107 Iowa L. Rev. 677 (2022)
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Abstract
Copyright law gives copyright owners tremendous power over their users, but some of them want even more.
Copyright law’s restrictions on the copying, distribution, adaptation, public performance, and public display of a work are broad, applicable to all stages within the stream of commerce and possession, and places liability on some third parties for merely assisting, benefiting, or encouraging an infringing activity. However, like any property-law based regime, those restrictions have limitations. The same law that gives copyright owners the power to restrict their users in multiple ways also has built-in boundaries, which means that not every action in connection to a copyrighted good is prohibited by copyright law.
Enters contract law. Some copyright owners, software companies in particular, try to use copyright license agreements to expand the rights provided by copyright law and customize them to their needs. They write standard form contracts that give them rights that are not provided for by copyright law, and nevertheless claim that the breach of those privately-made arrangements triggers liability under copyright law. In that way, they turn copyright law from a system of strict rules, created by Congress, that balances between the interests of copyright owners and users to one that they can shape as they see fit for their needs.
Courts have struggled and mostly failed in preventing copyright owners from using licenses in that way. The Article explains that the leading approach for policing such licenses was shaped in 2010 by two Ninth Circuit decisions: Vernor v. Autodesk and MDY v. Blizzard. This framework, however, missed the mark. The Article shows how both opinions are misguided as a matter of law and harmful as a matter of policy. They, unfortunately, give too much power to large software companies and too little freedom to consumers. Moreover, a survey of the 44 cases that applied MDY’s test in the last decade reveals that courts could not come up with clear criteria or an effective test to limit that power. Other developments in recent years, including new decisions of the Supreme Court and the Second Circuit, further weakened the Vernor-MDY framework. Those recent developments, as well as the increased centrality of digital distribution channels, make this the perfect time to reevaluate and abandon the currently prevalent framework.
The Article shows that core notions of commercial law offer a superior approach to police those licenses in a way that is consistent with copyright policy. Indeed, if the core principles of contract and property law are correctly applied, the balance between copyright law and contract law can be maintained. With it, copyright liability is restored to the scope intended by Congress, and its expansion through customization is successfully restricted.