Court Opinion

ID: 9495840
Source: CourtListenerOpinion
Date Created: 2023-08-05 16:11:20.03035+00
Date Added: 2024-06-11T17:57:13.374987
License: Public Domain

DYK, Circuit Judge,
concurring in part and dissenting in part.
I join the majority opinion except insofar as it holds that the contract claim is not preempted by federal law.1 Based on the petition for rehearing and the opposition, I have concluded that our original decision on the preemption issue, reaffirmed in today’s revision of the majority opinion, was not correct. By holding that shrinkwrap licenses that override the fair use defense are not preempted by the Copyright Act, 17 U.S.C. §§ 101 et seq., the majority has rendered a decision in conflict with the only other federal court of appeals decision that has addressed the issue — the Fifth Circuit decision in Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir.1988). The majority’s approach permits state law to eviscerate an important federal copyright policy reflected in the fair use defense, and the majority’s logic threatens other federal copyright policies as well. I respectfully dissent.
I
Congress has made the Copyright Act the exclusive means for protecting copyright. The Act provides that “all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright ... are governed exclusively by this title.” 17 U.S.C. § 301(a) (2000). All other laws, including the common law, are preempted. “[N]o person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.” Id.
The test for preemption by copyright law, like the test for patent law preemption, should be whether the state law “substantially impedes the public use of the otherwise unprotected” material. Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 157, 167, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989) (state law at issue was preempted because it “substantially restrict[ed] the public’s ability to exploit ideas that the patent system mandates shall be free for all to use.”); Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 231-32, 84 S.Ct. 784, 11 L.Ed.2d 661 (1964). See also Eldred v. Ashcroft, — U.S. -, 123 S.Ct. 769, 154 L.Ed.2d 683 (2003) (applying patent precedent in copyright case). In the copyright area, the First Circuit has adopted an “equivalent in substance” test to determine whether a state law is preempted by the Copyright Act. Data Gen. Corp. v. Grumman Sys. Support Corp. 36 F.3d 1147, 1164-65 (1st Cir.1994). That test seeks to determine whether the state cause of action contains an additional element not present in the copyright right, such as scienter. If the state cause of action contains such an extra element, it is not preempted by the Copyright Act. Id. However, “such an action is equivalent in substance to a copyright infringement claim [and thus preempted by the Copyright Act] where the additional element merely concerns the extent to which authors and their licensees can prohibit unauthorized copying by third parties.” Id. at 1165 (emphasis in original).
II
The fair use defense is an important limitation on copyright. Indeed, the Supreme Court has said that “[fjrom the infancy of copyright protection, some opportunity for fair use of copyrighted materials has been thought necessary to fulfill copyright’s very purpose, ‘[t]o promote the *1336Progress of Science and useful Arts.... ’ U.S. Const., Art. I, § 8, cl.8.” Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 575, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994). The protective nature of the fair use defense was recently emphasized by the Court in the Eldred case, in which the Court noted that “copyright law contains built-in accommodations,” including “the ‘fair use’ defense [which] allows the public to use not only facts an ideas contained in the copyrighted work, but also expression itself in certain circumstances.” Id. at -, 123 S.Ct. 769.
We correctly held in Atari Games Corp. v. Nintendo of America, Inc., 975 F.2d 832, 843 (Fed.Cir.1992), that reverse engineering constitutes a fair use under the Copyright Act.2 The Ninth and Eleventh Circuits have also ruled that reverse engineering constitutes fair use. Bateman v. Mnemonics, Inc., 79 F.3d 1532, 1539 n. 18 (11th Cir.1996); Sega Enters. Ltd. v. Accolade, Inc., 977 F.2d 1510, 1527-28 (9th Cir.1992). No other federal court of appeals has disagreed.
We emphasized in Atan that an author cannot achieve protection for an idea simply by embodying it in a computer program. “An author cannot acquire patent-like protection by putting an idea, process, or method of operation in an unintelligible format and asserting copyright infringement against those who try to understand that idea, process, or method of operation.” 975 F.2d at 842. Thus, the fair use defense for reverse engineering is necessary so that copyright protection does not “extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work,” as proscribed by the Copyright Act. 17 U.S.C. § 102(b) (2000).
Ill
A state is not free to eliminate the fair use defense. Enforcement of a total ban on reverse engineering would conflict with the Copyright Act itself by protecting otherwise unprotectable material. If state law provided that a copyright holder could bar fair use of the copyrighted material by placing a black dot on each copy of the work offered for sale, there would be no question but that the state law would be preempted. A state law that allowed a copyright holder to simply label its products so as to eliminate a fair use defense would “substantially impede” the public’s right to fair use and allow the copyright holder, through state law, to protect material that the Congress has determined must be free to all under the Copyright Act. See Bonito Boats, 489 U.S. at 157, 109 S.Ct. 971.
I nonetheless agree with the majority opinion that a state can permit parties to contract away a fair use defense or to agree not to engage in uses of copyrighted material that are permitted by the copyright law, if the contract is freely negotiated. See, e.g., Nat’l Car Rental Sys., Inc. v. Computer Assocs. Int’l, Inc., 991 F.2d 426 (8th Cir.1993); Acorn Structures v. Swantz, 846 F.2d 923, 926 (4th Cir.1988). See also Taquino v. Teledyne Monarch Rubber, 893 F.2d 1488 (5th Cir.1990). But see Wrench LLC v. Taco Bell Corp., 256 F.3d 446, 457 (6th Cir.2001) (“If the promise amounts only to a promise to refrain from reproducing, performing, distributing or displaying the work, then the contract claim is preempted.”). A freely negotiated agreement represents the “extra element” *1337that prevents preemption of a state law claim that would otherwise be identical to the infringement claim barred by the fair use defense of reverse engineering. See Data Gen., 36 F.3d at 1164-65.
However, state law giving effect to shrinkwrap licenses is no different in substance from a hypothetical black dot law. Like any other contract of adhesion, the only choice offered to the purchaser is to avoid making the purchase in the first place. See Fuentes v. Shevin, 407 U.S. 67, 95, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972). State law thus gives the copyright holder the ability to eliminate the fair use defense in each and every instance at its option. In doing so, as the majority concedes, it authorizes “shrinkwrap agreements ... [that] are far broader than the protection afforded by copyright law.” Ante at 1326.
IV
There is, moreover, no logical stopping point to the majority’s reasoning. The amici rightly question whether under our original opinion the first sale doctrine and a host of other limitations on copyright protection might be eliminated by shrin-kwrap licenses in just this fashion. See Brief for Electric Frontier Foundation et al. as Amici Curiae 10. If by printing a few words on the outside of its product a party can eliminate the fair use defense, then it can also, by the same means, restrict a purchaser from asserting the “first sale” defense, embodied in 17 U.S.C. § 109(a), or any other of the protections Congress has afforded the public in the Copyright Act. That means that, under the majority’s reasoning, state law could extensively undermine the protections of the Copyright Act.
V
The Fifth Circuit’s decision in Vault directly supports preemption of the shrin-kwrap limitation. The majority states that Vault held that “a state law prohibiting all copying of a computer program is preempted by the federal Copyright Act” and then states that “no evidence suggests the First Circuit would extend this concept to include private contractual agreements supported by mutual assent and consideration.” Ante at 1325. But, in fact, the Fifth Circuit held that the specific provision of state law that authorized contracts prohibiting reverse engineering, decompi-lation, or disassembly of computer programs was preempted by federal law because it conflicted with a portion of the Copyright Act and because it “ ‘touche[d] upon an area’ of federal copyright law.” 847 F.2d at 269-70 (quoting Sears, Roebuck, 376 U.S. at 229, 84 S.Ct. 784). From a preemption standpoint, there is no distinction between a state law that explicitly validates a contract that restricts reverse engineering (Vault) and general common law that permits such a restriction (as here). On the contrary, the preemption clause of the Copyright Act makes clear that it covers “any such right or equivalent right in any such work under the common law or statutes of any State." 17 U.S.C. § 301(a) (2000) (emphasis added).
I do not read ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir.1996), the only other court of appeals shrinkwrap case, as being to the contrary, even though it contains broad language stating that “a simple two-party contract is not ‘equivalent to any of the exclusive rights within the general scope of copyright.’” Id. at 1455. In ProCD, the Seventh Circuit validated a shrinkwrap license that restricted the use of a CD-ROM to non-commercial purposes, which the defendant had violated by charging users a fee to access the CD-ROM over the Internet. The court held that the restriction to non-commercial use of the program was not equivalent to any rights protected by the Copyright Act. Rather, the “contract refleet[ed] private ordering, essential to efficient functioning *1338of markets.” Id. at 1455. The court saw the licensor as legitimately seeking to distinguish between personal and commercial use. “ProCD offers software and data for two prices: one for personal use, a higher prices for commercial use,” the court said. The defendant “wants to use the data without paying the seller’s price.” Id. at 1454. The court also emphasized that the license “would not withdraw any information from the public domain” because all of the information on the CD-ROM was publicly available. Id. at 1455.
The case before us is different from ProCD. The Copyright Act does not confer a right to pay the same amount for commercial and personal use. It does, however, confer a right to fair use, 17 U.S.C. § 107, which we have held encompasses reverse engineering.
ProCD and the other contract cases are also careful not to create a blanket rule that all contracts will escape preemption. The court in that case emphasized that “we think it prudent to refrain from adopting a rule that anything with the label ‘contract’ is necessarily outside the preemption clause.” 86 F.3d at 1455. It also noted with approval another court’s “recogni[tion of] the possibility that some applications of the law of contract could interfere with the attainment of national objectives and therefore come within the domain” of the Copyright Act. Id. The Eighth Circuit too cautioned in National Car Rental that a contractual restriction could impermissibly “protect rights equivalent to the exclusive copyright rights.” 991 F.2d at 432.
I conclude that Vault states the correct rule; that state law authorizing shrin-kwrap licenses that prohibit reverse engineering is preempted; and that the First Circuit would so hold because the extra element here “merely concerns the extent to which authors and their licensees can prohibit unauthorized copying by third parties.” Data Gen., 36 F.3d at 1165 (emphasis in original). I respectfully dissent.

.' Like the majority, I do not reach the copyright claim.

. In the patent context, reverse engineering is viewed as an important right of the public. Bonito Boats, 489 U.S. at 160, 109 S.Ct. 971.