently Asked Questions on the Standard Contractual Clauses.” The Article analyzes the standard contractual clauses in the context of data transfers: details of the transfer, third arty beneficiary clauses, obligations of the data exporters and importers, liability, and mediation and jurisdiction in the event of a dispute. The author criticizes the third party beneficiary clause, the clause spelling out obligations of the data importer, and the “system of joint and several liability,” offering recommendations to improve those provisions.
The author acknowledges the benefit of having data protection laws in all countries, but recognizes that in reality only a small number of countries have enacted such laws. For this reason, he concludes that the contractual solution, while not perfect, “is one measure, which could overcome the lack of equivalent data protection laws.”

Software Licenses – What Law Applies
Acknowledging Information Technology Under the Civil Code: Why Software Transactions Should Not Be Treated as Sales, by Alia Susann Zohur - 50 Loy. L. Rev. 461,

“This comment challenges the classification of software transactions as contracts of sale,” and calls for a reform of the Louisiana Civil Code to adapt to the current technology-driven society. The author argues that “software cannot accurately be characterized as tangible property.” She “explains why redhibition should not be applied to software contracts,” and proposes computer malpractice as an alternative remedy for “dissatisfied software vendees.” The comment considers the Uniform Commercial Information Technology Act (UCITA) as a framework for addressing software transactions, but concludes that “it is not a viable solution.” The author “suggests that the legislature formulate provisions to regulate software and software transactions,” and to protect software consumers.