Tom Field's 97 Mt Ct problem

Moot Court

Tom Field ---------- Spring 1997

KISS Software, Inc. v. Kiss-Off, Inc.
Rulings on Motions for Summary Judgment
District Court for the District of New Hampshire

Ira Scible, J., sitting by designation.

Plaintiff, KISS Software, Inc. (KISS), seeks summary judgment and relief, including an injunction, following the sale by defendant, Kiss-Off, Inc. (Kiss-Off), of software alleged to be improperly derived from its own. Kiss-Off likewise asks for summary judgment. Insofar as the original complaint was based in part on copyright, this court has jurisdiction under 28 U.S.C. § 1338. It also has jurisdiction under 28 U.S.C. § 1332; the amount in controversy is said to exceed $75,000, and the parties' sole places of business are in New Hampshire and Utah, respectively.

I. Facts      Critical facts are not in dispute.
     Determined to fight "bloatitis," KISS (based on the oft-ignored adage, "keep it simple, stupid!") was formed in 1994 for the purpose of writing and distributing computer software designed to do a single thing, e.g., word processing, well and quickly; fancy features are eschewed. KISS products are advertised only at a single world wide web site and are therefore either ignored or unfavorably reviewed in computer magazines. Its products nevertheless enjoy great success through a fiercely loyal group of customers who are unstinting in word-of-mouth promotion. Because of its sales volume, KISS products are inexpensive, and free upgrades are liberally offered at its web site -- along with complementary applications written by customers.
     In early 1996, Iben Smart, submitted such an application for including complex mathematical expressions in documents prepared with KISS-WP. KISS personnel reviewed it and found it "buggy." They refused to post it. Smart then declared that he was no longer a fan and that they would regret their refusal to post his add-on.
     Shortly thereafter, KISS became aware of a new Kiss-Off web site, operated by Smart. It was offering Kiss-Off-WP for even less than KISS-WP sells for. Purchasing a copy, KISS examined it and found it very similar to their word processor. They soon filed suit against Smart and Kiss-Off. Mediation was ordered. Fortunately, most differences have been resolved. For example, Kiss-Off has agreed to change its name to K-O Software, and KISS concedes that what is now called "K-O" (K-O-WP), although it uses the logic and flow of KISS-WP does not infringe its copyright.
     What remains can be called the battle of the web-wrap. At its site, KISS posts many prominent notices that say, "Do not order our software until you read our license." The last two, highlighted, words invariably link to a page setting forth various terms and conditions of sale. K-O is sold similarly. In both cases, sale is conditioned on agreeing not to decompile the software. K-O's clause is unconditional, whereas KISS' clause permits decompiling for the purpose of writing enhancements only and explictly forbids other uses of information so obtained.
     II. The Legal Issues      Being mindful of the KISS adage, I keep this short.
     A. Contract Issues      An initial issue is whether the"license" involved here is valid as a matter of state law under the Uniform Commercial Code. A similar one was recently found so in ProCD, Inc. v. Zeidenberg (7th Cir. 1996) under far more egregious circumstances -- notwithstanding that the entire license could not be read prior to purchase. Not being informed to the contrary, I presume the law in New Hampshire and Utah to be the same as discussed there. Here, the license can be read prior to purchase. Moreover, purchasers are exhorted to do so. Under such circumstances, it is even more difficult to see any U.C.C. bar to validity.
     Next, we consider whether either license was breached. Kiss admits that Smart did not breach the KISS-WP license in decompiling to write his rejected enhancement. Rather, it points to use of information so obtained to write K-O-WP as a clear breach. Defendants counter that decompiling for purposes of ascertaining infringement constitutes a breach of the K-O-WP license. With regard to the last, it is difficult to see a justiciable injury, and defendants have offered virtually nothing in support of this interesting proposition. However, assuming arguendo that both contracts are valid and that each party would be entitled to some kind of relief as a matter of state law, copyright preemption presents an insurmountable barrier.
     B. Copyright Preemption      ProCD, in my view, correctly distinguishes the preemption significance of prohibitions against copying that run against the world and those that run only against individuals, e.g., by virtue of agreement. However, given the circumstances presented there (that seem much more akin to misappropriation than to breach of contract), it did not find the ProCD license to run against the world.
     On the facts here, I must find to the contrary as fact and law. KISS offers but one license, take-it-or-leave-it. To say that a purchaser has entered into an individual transaction in such circumstances is to gut what I perceive to be the unambiguous intent of 17 U.S.C. § 301. KISS' economic arguments to the contrary seem irrelevant, but I admit to being schooled only in law.
     In any event, absent patent or copyright infringement, the law of this circuit clearly favors would-be competitors' reverse engineering products acquired in the marketplace; see Lotus Development Corp. v. Borland International, 49 F.3d 807 (1995), affirmed per curiam, 116 S.Ct. 804 (1996). KISS cannot accomplish with "licenses" what it could not accomplish under copyright or has even tried to accomplish under patent law.
     Perhaps outstandingly egregious circumstances, present in ProCd and lacking here, can justify a state prohibition regarding use of information acquired in the marketplace; see also, e.g., National Basketball Association v. Motorola, Inc., ___ F.3d ___ (2d Cir. 1997) . However, I cannot distinguish the circumstances here from those in Bonito Boats, Inc. v. Thunder Craft Boats, 489 U.S. 141 (1989); it is difficult to fathom how the Supreme Court could have reached a contrary result if relief had been sought based on a shrink-wrap license instead of a plug molding statute.
     III. Conclusion      I award summary judgment in favor of Smart and Kiss-Off, Inc. Defendants may continue their activities in accordance with the mediated agreement disposing of issues that would otherwise remain.

To students:
KISS has appealed. You will represent the parties in pairs of two, one person representing each.

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