ProCD, Inc. v. Zeidenberg


–          ProCD sells computer software and Defendant bought some.

–          In lue of having a good price arbitrage.

  • Every box containing the product declares licensing agreements on each cd and when the cd is prompted. Abundantly clear:
    • Limits use of operation to non-commercial purposes.

–          D, bought software and used it for commercial purposes, re-selling it on the web.

  • ProCD brought suit for infringing the terms of use agreement.

–          Defendant’s argument

  • Package of software is the “offer” and the customer “accepts” by paying the asking price when he buys the good.
  • Cannot agree to hidden terms that he did not know about when he bought the good.

–          Nature of industry of computer software.

  • Consumer goods work the same way, buy a radio and then are subject to the licensing agreements therein- have chance to return the product if you want to.

Procedural History

–          District court favored for Zeidenberg

  • Stated the additional terms do not appear on the outside of the package
    • Can’t be bound to “secret” terms of a seller

–          U.S. Appellate court favored “ProCD”

  • Reversed and remanded.


–          Is there a proposed contract that a buyer would accept by using the software after having an opportunity to read the license at leisure?


–          YES. UCC permits contracts to be formed in other ways than simply what was agreed upon at the time of payment.

  • Its not like, pay an extra $10,000…it’s a simple licensing agreement.


–          Due to technological advances and the futuristic nature of the market place, many consumer purchases are “pay now” read terms later. It is the only way to do consumer business because the time and effort to have every agreement on the “box” is just counter-productive on the whole.

–          “A contract for the sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.”

–          2-606(1)(b)

–          “A buyer accepts goods when after an opportunity to inspect, he fails to make an effective rejection…”


–          Notice on the outside, terms on the inside…

–          Better for all businesses…To cumbersome to have every single term and license on the face of a package…not a good way to have industry standards

  • Mass production and distribution


– Reversed and remanded.


–          30 day rule. Consumer had time to inspect the product and then reject an arbitration clause or a warranty clause…The fact of continuous use shows the acceptance of all terms.

–          Very different from commercial cases.

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