## Facts

- ProCD compiled a large telephone-directory database and sold it on CD-ROM as “SelectPhone.”
- ProCD marketed different versions: a lower-priced consumer product limited to noncommercial use and a higher-priced commercial product.
- The consumer package displayed notice that use was subject to an enclosed license; the license terms were included inside the box, on the CD-ROM, and shown during installation with an on-screen assent step.
- The license restricted use of the consumer product to noncommercial purposes.
- Matthew Zeidenberg bought the consumer version at retail, installed it, and proceeded after seeing the on-screen license.
- Zeidenberg copied substantial portions of the database and provided access through a website (Silken Mountain Web Services), charging less than ProCD’s commercial rates.
- ProCD sued for breach of the license terms and related claims.
- The district court ruled for Zeidenberg, concluding the inside-the-box license was not a contract and, even if it were, federal law barred enforcement.

## Issues

1. Whether shrinkwrap and installation-presented (clickwrap) terms enclosed with software can form an enforceable contract when the buyer can review the terms after purchase and return the product if unacceptable.
2. Whether federal copyright law preempts state-law contract enforcement of noncommercial-use restrictions on database access and use.

## Decision

- The Seventh Circuit reversed.
- The court held the shrinkwrap/clickwrap license was enforceable because ProCD structured acceptance to occur by use after the buyer had an opportunity to read the terms and return the product.
- The court held ProCD’s contract claims were not preempted by copyright law because contract rights bind only the parties to the agreement and are not equivalent to copyright’s exclusive rights.
- The case was remanded with instructions to enter judgment for ProCD.

## Legal Principles

- Under UCC contract-formation rules, a seller may propose that acceptance occurs through conduct (e.g., using software) after the buyer has a reasonable opportunity to review terms supplied with the goods and to reject by returning them.
- A buyer who proceeds to use goods after an opportunity to inspect terms and return the product can be bound to those terms, absent generally applicable contract defenses (e.g., unconscionability or illegality).
- Mass-market “shrinkwrap” and “clickwrap” terms are not invalid merely because the full terms are provided after payment, so long as the buyer is given notice that terms apply and a practical right to return.
- Copyright preemption does not bar enforcement of private contractual restrictions where the asserted rights arise from agreement between specific parties and are not equivalent to copyright rights enforceable against the public at large.

## Conclusion

The court enforced the consumer software license’s noncommercial-use restriction because the buyer accepted the terms by using the product after having an opportunity to read them and return the package, and it held that enforcing those contractual limits was not preempted by federal copyright law.


ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996)