1. I move that Section 2B-308 of the Discussion Draft of Uniform Commercial Code Article 2B (dated April 14, 1997) be amended by adding the following section (h):

2. In the alternative, I move that Section 2B-308 of the Discussion Draft of Uniform Commercial Code Article 2B (dated April 14, 1997) be amended by adding the following section (h):

The purpose of my alternative motions is to create greater certainty as to the enforceability of mass-market licenses by avoiding, or at least reducing, the possibility of conflict with, and consequent preemption by, federal copyright and/or federal patent law. As Section 2B-308 of the Discussion Draft of Article 2B currently stands, I believe there is a serious likelihood of such a conflict, and thus preemption by, one or both bodies of federal intellectual property law.

A detailed statement of my reasons for the foregoing conclusion is contained in the accompanying paper [available in printed form at the ALI Annual Meeting], entitled "Intellectual Property Protection and Reverse Engineering of Computer Programs in the United States and Europe," which is an updated version of my earlier published article, Intellectual Property Protection and Reverse Engineering of Computer Programs in the United States and the European Community, 8 High Technology Law Journal 25 (1993). What follows here is a summary of the supporting reasons for each of my alternative motions:

1. Unlike some of the statutory limitations on the exclusive rights of federal copyright owners, the fair use privilege contained in Section 107 of the Copyright Act of 1976, 17 U.S.C.§ 107, is not restricted to owners of a particular copy of a copyrighted work, but extends all users of a copyrighted work. The juxtaposition of copyright limitations that apply only to "owners" of a particular copy of a copyrighted work (see Sections 109 and 117) and limitations that extend to users of copyrighted works (see Sections 107, 108, 110, 111, and 112), suggests that whereas copyright limitations of the former kind can be abrogated by the simple expedient of leasing (or "licensing") rather than selling a copy of the copyrighted work, copyright limitations of the latter kind may not be abrogated by contract--or at least not by a unilateral contractual provision whose practical effect, if enforced, would be to deprive virtually the entire public of these federally created user rights. Such a sweeping state-created contractual right could be held to be "equivalent" to an exclusive right within the general scope of copyright, and thus preempted under Section 301 of the Copyright Act.

Given the unsettled state of existing federal appellate case law on this point, it is not at all clear that mass-market licenses made enforceable under Section 2B-308 would survive preemption under Section 301 of the Copyright Act of 1976, where the practical effect of enforcement would be to deprive virtually the entire public from 1) gaining access to an uncopyrightable and unpatented idea, procedure, process, system, method of operation, concept, principle, discovery, or data contained in widely-distributed federally copyrightable subject matter; or 2) engaging in any other conduct that would otherwise constitute a fair use of widely-distributed federally copyrightable subject matter. Compare ProCD, Inc. v. Zeidenberg, 86 F. 3d 1447 (7th Cir. 1996) (holding that a shrink-wrap license purporting to condition the use of a computer program and accompanying database on terms that appeared only inside the box nevertheless constitiutes an enforceable contract that could validly prohibit the commercial use of the program and database, and 2) that federal copyright law does not preempt enforcement of the shrink-wrap license against a purchaser of the software and database who, with knowledge of the restriction, nevertheless made commercial use of the computer program and database; and stating in dictum that "To the extent licenses facilitate distribution of object code while concealing the source code (the point of a clause forbidding disassembly), they serve the same procompetitive functions as does the law of trade secrets.") with Wright v. Warner Books, Inc., 953 F.2d 731 (2d Cir. 1991) (holding that a contractual term purporting to prohibit publication of unpublished library archive manuscripts "in whole or in part unless such publication is specifically authorized," should not be construed in such a way as to prohibit a biographer from using the manuscripts for scholarly purposes, as it "defies common sense to construe this agreement as giving scholars access to manuscripts with one hand but then prohibiting them from using the manuscripts in any meaningful way with the other"; and quoting with approval from Salinger v. Random House, Inc., 650 F.Supp. 413, 427 (S.D.N.Y. 1986), rev’d on other grounds, 811 F.2d 90 (2d Cir. 1987), which stated that: "To read [restrictions agreed upon as a condition for obtaining access to unpublished manuscripts in a library archive] as absolutely forbidding any quotation, no matter how limited or appropriate, would severely inhibit proper, lawful scholarly use and place an arbitrary power in the hands of the copyright owner going far beyond the protection provided by law.").

See generally Sega Enterprises Ltd. v. Accolade, Inc., 977 F. 2d 1510 (9th Cir. 1992)(holding that under Section 107 of the Copyright Act, "a party in rightful possession of a computer program may undertake necessary efforts, including disassembly or decompilation, to gain an understanding of the unprotected functional elements of the program, at least where there is a legitimate reason for doing so and no other means of access to the unprotected elements exists."); Atari Games Corp. v. Nintendo of America, Inc., 975 F.2d 832 (Fed. Cir. 1992)(accord); Computer Associates International, Inc. v. Altai, Inc., 982 F.2d 693 (2d Cir. 1992)(holding that copyright protection does not extend to those design elements of a computer program where a programmer's freedom of choice is circumscribed by extrinsic considerations such as (1) the mechanical specifications of the computer on which a particular program is intended to run; (2) compatibility requirements of other programs with which a program is designed to operate in conjunction; (3) computer manufacturers’ design standards; (4) demands of the industry being serviced; and (5) widely accepted programming practices within the computer industry); Lotus Development Corp. v. Borland International, Inc., 49 F.3d 807 (lst Cir. 1995), cert. denied by an equally divided Court, 64 U.S. L. W. 4059 (1996) (holding that because a computer menu command hierarchy is an uncopyrightable "method of operation" within the meaning of Section 102(b) of the Copyright Act, "[o]riginal developers are not the only people entitled to build on the methods of operation they create; anyone can.").

2 . Even if Section 301 of the Copyright Act of 1976, 17 U.S.C. § 301, were not held expressly to preempt Section 2B-308 to the extent suggested in the preceding paragraph, Section 2B-308 could nevertheless be held to be either expressly preempted by Section 301 of the Copyright Act or impliedly preempted by federal patent law to the extent that it rendered enforceable a unilateral contractual term whose practical effect would be to prevent virtually the entire public from reverse engineering a widely distributed unpatented product for a purpose that would otherwise constitute a fair use of copyrighted subject matter under Section 107 of the Copyright Act. Compare Kewanee Oil Co. v. Bicron Corp. , 416 U.S. 470 (1974) (holding that state trade secret law is not preempted by federal patent law, in part because trade secret law "provides far weaker protection in many respects that the patent law . . . [given that] trade secret law does not forbid the discovery of the trade secret by fair and honest means, e.g. independent creation and reverse engineering . . ." but stating in dictum that "If a State, through a system of protection, were to cause a substantial risk that holders of patentable inventions would not seek patents, but rather would rely on the state protection, we would be compelled to hold that such a system could not constitutionally continue to exist.") with Bonito Boats, Inc. v. Thunder Craft Boats, 489 U.S. 141 (1989) (holding that a state statute that prohibited the use of a direct molding process to duplicate boat hulls so substantially impedes the public use of the otherwise unprotected design and utilitarian ideas embodied in unpatented boat hulls, by in essence prohibiting the entire public from engaging in a form of reverse engineering of a product in the public domain, as to run afoul of the Supreme Court's decisions in Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 255 (1964), and Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234 (1964); and noting that while "the competitive reality of reverse engineering may act as a spur to the inventor, creating an incentive to develop inventions which meet the rigorous requirements of patentability," the state statute in question "substantially reduces this competitive incentive, thus eroding the general rule of free competition upon which the attractiveness of the federal patent bargain depends.").

See generally Arrythmia Research Technology. Inc. v. Corazonix Corporation, 958 F.2d 1053 (Fed. Cir. 1992) (holding that certain "pure software" patent claims, i.e. claims which specifically disclose and claim software technology without referring to hardware, other than a computer and typical peripheral devices constitute patentable subject matter); Sega Enterprises Ltd. v. Accolade, Inc., supra; Atari Games Corp. v. Nintendo of America, Inc. , supra; Computer Associates International, Inc . v. Altali, Inc. , supra; Lotus Development Corp v. Borland International, Inc., supra.

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