ProCD, Inc. v. Zeidenberg

Brief Fact Summary. ProCD, Inc. (Plaintiff) sued Zeidenberg (Defendant) for violation of a shrink-wrapped license included inside its CD-ROM database.

Synopsis of Rule of Law. Shrink-wrap licenses are enforceable unless their terms are objectionable on grounds that apply to contracts in general.

Facts. ProCD, Inc. (Plaintiff) compiled information from more than 3,000 telephone directories into a computer database. The database cost over $10 million to compile and was expensive to keep current.  ProCD (Plaintiff) included a license in every CD-ROM box stating that the software came with specified restrictions.  The license limits the use of application program and listing for noncommercial purposes.  Zeidenberg (Defendant) bought a consumer package of ProCD’s (Plaintiff) CD-ROM box in 1994 and formed Silken Mountain Web Services to resell the information in Select-Phone’s database.  Defendant offered the information by Internet at a lower price than Plaintiff charged its commercial customers.  Plaintiff filed suit seeking an injunction against further dissemination in violation of the licenses included in the box.  The district court held that the licenses were ineffective.  Plaintiff appealed.

Issue. Are shrink-wrap licenses enforceable unless their terms are objectionable on grounds that apply to contracts in general?

Held. (Easterbrook, J.)  Yes.  Shrink-wrap licenses are enforceable unless their terms are objectionable on grounds that apply to contracts in general.  The district court concluded that neither the UCC, nor Wisconsin’s version of the UCC, authorized the payment of money before the disclosure of the terms of a contract took place.  UCC section 2-204 states that “a contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.â€Â  The vendor invites acceptance of the offer by conduct and may restrict the manner in which acceptance may be made.  In this case, ProCD (Plaintiff) proposed a contract that the buyer would accept by using the software after reading the license.  Defendant accepted.  Section 2-606 also supports this conclusion.  A buyer accepts goods if he fails to make an effective rejection after an opportunity to inspect.  Defendant accepted the goods, had an opportunity inspect and did not reject them.  Reversed and remanded.

Discussion. Discussion:  The courts have varied in their decisions regarding shrink-wrapped licenses with the enforceability of such license being upheld in more recent cases.