September 11, 2000
Federal Trade Commission
600 Pennsylvania Ave. NW
Washington, D.C. 20580
Dear Sir or Madam:
Re: High-Tech Warranty Project -- Comment, P994413
(1) We file these comments on behalf of five major library associations, the American Library Association, the American Association of Law Libraries, the Association of Research Libraries, the Medical Library Association, and the Special Libraries Association (the Libraries). These associations represent the interests of tens of thousands of libraries, librarians and institutions, and often speak on behalf of their public and private patrons.
(2) We appreciate the opportunity to comment on the issue of warranty protection for software and other computer information products and services. Because of the many issues associated with the topic of warranty protection for software and other high-tech consumer goods and services, we believe that the FTC's inquiry and its public forum planned for October 26-27 are timely and important.
(3) The Libraries are aware of the impact upon consumers of mass-market licenses of software and other information products and the enforceability of such "shrink-wrap" or "click wrap" licenses, including through the proposed state contract law, the Uniform Computer Information Transactions Act (UCITA). In a variety of forums, Libraries have expressed particular concern that UCITA would validate terms in shrink-wrap and clickable licenses that restrict uses by libraries, and library users, which are otherwise allowed under copyright law.
(4) As the FTC recognized in its notice requesting comments, many software and information products are made available to the public as shrink-wrapped packages or as products downloaded through the Internet from a vendor's web site. A buyer who breaks the product wrapping, or clicks "ok" with his or her mouse in downloading a product, is most often entering into a contract or license with terms that may contain disclaimers of substantive implied warranty protections. In addition, the terms in such a mass-market license frequently restrict otherwise legitimate uses of the product, such as legally transferring the software or digital works; publicly discussing the product; or providing access to other users.
(5) Moreover, unlike with contracts that are actively negotiated, the buyer may not have the terms available for review before making the purchase or may not clearly understand that he or she has agreed to those contract terms because of the technical language in which the license agreement is written. For these reasons, the Libraries and others in education fear that if states adopt UCITA as currently proposed -- without additional consumer protections and without the explicit recognition of the legal priority of federal copyright policy -- UCITA would allow an end run not only around well-established consumer protection laws, but also would prohibit currently legitimate practices under the copyright exceptions for fair use, first sale, preservation and more.
(6) The FTC notice asked about the enforceability of such mass-market licenses under existing law. Since the mid-1990's the courts have become more accepting of shrink-wrap licenses in general. In cases involving terms in mass-market licenses which have attempted to vary the provisions of the Copyright Act, however, the situation is not so clear: some courts have refused to enforce the contract, while other courts did enforce the contract. It may well be that the Supreme Court eventually will conclude that the federal Copyright Act or the U.S. Constitution preempts "click wrap" terms that interfere with fair use or that override other statutory limitations on copyright protection. In the interim years that will pass before the issue is presented to the Supreme Court, however, much harm to public rights will occur. The traditional use practices of consumers, universities and libraries -- practices that have been protected under American copyright law for the past 200 years -- are thus at serious risk. In the Libraries� view, consumers will experience an actual diminution of rights. This situation will be greatly exacerbated if states adopt UCITA or comparable laws that give new civil and criminal statutory weight to contracts of adhesion.
(7) The FTC in its notice also inquired about the impact of characterizing a mass-market software transaction as a license rather than a sale of goods. The Libraries believe that consumer protection laws should recognize the mass-market license (whether as a shrink-wrap or clickable license) as a sale for purposes of consumer protection and copyright law. In this regard, we would direct you to the recent request for comments by the U.S. Copyright Office regarding the effect of the development of electronic commerce and associated technology on the operation of certain sections of the Copyright Act and the relationship between existing and emerging technology and the operation of those sections. One of the provisions being studied by the Copyright Office, for a report that it will make to Congress, is Section 109, which codifies the "first sale doctrine." The first sale doctrine limits the exclusive public distribution right of a copyright holder by providing that once the owner authorizes the release of lawfully made copies of a work, those copies may in turn be passed along to others by sale, rental, loan, gift or other transfer. Among other issues, the Copyright Office is looking at what effect, if any, the development of electronic commerce and associated technology has had on the operation of the first sale doctrine.
(8) As a general proposition, owners of copyright in digital works distribute these works by licensing usage rights rather than selling physical copies of the copyrighted work. Because the first sale doctrine clearly applies to lawfully owned copies of a copyrighted work, and not to copies acquired when ownership to the copy does not pass, some suggest that licensed works are completely outside the scope of this doctrine which has long been an essential part of the balance in copyright law between the rights of owners and the interests of the public. Whether the first sale doctrine, and other public policy provisions of copyright law such as fair use and preservation, should be completely inapplicable to licensed works is the focal point of this debate.
(9) While these issues are being raised, many digital licenses are able to -- and do -- restrict both the resale and lending of digital works and the licensee's ability to use lawfully obtained copies in ways that traditionally have been permitted under fair use, the first sale doctrine and the rules of preservation with regard to analog works. As set out more fully in the comments and reply comments of the Libraries in the Copyright Office First Sale Doctrine Inquiry -- http://www.ala.org/oitp/copyr/firstsale.html -- the replacement of the traditional model of distribution of selling copies of works to the public through the licensing model of distribution of software and information products has substantial, adverse implications for consumers. We would add that, in this regard as well, UCITA hastens the erosion of user rights by codifying recent court decisions enforcing shrink-wrap licenses. The Libraries also invite the Commission to consider the comments we and others in education submitted to the Copyright Office in that agency's rulemaking proceeding involving Section 1201 of the Copyright Act: http://www.ala.org/oitp/copyr/anticir.html. This proceeding involves potential exemptions from the application of new laws affecting copyrighted works published that are subject to technological measures designed to limit access to works. The Libraries' comments address questions related to the FTC inquiry and provide results of information-gathering studies we conducted regarding trends that limit libraries and the public's access to digitally protected works.
(10) We urge the FTC to include the issues discussed above in the public forum to be held next month. The Libraries, as representatives of institutions providing essential services to the American public in the information age, would be pleased to be represented and to offer greater explication of our concerns.
American Library Association
American Association of Law Libraries
Association of Research Libraries
Medical Library Association
Special Libraries Association