When a work is distributed to the public subject to non-negotiable license terms,
such terms shall not be enforceable under the common law or statutes of any state
to the extent that they –(1) limit the reproduction, adaptation, distribution, performance, or
display, by means of transmission or otherwise, of material that is
uncopyrightable under section 102(b) or otherwise; or(2) abrogate or restrict the limitations on exclusive rights specified in
sections 107 through 114 and sections 117 and 118 of this title.Clause (1) was apparently intended to establish an affirmative principle that subject
matter which is not protected by copyright under Section 102(b) of the copyright statute (which
includes “any idea, procedure, process, system, method of operation, concept, principle, or
discovery”) cannot be the subject of contractual prohibitions on reproduction, adaptation,
distribution, performance or display in a license having non-negotiable terms (such as a
shrinkwrap or clickwrap agreement). Although this provision is founded on a philosophical
notion that subject matter which the copyright law deems free for the public to use should not be
withdrawn from use, at least by virtue of a non-negotiable license, it might have had unintended
consequences with respect to confidentiality clauses that protect trade secret material.
Specifically, many shrinkwrap or clickwrap agreements contain confidentiality clauses
that prohibit the disclosure, use and reproduction of trade secret subject matter embodied in
software that will typically fall within the enumerated subject matter of Section 102(b) of the
copyright statute. Clause (1) could have been read to preempt these confidentiality clauses. This
seems like a somewhat strange result in view of the Supreme Court’s ruling that copyright law
does not preempt state trade secret law.^1515 The authors of H.R. 3048 apparently saw a more
pernicious effect from such clauses simply because they are contained in a non-negotiable
license, although it is not clear why.
Clause (2) would have preempted clauses in a shrinkwrap or clickwrap agreement that
have the effect of restricting the limitations on copyright rights enumerated in Sections 107
through 114, 117, and 118 of the copyright statute. This provision would have affected many
shrinkwrap and clickwrap agreements in at least two ways. First, because many courts have
ruled that disassembly of computer programs to extract ideas from them is a fair use under
certain circumstances,^1516 the clauses which flatly prohibit disassembly or reverse engineering of
software that are common in shrinkwrap and clickwrap agreements might have been preempted.
Second, clauses which prohibit transfer of a copy of a computer program by the licensee to a
third party (a right that would otherwise be available if the first sale doctrine of Section 109 of
the copyright statute is deemed applicable by treating a shrinkwrap license transaction as a sale)
might have been preempted.
(^1515) Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974).
(^1516) See Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1993); Atari Games Corp. v. Nintendo of
America, Inc., 975 F.2d 832 (Fed. Cir. 1992); DSC Communications Corp. v. DGI Technologies Inc., 898 F.
Supp. 1183 (N.D. Tex. 1995).