How you can be prosecuted for taking a picture

“The commercial licensing epidemic.
Shutter Bug
by Clay Risen Only at TNR Online Post date 10.31.06

Do you own a Canon EOS-1D, one of the most popular digital SLR cameras on the market? Really? Think again. While you might own the plastic, glass, and metal in the camera, you don’t actually own the software that makes it run–you only have a license to it. And that license is pretty restrictive. If you let anyone outside your immediate family use the camera–if you lend it to a friend for the weekend or even ask a stranger to take a picture of you and your wife–Canon could technically sue you for breach of contract. Canon, in other words, isn’t interested in selling cameras anymore. It’s interested in licensing the software inside them, along very favorable terms–for Canon, at least.

Canon isn’t alone. Consider the case of Homan McFarling, a Mississippi farmer who bought genetically modified soybean seeds from Monsanto. He planted a crop, collected the seeds from it, and planted another–it’s a standard, environmentally friendly, practice. But Monsanto claimed that it had only granted McFarling a ‘limited use license’ to use the seeds for one generation. The company sued–and won.

According to Catholic University law Professor Elizabeth Winston, recent years have seen an explosion in the number of products that are being licensed, rather than sold, with companies placing broad restrictions on consumers’ ability to use them. ‘[I]ntellectual property owners,’ she wrote recently in the George Mason Law Review, ‘increasingly choose to license products that embody their intellectual property and use privately-legislated licenses to augment their intellectual property rights and circumvent publicly-legislated restrictions”–including, for example, implied warranties, resale rights, even the ability to review a product on the Internet. Such a practice undermines the very notion of ownership, and all the rights and protections it affords. Which means that, unless courts start to take a critical eye toward such aggressive contracts, the consumer landscape is going to get a lot rockier.

The licensing trend began reasonably enough. Before the 1990s, it was technically very difficult to transfer intellectual property (IP) without also giving up a movable piece of property–in legal terms, a “chattel.” Copying music, for example, was nearly impossible without significantly degrading the recording quality–you could make a mix tape for your friends, but you wouldn’t get much for it on the street. Thus, even though the real value in a CD was in the music it contained, we tended to think of the intellectual and physical property as the same thing.

That has all changed over the last 15 years, as the Internet, the ubiquity of personal computers, and the easy availability of digital transfer devices made the separation of intellectual and physical property apparent–a CD can be uploaded to a computer and shared an infinite number of times. And consumer software, once a niche market, has become one of the biggest industries in the world–and also one of the most ephemeral. A copy of Microsoft Word 2003 costs $229, even though the CD it comes on is worth just pennies. And, while many of us still tend to place more value on the physical than the conceptual, the economy doesn’t: According to economists Robert Shapiro and Kevin Hassett, American intellectual property accounts for 45 percent of the total U.S. GDP, or between $5 trillion and $5.5 trillion.

For companies heavily invested in IP, the problem was obvious and pressing: how to protect their assets in an environment where those assets are infinitely replicable. While some technical solutions, such as password protections, have some limited effectiveness, the more durable solution lay in licensing. “Software was new, difficult to protect, expensive to develop, and easy to replicate,” Winston writes. “As a result, the software industry promulgated a standard of private legislation, whereby licensing products that embody intellectual property and allow the intellectual property owner to retain title became the norm.” And it is amazing how fast–and how thoroughly–that shift has been accepted by consumers: Just a few years ago, trading songs on Napster and KaZaa was the norm; today, large numbers of people buy digital music from iTunes, eagerly submitting to Apple’s licensing agreements.

We do this because we understand that, vintage LPs notwithstanding, music and software are valuable purely as intellectual property. But, as Winston documents, what was a reasonable step for record labels and software developers has become an innovative, and potentially abusive, strategy for a whole host of industries. “[O]nce the private legislation model of the software industry proved profitable and beneficial, other industries began to adopt private legislation,” she writes. “As a result, licenses are now widely used as a device to circumvent public legislation.” In today’s tech-centric market, it’s not completely ridiculous–after all, what matters in a camera, or a DVD player, or even a genetically modified soybean seed, isn’t the physical product but the intellectual property it embodies.

But some vendors are making IP protection an excuse to massively restrict consumers’ ability to use their products. The Maryland State Bar Association licenses, instead of sells, its membership directory; as a result, writes Winston, “If a lawyer who is not a member of the Maryland State Bar wishes to look up information about a judge in his firm’s copy of the Manual, she may not borrow a copy from the firm library without breaching the contract.” The Stots Corp. licenses, rather than sells, its woodworking tools, and it even prohibits the copying of the instruction manual (Stots explains that it is an effort to fight “tool piracy”). And Yorktown Technologies, which markets a genetically modified zebra fish called the GloFish, forbids licensees to “breed or propagate these fish, permit or encourage others to breed or propagate these fish, or otherwise intentionally engage in any activity that may result in or lead to the breeding or propagation of these fish.” Notes Winston, wryly, “Given the nature of fish, the licensee may breach the terms of the contract simply by displaying several fish in the same tank.”

Moreover, software companies, emboldened by their success at expanding the realm of product licensing, are going even further. Microsoft, for example, forbids licensees of its Microsoft Agent software from publishing anything that might “disparage Microsoft, its products or services.” And Network Associates, which produces anti-virus software, includes in its license agreement that “the customer shall not disclose the results of any benchmark test to any third party without Network Associates’ prior written approval”–in other words, no product reviews.

Beyond outlandish examples, why does any of this matter? It’s not as if Canon is actually suing people for lending their cameras. But the very fact that they can, and that many consumers unwittingly enter into licensing agreements that open them up to legal action for previously unlitigable activities, should be a big concern. And it’s not just a matter of what’s in the contracts, but what isn’t. Courts have long recognized that sales imply a certain basic warranty–if you sell something, you’re promising that it will work. But licenses don’t carry such protection, and they often say so explicitly.

The license on the EOS-1D includes the following disclaimer:

THE SOFTWARE IS PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. … THE ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THE SOFTWARE IS WITH YOU. SHOULD THE SOFTWARE PROVE DEFECTIVE, YOU (AND NOT CANON, CANON’S SUBSIDIARIES AND AFFILIATES, THEIR DISTRIBUTORS AND DEALERS) ASSUME THE ENTIRE COST OF ALL NECESSARY SERVICING, REPAIR OR CORRECTION. THE ABOVE EXCLUSION MAY NOT APPLY TO YOU IN SUCH STATES WHICH DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES.

In other words, notes Winston, “The software could render the camera useless and Canon would have no obligation to fix it.”

What’s more, if companies are able to place restrictions on how their licensed products are used, they could end up inhibiting competition. For example, a company that prevented consumers from writing reviews of their product or forbade them from using other companies’ products in coordination with their own would be giving themselves monopolistic market advantages–the sort that could never be achieved through conventional sales alone. It sounds ridiculous, but, in theory, there is nothing to prevent companies from pushing even further.

Will such draconian agreements fly? After all, contracts aren’t untouchable by the government; otherwise, it would give companies an enormous amount of leverage outside of government purview. In this instance, the courts could invalidate the contract–or simply refuse to enforce it–on the grounds that the exchange was in fact a sale, even if it came with a license attached. Courts could also say that a license intended to protect software IP, such as the Canon’s, would be invalid if Canon tried to use it to limit something else, such as the use of the camera by a noncommercial third party. But, as Winston notes, courts have so far been deferential to aggressive contracts because they feel such protection is needed for rapidly advancing fields like software and genetic engineering.

So, for now, it’s up to consumers to recognize the new limits being placed on them–and to make their purchases accordingly. Indeed, if the comments posted on dozens of woodworking-enthusiast websites in response to Stots’ tool-licensing are any guide, consumers are already getting angry. As one poster said of the Stots tool, “John Q Consumers are not going to put up with this kind of crap! … We are slowly being deprived of our basic freedoms — the right to buy a product with our hard earned money and do whatever the damn hell we please with it!” Shoppers of the world, unite!

Clay Risen , a former assistant editor at The New Republic, is managing editor of Democracy: A Journal of Ideas.”

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One response

  1. Anonymous

    There is some evidence that the Supreme Court would consider these so-called contracts “boilerplate.” We sign a contract every time we sign our names on credit card receipts; those “contracts” have not been held binding for contract torts, much less criminal prosecutions. Just something to keep in mind.

    October 31, 2006 at 5:49 pm

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