Shrink-wrap license not preempted by fair use
In Davidson & Associates v. Internet Gateway, the Court of Appeals held that a shrinkwrap license that barred reverse engineering was not preempted by federal fair use law. The court thus joined the chorus of courts that enforce licenses for software and data, regardless of whether the terms of those licenses match limitations in copyright law. These courts make the distinction between property law on one hand, and contract law on the other. While reverse engineering is sometimes protected by a defense to a claim copyright infringement, the possible existence of that defense to a claim of infringement of a property right does not preclude an agreement to not reverse engineer.
Davidson and the other courts that enforce contracts have it right. Think about your own property, your car. You can keep it, sell it, hide it, loan it, lease it, or give it away; it's your choice. Property law doesn't prevent your making a choice and creating a contract to enforce it; property law actually supports your doing that.
Copyright and its subject matter (property rights in intellectual property) are different in some ways from other types of property law and subject matter. But there is at least one way in which copyright is not different: it deals with property rights and leaves contracts, contract law and contract practice to the parties and to their agreements. Contracts are agreements that reflect market choices made by people acting in that market. Contracts are as important in developing and distributing creative works as property law. Indeed, contracts are more important.
The contract in Davidson was enforceable. It contained a term that prevented reverse engineering of the licensed game program. Sometimes, reverse engineering is fair use under copyright law, but that is a property rights rule. The defendants and the Electronic Frontier Foundation and others who supported them claimed that the contract conflicted with fair use and should not be enforced. The court rejected that claim. It said simply: "Appellants contractually accepted restrictions on their ability to reverse engineer by their agreement to the terms of the TOU [terms of use] and EULA. "[P]rivate parties are free to contractually forego the limited ability to reverse engineer a software product ..." and "a state can permit parties to contract away a fair use defense or to agree not to engage in uses of copyrighted material that are permitted by the copyright law"
Fair use is not a "right." It is a limited defense to someone else's right to sue for violation of their copyright (a property right). Fair use thus plays an important part in the property rights law created under copyright, but it has no special status in reference to enforcing contracts. In fact, one can contract not to exercise far greater personal privileges or rights than those grounded in the limited defense of fair use. So, the Court's result in upholding the contract was not surprising.
The result is simple and correct. One of the ways in which copyright law seeks to encourage and expand innovation and creativity is by creating property rights incentives that work in the marketplace; that marketplace today often consists of licenses and other types of contract. Contracts and property rights are not inconsistent, but parallel and independent systems that ultimately lead toward achieving consistent goals. Contracts neither create nor enforce rights equivalent to copyright; they set out the terms of an agreement and the law that supports them merely enforces the agreements when appropriate to do so.