ProCD

v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996)

Summary of the Case (IRAC):

Issue:
The main issue in ProCD v. Zeidenberg is whether a contract for software, which includes terms that become available only after purchase, specifically a shrinkwrap license agreement, is enforceable against the purchaser who later violates the terms of that agreement.

Rule:
The rule applied in ProCD v. Zeidenberg is drawn from the Uniform Commercial Code (UCC) § 2-204, which allows for the formation of a contract in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract. Additionally, UCC § 2-207, which addresses additional terms in acceptance or confirmation, is relevant to the enforceability of license terms not available until after the purchase.

Application:
The application of the aforementioned rules centers on the conduct of the purchaser, Zeidenberg, who used the software contrary to the license terms after having the opportunity to read and understand them post-purchase. ProCD argues that their shrinkwrap license terms, which are made available to the buyer upon opening the software, form a part of the contract and are binding if not promptly rejected by the user.

Conclusion:
The Seventh Circuit Court of Appeals concluded that the shrinkwrap license agreement terms included inside the ProCD software package are enforceable against Zeidenberg, who had an opportunity to review the terms after purchasing the software and prior to using it.

Detailed IRAC Outline:

Issue:
The more detailed issues in this case are (1) whether shrinkwrap licenses are valid contracts under the UCC, and (2) whether Zeidenberg’s actions constituted acceptance of the contract terms contained in the shrinkwrap license.

Rule:
Under UCC § 2-204, a contract may be formed in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of a contract. The court also considers UCC § 2-207 on additional terms and how it applies to a shrinkwrap agreement as well as precedent regarding the enforceability of such agreements.

Application:
In applying these rules, the court examined the nature of shrinkwrap licenses and the commercial realities of software transactions. The court noted that by not returning the software after having the chance to read the additional terms included in the shrinkwrap agreement, Zeidenberg engaged in conduct acknowledging the existence of a contract. His subsequent use of the software was an implicit acceptance of the terms.

The court also considered the practical aspects of software sales and the reasonable expectations of consumers who are accustomed to receiving and adhering to terms after the sale. The court found that allowing such a mechanism for contracting was reasonable and necessary in the context of mass-market software distribution.

Conclusion:
The court concluded that the terms of the shrinkwrap license were part of the contract between ProCD and Zeidenberg. Since Zeidenberg chose to retain and use the software after having the opportunity to read the terms, he accepted the contract, including the restrictions on the use and distribution of the software provided in the license agreement. The court’s decision favored the enforceability of shrinkwrap licenses, provided that the user has a reasonable opportunity to review and reject the terms after the purchase.