ProCD, Inc. v. Zeidenberg

ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir., 1996), was a court ruling at the United States Court of Appeals for the Seventh Circuit. The case is a significant precedent on the matter of the applicability of American contract law to new types of shrinkwrap licenses that arose with home computing and the Internet in the 1990s, and whether such licenses are enforceable contracts.

In the mid 1990s, Matthew Zeidenberg purchased a telephone directory database, SelectPhone, on a CD ROM produced and sold by the company ProCD. That company had compiled information from over 3,000 local telephone directories, at a cost of more than $10 million, and sold the results to marketers and other interested persons. To recoup its costs, ProCD discriminated based on price by charging commercial users a higher price than it did to everyday, non commercial users.

ProCD argued at the district court that Zeidenberg violated its license by copying and reselling the contents of its SelectPhone CD ROM. Zeidenberg argued that the shrinkwrap license was not a valid contract that could be enforced, because it merely hinted at hidden terms that could not be evaluated by the customer until after purchase. Zeidenberg also claimed that by trying to prohibit its users from copying phone numbers from its database, ProCD was violating copyright law because phone numbers are facts, and facts cannot be copyrighted. For Zeidenberg's argument, the circuit court assumed that a database collecting the contents of one or more telephone directories was equally a collection of facts that could not be copyrighted. Thus, Zeidenberg's copyright argument was valid. However, some pro consumer commentators criticized the ruling's acceptance of a business model in which a consumer was required to buy a product and open it first, and then take additional steps to return the product to the retailer and seek a refund (which would be questionable with an opened and possibly damaged package) if they disagreed with the terms of the contract. The ruling also received some criticism, in agreement with Zeidenberg's argument, that ProCD intended to use contract law to indirectly enforce control over un copyrightable facts such as phone numbers.