Why waive your right to fair use?

There has been a lot of discussion on the recent Blizzard case, especially on EULAs - (which you agree to by clicking on the "I Agree" button before using most software now-a-days), and waiving your right to reverse engineer that software. Ed Felten over at Freedom-to-Tinker, Seth Finkelstein over at Infothought, Donna WentWorth over at Copyfight, Matthew Caron here on copyfutures, all have blogged on this recently. I thought I'd weigh in.

There seems to be a strong public policy argument in favor of allowing fair use. Fair use is beneficial to society, fair use helps to promote the arts & sciences, fair use should be protected. By allowing fair use to be waived away by a click of the button, the courts appear to be ignoring this argument. Why?

Form contracts do make a lot of economic sense. They allow both parties to save the cost of negotiating by including terms which both parties would probably have agreed to ex ante. They can include liability provisions, choice of law provision, choice of venue provisions, all of which generally allow a seller to more accurately assess his costs (costs of future litigation, for instance). A seller who can better assess his costs can bring products to market at a better price, because he is more certain of the risk he takes. In this light, form contracts, such as EULAs, are deemed to be useful and beneficial to both parties. The seller gets more certainty on risks. The buyer gets a better price.

However, I imagine that not all clauses that can be found today in actual form contracts serve a cost assessment purpose. Nor that all clauses that do, do so to the benefit of both parties. Sometimes a clause that's beneficial to the seller may be highly detrimental to the buyer. In such a case, a clause may be found to be "unconscionable", and struck from the contract. Sometimes clauses serve an anti-competitive purpose. Sometimes clauses may simply be against public policy. When a clause on its face does not serve a cost assessment purpose or is against prevailing policy, its validly should be viewed much more skeptically.

Anti-reverse engineering clauses seem to fall somewhere in between. If a company is worried about its product being reversed engineered, it may be unwilling to spend the resources developing the product. On its face such a clause seems to have a cost assessment purpose. At least for the initial life of the product. For once a product has been on the market for a substantial time and has already recouped its development costs, the risk assessment aspect of the clause becomes substantially less useful. A second useful purpose remains, an anti-competitive one. An anti-reverse engineering clause will then be retained to help insure that competitors cannot bring out interoperable products of a competing nature. Such a purpose, in and of itself should not stand.

Reverse engineering is a right that falls under fair use. While clauses that waive fair use rights may serve a legitimate purpose, I'm beginning to feel that fair use rights should not be something that you can simply contract away. They are simply too important. Alternatively, when fair use rights are waived, we should strictly scrutinized the purpose for that waiver.

Of course the DMCA adds a whole new layer to this issue...

Comments

[Paul Crowley]

The problem with fair use rights and copyright today is primarily the changing landscape. Even ten years ago it was simply impractical for a company to worry much about reverse engineering - while someone might do it for their own purposes, the likelyhood of a serious competitor posing a financial risk through it was very low.

Similarly, as you point out the loss to a company through reverse engineering diminishes over time. In a few years it makes far less difference than it does the week a product is released.

However, we are now in a different age. Distribution channels have changed such that it is possible for a company to lose 90% of their sales because of an event within the first month of a product release. The same event occurring later would have limited impact, if any. Copyright law and contracts do not reflect the time sensitive nature of much of this.