Editor’s note: “c:\spin”, a regular feature produced by the Competitive Enterprise Institute, was written this week Solveig Singleton , senior analyst, Project on Technology and Innovation, at CEI. In a case, Bowers v. Baystate, the Federal Court of Appeals considered a shrink wrap agreement that purported to prevent reverse engineering and disagreed with a lower court’s instruction that copyright law limited the contract. Singleton addresses the fallout of the case.Federal Circuit Court of Appeals Judge Randolph Rader’s opinion in Bowers v. Baystate Technologies explains that federal copyright law does not preempt a shrink-wrapped contract barring reverse engineering.

The case has aroused concern, and a brief signed by myriad law professors argues that the decision embraces unacceptably broad restraints on reverse engineering, fair use, and other limits on copyright.

The professors raise an interesting intellectual problem, but their proposed solution, preemption, is not the way to go.

Courts sometimes refuse to allow IP protection of functional designs, such as the H-pattern gear shift of a car. This lets competitors offer a similar item. Reverse engineering is defended for similar reasons; it allows competitors to develop non-infringing alternatives.

But Bowers is not the best choice for defenders of reverse engineering. It is not a case of copying to obtain interactivity, or to adapt functional ideas from the original work. Baystate turned down Bowers’ offer to negotiate, produced an almost indistinguishable copy of his product, squeezed him out of his business relationship with another vendor, then sued him to invalidate his patent. A decision in Bower’s favor on contract grounds is not a threat to fairness or competition.

Not a precedent

The professors’ brief notes that they do not dispute the result in Bowers, only its broad assertion of the persistence of contract in the face of copyright. Bowers is not the only case to dismiss the argument that copyright preempts contract so resoundingly. Judge Easterbrook wrote a similar opinion in ProCD Inc. v. Zeidenberg in 1996.

The law profs do raise an interesting question. Do rulings that contracts are not preempted by copyright threaten to create a world where fair use is barred by contract? Could the publisher of a novel sell it on the condition that it could not be quoted or parodied, and have that restriction enforced in court?

Perhaps. The right of property owners to eject trespassers allows us to envision a world where there are no more dinner parties, because no one is permitted to step onto others’ property. But legal rulings have not been needed to ward off this purely speculative problem. In suggesting that federal copyright law should preempt contract, the law professors brief calls for a rather drastic cure to the mere potential for disease.

Suppose the Bowers court were to rule that federal copyright law sometimes preempts terms in private licenses or contracts. But when? Is any contract term that impedes fair use or the dissemination of certain facts in copyrighted material invalid? Why would provisions of federal copyright law that limit copyright be preemptive and not those that extend copyright? There is no end to the uncertainty that such a ruling would create.

Copyright vs. contract

Certainly, copyright should not generally preempt contract.

Copyright’s statutory provisions cannot be tailored, as can a license, to the circumstances of different works, authors, publishers, and distributors…employers and employed writers, galleries and artists, musicians and record companies, programmers and software firms. Copyright law must be alterable by consent, or every industry will be bound by one-size-fits-all rules inappropriate to their individual circumstances. If contract cannot change the default rules laid down by copyright, buyers or licensees could obtain no more rights in the sale than they already enjoy under general copyright law. Indeed, one could not have open source software if contract did not usually trump the default rules of copyright; the obligation to give back to the open source community if one uses open source code comes from the license terms, not general copyright law.

And contract law has inherent limits, which should comfort the concerned professors. First, contracts bind only the parties. A reverse engineer who acquires software some other way than an ordinary purchase…by finding a copy on the street, for example–may escape the terms of the contract. Second, contract damages are much more limited than copyright damages, leaving open the possibility of “efficient breach”…and, unlike copyright damages, contract damages must be proved. Third, the burden of enforcing contracts is on the plaintiffs (unlike in copyright, where a public prosecutor might be talked into bearing the burden).

So, for the most part, the law professors’ concerns are academic. And a preemption cure would be worse than the disease.