Are Fears About The Reach of Baystate Justified?
 
December 11, 2002
 

It appears that Bowers v. Baystate Technologies, Inc., a decision of the U.S. Court of Appeals for the Federal Circuit, has alarmed a number of law professors, library groups and members of the computer industry. The central issue in Baystate was whether the Federal Copyright Act preempts state contract law issues. The Federal Copyright Act, 17 U.S.C. § 301, does provide for preemption, but only for those rights that are qualitatively equivalent to rights addressed under the federal law. The issue is not new; several courts have examined this issue before and found that the Copyright Act does not preempt contractual constraints on copyrighted articles. The issue in Baystate, which has some people worried, concerned a shrink-wrap license on software, which expressly prohibited reverse engineering. Academics have expressed their concern that software producers could, by a similar, properly worded, shrink-wrap license, contractually exclude all privileges under the Copyright Act; specifically, fair use rights.

Upon the filing of amici briefs by professors from U.C. Berkeley, among others, the Federal Circuit has been asked to clarify this point, and the Federal Circuit has agreed to do so. Thus, it remains to be seen how the court will sort out these seemingly conflicting, prospective concerns. Specifically, the question arises as to whether the fair use doctrines, of the copyright law, which provide limited privileges for certain entities to use copyrighted material, could in effect trump state contract law. One of the considerations, of course, is that federal copyright law defines fair use as not being "an infringement"; and, therefore, it could be argued that a fair use could violate a prohibition against copying the program covered by the shrink-wrap license. Of course, much depends on the actual wording of the license. However, since fair use is statutorily defined as not being an infringement, if the parties can otherwise qualify under the other provisions of a fair use, a prohibition of a shrink-wrap license against acts that otherwise would constitute copyright infringement would not seemingly result in liability.

The entirety of the fair use doctrine under federal law is, however, quite complex. When the 1976 Copyright Act was adopted, the Congress stated that they intended to codify existing case law on the subject. They then also proposed some "guidelines," which do not have the force of law but which some courts have considered. Thus, there exist the express statutory language, the prior case law, the Congressional guidelines and subsequent case law, all of which are bound up and confused by modern folklore (and a bit of wishful thinking on the part of some academics) as to what use is really fair (or free).

Two bills are presently before Congress dealing with the specific question of the application of fair use to digital media, which could impact the issues presently before the court. One such bill would amend the Digital Millennium Copyright Act to permit circumvention of copyright protections when executing a "fair use" use. These represent tensions between by the entertainment industry on the one hand and the technology industry on the other.

One of the fears academics share is that a piece of software having an educational purpose should not come with a shrink-wrap license that prohibits the making of fair use copies.

In Baystate, the trial court specifically instructed the jury that, under the shrink-wrap license, reverse engineering would be a violation of the contract only if the product infringes the plaintiff's copyright rights; i.e., by copying protectable expression. Accordingly, it was the trial court's position that the shrink-wrap license prohibitions against reverse engineering could only breach that agreement if there was also a copyright infringement. Whether that instruction was correct; assuming it is, then a fair use, not being "an infringement," would not be a violation of a shrink-wrap provision.

In any event, stay tuned, as they say, while the academics and the parties to Baystate sort out (if they can under this case) the issue of whether the fair use provisions of the Copyright Act could preempt state contract law. The Federal Circuit could well defer the issue because fair use was not an issue before them in the Baystate case and appellate courts often decline to give advisory opinions.

For more information on Baystate or “fair use,” contact Robert Lyon, toll free, at 888-688-8500.