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Say a user purchases Company A's Fast Word Processor software and saves a document using it. Company B released a free document viewer, but Company A doesn't like competition, since they want everyone to buy their software.

In order to keep out competitors, Company A specifies in the click-wrap license terms of Fast Word Processor that the user isn't allowed to open documents saved with it in other software. They also prohibit the user from giving anyone the document files without applying that same restriction to the receiver.

Are those terms really legitimate?

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  • That seems to be anti-competitive. So maybe the customer can't complain, but company B can. Possibly the government will. You could try to change the situation so that it is not anti-competitive.
    – gnasher729
    Mar 11, 2023 at 1:16
  • @gnasher729 Thankfully it's not my agreement, but I've seen it somewhere else, and I knew something wasn't right. Mar 11, 2023 at 1:22
  • And just because it is anti-competitive (affects B's ability to compete with A) doesn't mean it cannot also affect the user's rights, but someone else needs to answer that.
    – gnasher729
    Mar 11, 2023 at 8:49
  • That’s at least two questions in one. (1) Whether company A can meaningfully enforce obligations on third parties (if X gives Y a file under the promise that Y will not use company B’s software, and Y breaks that promise, it’s not clear to me that X breached anything or that company A has standing to sue Y). (2) To what extent company A’s software license can bind someone’s use of the products of the software. (I previously had to research a version of question (2) in my jurisdiction, and the answer was "it’s complicated", but maybe in the US there is a clear answer.)
    – KFK
    Mar 14, 2023 at 10:23
  • Perhaps it would have been better for me to state the question as "is it legitimate for a license agreement to have provisions whose only stated purpose is to prevent competition?" Mar 14, 2023 at 18:31

2 Answers 2

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Copyright law

Copyright law operates to protect proprietory software developers' rights to limit use of their software. The protection granted to them as creators of the work under the law is based in United States, for example, on the United States law governing computer programs, much of which is codified in the Copyright Act of 1976

This law operates by protecting software companies, mostly growing out of the United States jurisdiction, who effectively license users to use the software in accordance with copyright law, with no ownership of the software itself granted. Further, to implement Digital Restrictions Management, their licenses restrict the usage of their software.

Digital Restrictions Management (better known as Digital Rights Management) is a technique that is applied by companies for some file formats, i.e to prohibit users from opening "proprietary file formats" in other software.

It is also accompanied by contractual or license restrictions that limit users from accessing the content in such files and from sharing it "illegally".

This technique was traditionally made for content which is used in distribution channels for example, Adobe Digital Editions prevents file owners from accessing .acsm files and it is used for implementing DRM in publishers' contracts with libraries with restrictions imposed on their patrons on copying or distributing copies.

Interoperability

A natural consequence of restricting users from accessing published content is to also disallow interoperability which can remove the lock on the digital content itself. While Adobe uses DRM in its distribution channel, many others utilise it to limit the interoperability of their software products and works made using those products.

Legal treatment of DRM and interoperability

The Digital Millenium Copyright Act "criminalizes the production and distribution of technology that tries to circumvent DRM.". However, as regards interoperability, the Act itself provides an exception under which computer programmers are allowed to reverse engineer a DRM product to provide for interoperability.

What this means for you is, regardless of the software licensing terms, you are still entitled to break the DRM lock for the purposes of achieving interoperability as holding otherwise would defeat public policy in the United States, considering that,

In Vault Corp. v. Quaid Software Ltd, Louisiana Software License Enforcement Act clause permitting the Copyright owner to restrict or prohibit software decompilation or disassembly was barred by the Copyright Act and therefore was held unenforceable by the US Courts.

SaaS and Users' rights

A "computer program" is not the only thing that is shipped with a software product, there could also be a service or service(s), which can include many other features bundled on with the product which are more in the domain of services. It could include the provision of a collaboration feature on the cloud, in which case, the company has you bound by a Terms of Use on their website.

For example, this is the case with Apple Media's Services Terms and Conditions' "Usage Terms" which states the following (this sub-clause is incorporated in its non-media services also, including the text-editor known as "Pages"):

You may access our Services only using Apple’s software, and may not modify or use modified versions of such software.

In such a case, restriction operates on the basis of contract law governing contracts of service, whereby the service provider and you have agreed to provision of this service on certain restrictive terms and conditions.

All of this is not to say that users don't have rights over their own works and content. Your rights to use your own works is also a protected by copyright, since the written work receives international protection as a "literary work" due to it falling within the scope of the Berne Convention for the Protection of Literary and Artistic Works. You also have the right to reverse-engineer software for the basis of interoperability. However, you cannot extend this to requesting a service to be provided outside its intended scope of provision as per the terms of use, since, in the case of SaaS, copyright laws are not invoked.

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  • This is very detailed, but I'm not sure where it actually answers the question. Mar 17, 2023 at 16:37
  • I meant to provide details of what OP would have to consider in deciding whether or not their use-case falls within permissible limits of the law. So, restricting interoperability and users rights over their own works is restricted in copyright law, but the company can prove it is in fact a SaaS product and have contract law primarily govern OP's use of their service.
    – sankeiy
    Mar 17, 2023 at 16:45
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I think that the restrictions in the license would not actually be binding on the licensee, because a license isn't quite the same thing as a contract.

If you violate a contract, a court can compel performance. If you violate a license, you no longer have (or possibly never had?) a license to the relevant intellectual property, and so any use of it would be unlicensed and possibly infringing.

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