In the previous chapters, we have examined open source and free
software licenses, all of which permit, to varying extents,
substantial inroads on the protections otherwise available under
copyright or patent law. In this chapter, by contrast, we examine one
variety of a classic proprietary license, as well as the Sun
Community Source licenses and the Microsoft Shared Source Initiative.

Classic Proprietary License

The classic proprietary license needs

relatively little
explanation.
The license does not need to distinguish, for example, between source
and binary code: the source code is simply not made available. The
license need not distinguish between distribution of derivative and
original works: with one very narrow exception, neither is permitted.
Proprietary licenses, like the one described below, may contain
“open source” licensed software
(under the more permissive licenses, like the MIT and BSD Licenses),
but the code they license may not be included in any open source
project, unless the code is licensed under a parallel non-proprietary
license that permits such use.

The following license is the creation of the author. It licenses the
hypothetical software of the Mildew Corporation, using terms found in
virtually all proprietary licenses.

1. General. The
software, documentation and any fonts accompanying this License
whether on disk, in read only memory, on any other media or in any
other form (collectively the
“Software”) are licensed, not sold,
to you by Mildew Computer, Inc.
(“Mildew”) for use only under the
terms of this License, and Mildew reserves all rights not expressly
granted to you. The rights granted herein are limited to
Mildew’s intellectual property rights in the Mildew
Software and do not include any other patents or intellectual
property rights. You own the media on which the Mildew Software is
recorded but Mildew and/or Mildew’s licensor(s)
retain ownership of the Software itself.

This provision provides that the software and associated
documentation provided by Mildew are only licensed, not sold, to the
consumer. This provision is substantially similar in effect to
language used in the open source and free software licenses already
described. The only rights granted are those specifically described
in the license; all other rights are reserved.

The sentence stating that Mildew does not license any property rights
other than those that it owns is likely meaningless. By licensing the
Software, Mildew is implicitly representing that it has the authority
to license all of its components, whether those components are its
own work or not. It seems unlikely that a court would hold that
Mildew was not responsible for damages to a consumer arising from
infringement if the Software turned out to infringe the intellectual
property rights of a third party. After all, given the closed nature
of the licensed software, consumers are not allowed to determine for
themselves whether the software was infringing, even if they have the
inclination or the resources to do so.

The second section of the license makes clear the very

strict limitations on the use of the
software: not only may the end user not distribute the software, he
cannot even install more than one copy of it at a time.

2. Permitted License Uses and
Restrictions. This License allows you to install and use one (1) copy
of the Software on a single device or computer at a time. This
License does not allow the Software to exist on more than one such
device or computer at a time, and you may not make the Software
available over a network where it could be used by multiple devices
or multiple computers at the same time.

Because of these limitations, every user of the software, whether on
a network or otherwise, must be individually licensed. This type of
restriction is contained in almost every proprietary license and is
universally enforced by the courts. The second paragraph continues
with a narrow exception to this restriction.

You may make one copy of the Software in machine-readable form for
backup purposes only; provided that the backup copy must include all
copyright or other proprietary notices contained on the original.

The next part of this sentence expressly bars any attempt to derive
any of the utility of the code for use other than in the licensed
Software.

Except as and only to the extent expressly permitted in this License
or by applicable law, you may not copy, decompile, reverse engineer,
disassemble, attempt to derive the source code of, modify, or create
derivative works of the Software or any part thereof. Any attempt to
do so is a violation of the rights of Mildew and its licensors of the
Software. If you breach this restriction, you may be subject to
prosecution and damages.

Breaching this provision would certainly terminate the license and
would render the user liable for damages for further use. Although it
is hard to see what damages, if any, Mildew would suffer from such
unauthorized use beyond the sales price of another unit of the
Software, such use could obviously lead to more substantial forms of
infringement through the creation and distribution of derivative
works. In addition, reverse engineering or otherwise trying to derive
the source code from software could violate U.S. copyright law or the
Digital Millennium Copyright Act. Such source code certainly could
not be used or distributed in any event, without violating the civil
and criminal laws of the United States.

The final provision is a special disclaimer of liability, noting that
the Software is not intended for use in high-risk applications.

THE SOFTWARE IS NOT INTENDED FOR USE IN WHICH THE FAILURE OF THE
SOFTWARE COULD LEAD TO DEATH, PERSONAL INJURY, OR SEVERE PHYSICAL OR
ENVIRONMENTAL DAMAGE.

The third section bars transfers or sales of the
licensed software, except for the exception provided under law by the
first-sale doctrine, which permits users to sell the rights acquired
by license along with the physical medium, regardless of the terms
under which the work was originally acquired.

3. Transfer. You
may not rent, lease, lend or sublicense the Software. You may,
however, make a one-time permanent transfer of all of your license
rights to the Software to another party, provided that: (a) the
transfer must include all of the Software, including all its
component parts, original media, printed materials and this License;
(b) you do not retain any copies of the Software, full or partial,
including copies stored on a computer or other storage device; and
(c) the party receiving the Software reads and agrees to accept the
terms and conditions of this License.

This paragraph does not grant any rights to the licensee that he or
she would not otherwise have by operation of law.

Like most of the open source and free software licenses already
examined, the license provides for automatic termination upon
any breach of the license.

4. Termination.
This License is effective until terminated. Your rights under this
License will terminate automatically without notice from Mildew if
you fail to comply with any term(s) of this License. Upon the
termination of this License, you shall cease all use of the Mildew
Software and destroy all copies, full or partial, of the Mildew
Software.

However, because the rights granted by the license are so limited in
the first place, the effects of the termination are not likely to be
severe, at least for programs purchased by individual consumers. As
already noted, the measure of damages for continuing use of the
licensed program is not likely to be greater than the sales price of
the Software. It should be noted, however, that U.S. copyright laws
provide for potentially severe penalties for unlawful distribution of
copyrighted material, including punitive damages.

The fifth section provides a limited warranty for the medium on which
the code of the Software is carried.

Commercial
software usually carries at least this minimal a warranty.

5. Limited Warranty on Media. Mildew
warrants the media on which the Software is recorded and delivered by
Mildew to be free from defects in materials and workmanship under
normal use for a period of ninety (90) days from the date of original
retail purchase. Your exclusive remedy under this Section shall be,
at Mildew’s option, either a refund of the purchase
price of the product containing the Software or replacement of the
Software which is returned to Mildew. THIS LIMITED WARRANTY AND ANY
IMPLIED WARRANTIES ON THE MEDIA INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR
PURPOSE, ARE LIMITED IN DURATION TO NINETY (90) DAYS FROM THE DATE OF
ORIGINAL RETAIL PURCHASE. SOME JURISDICTIONS DO NOT ALLOW LIMITATIONS
ON HOW LONG AN IMPLIED WARRANTY LASTS, SO THE ABOVE LIMITATION MAY
NOT APPLY TO YOU. THE LIMITED WARRANTY SET FORTH HEREIN IS THE ONLY
WARRANTY MADE TO YOU AND IS PROVIDED IN LIEU OF ANY OTHER WARRANTIES
(IF ANY) CREATED BY ANY DOCUMENTATION OR PACKAGING. THIS LIMITED
WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS, AND YOU MAY ALSO HAVE OTHER
RIGHTS WHICH VARY BY JURISDICTION.

The following provisions restate the same limitations articulated by
the second to last sentence of the fifth paragraph: Mildew disclaims
all responsibility for any damages caused by the Software, except to
the extent it is prohibited from doing so by law.

6. Disclaimer of Warranties. YOU
EXPRESSLY ACKNOWLEDGE AND AGREE THAT USE OF THE SOFTWARE IS AT YOUR
SOLE RISK AND THAT THE ENTIRE RISK AS TO SATISFACTORY QUALITY,
PERFORMANCE, ACCURACY AND EFFORT IS WITH YOU. EXCEPT FOR THE LIMITED
WARRANTY ON MEDIA SET FORTH ABOVE AND TO THE MAXIMUM EXTENT PERMITTED
BY APPLICABLE LAW, THE SOFTWARE IS PROVIDED “AS
IS”, WITH ALL FAULTS AND WITHOUT WARRANTY OF ANY
KIND, AND DANGER AND DANGER’S LICENSORS
(COLLECTIVELY REFERRED TO AS
“DANGER” FOR THE PURPOSES OF
SECTIONS 6 AND 7) HEREBY DISCLAIM ALL WARRANTIES AND CONDITIONS WITH
RESPECT TO THE SOFTWARE, EITHER EXPRESS, IMPLIED OR STATUTORY,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES AND/OR
CONDITIONS OF MERCHANTABILITY, OF SATISFACTORY QUALITY, OF FITNESS
FOR A PARTICULAR PURPOSE, OF ACCURACY, OF QUIET ENJOYMENT, AND
NON-INFRINGEMENT OF THIRD PARTY RIGHTS. DANGER DOES NOT WARRANT
AGAINST INTERFERENCE WITH YOUR ENJOYMENT OF THE SOFTWARE, THAT THE
FUNCTIONS CONTAINED IN THE SOFTWARE WILL MEET YOUR REQUIREMENTS, THAT
THE OPERATION OF THE SOFTWARE WILL BE UNINTERRUPTED OR ERROR-FREE, OR
THAT DEFECTS IN THE SOFTWARE WILL BE CORRECTED. NO ORAL OR WRITTEN
INFORMATION OR ADVICE GIVEN BY DANGER SHALL CREATE A WARRANTY. SHOULD
THE SOFTWARE PROVE DEFECTIVE, YOU ASSUME THE ENTIRE COST OF ALL
NECESSARY SERVICING, REPAIR OR CORRECTION. SOME JURISDICTIONS DO NOT
ALLOW THE EXCLUSION OF IMPLIED WARRANTIES OR LIMITATIONS ON
APPLICABLE STATUTORY RIGHTS OF A CONSUMER, SO THE ABOVE EXCLUSION AND
LIMITATIONS MAY NOT APPLY TO YOU.

7. Limitation of Liability. TO THE
EXTENT NOT PROHIBITED BY LAW, IN NO EVENT SHALL DANGER BE LIABLE FOR
PERSONAL INJURY, OR ANY INCIDENTAL, SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES WHATSOEVER, INCLUDING, WITHOUT LIMITATION,
DAMAGES FOR LOSS OF PROFITS, LOSS OF DATA, BUSINESS INTERRUPTION OR
ANY OTHER COMMERCIAL DAMAGES OR LOSSES, ARISING OUT OF OR RELATED TO
YOUR USE OR INABILITY TO USE THE SOFTWARE, HOWEVER CAUSED, REGARDLESS
OF THE THEORY OF LIABILITY (CONTRACT, TORT OR OTHERWISE) AND EVEN IF
DANGER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. SOME
JURISDICTIONS DO NOT ALLOW THE LIMITATION OF LIABILITY FOR PERSONAL
INJURY, OR OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THIS LIMITATION
MAY NOT APPLY TO YOU. In no event shall Mildew’s
total liability to you for all damages (other than as may be required
by applicable law in cases involving personal injury) exceed the
amount of fifty dollars ($50.00). The foregoing limitations will
apply even if the above stated remedy fails of its essential purpose.

For a more thorough discussion of the meaning and effect of such
provisions, see the discussion of warranties in Chapter 1. The last sentence of the seventh paragraph
provides a fallback position for Mildew. In the event that use of the
Software results in damages to the user, the most the user can
collect is $50. It seems unlikely that this provision would ever be
enforced: to the extent that a court determines that Mildew is liable
in spite of all the previous disclaimers, it seems unlikely to limit
the injured party to $50 in recovery.

8. Export Law Assurances. You may not
use or otherwise export or reexport the Software except as authorized
by United States law and the laws of the jurisdiction in which the
Software was obtained. In particular, but without limitation, the
Software may not be exported or re-exported (a) into (or to a
national or resident of) any U.S. embargoed countries (currently
Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria) or (b) to
anyone on the U.S. Treasury Department’s list of
Specially Designated Nationals or the U.S. Department of Commerce
Denied Person’s List or Entity List. By using the
Software, you represent and warrant that you are not located in,
under control of, or a national or resident of any such country or on
any such list.

The eighth section of Mildew’s license does not
impose additional restrictions on users so much as inform them on the
limitations on their ability to transfer the software, even in the
limited manner described in the third section.

The ninth section provides that U.S. government users are bound by
the same terms of the license as are other users, provisions typical
in commercial software licenses.

9. Government End Users. The Software and
related documentation are “Commercial
Items”, as that term is defined at 48 C.F.R.
§2.101, consisting of “Commercial
Computer Software” and “Commercial
Computer Software Documentation”, as such terms are
used in 48 C.F.R. §12.212 or 48 C.F.R.
§227.7202, as applicable. Consistent with 48 C.F.R.
§12.212 or 48 C.F.R. §227.7202-1 through
227.7202-4, as applicable, the Commercial Computer Software and
Commercial Computer Software Documentation are being licensed to U.S.
Government end users (a) only as Commercial Items and (b) with only
those rights as are granted to all other end users pursuant to the
terms and conditions herein. Unpublished-rights reserved under the
copyright laws of the United States.

The tenth section provides choice of law and forum selection clauses
as previously discussed in connection with the Mozilla Public License
in Chapter 3.

10. Controlling Law and Severability and
Choice of Forum. This License will be governed by and construed in
accordance with the laws of the State of Colorado, as applied to
agreements entered into and to be performed entirely within Colorado
between Colorado residents, that is, without giving any effect to the
choice of laws provisions of the State of Colorado. This License
shall not be governed by the United Nations Convention on Contracts
for the International Sale of Goods, the application of which is
expressly excluded. If for any reason a court of competent
jurisdiction finds any provision, or portion thereof, to be
unenforceable, the remainder of this License shall continue in full
force and effect. You agree that the only courts in which You will
bring lawsuits concerning the application or enforcement of this
License are courts of competent jurisdiction located in the State of
Colorado and you consent to the exercise of jurisdiction by any such
court. This paragraph shall survive in full force and effect
regardless of any termination of this License.

This paragraph works one minor variation on the typical forum
selection clause, in that it imposes a limitation only on
“You”—i.e., the licensee. The
Licensor presumably could bring an action in any court having
jurisdiction over the licensee, not just the courts of Colorado.

The eleventh section reflects that the Software contains code
originally licensed under an open source license, in this case, code
licensed under an MIT License.

11. Third Party Notices and Conditions.
The Software may include or utilize certain software which is owned
by Mongrel Mix, the source code of which is available under the MIT
License (the “Mongrel Mix Code”).
Mildew may make modifications to this Mongrel Mix Code. The license
for the Mongrel Mix Code is included here as Exhibit A. Those terms
are fully applicable to the use of those portions of the Software
that consist of or are derived from the Mongrel Mix Code.

The conditions imposed by the MIT license are described in Chapter 2. Mildew, as a licensee of Mongrel Mix, has
complied with its license obligations by noting that Mongrel Mix
originated part of the code contained in the Software and by
attaching the license applicable to that Code as an exhibit. As
described in Chapter 2, Mildew is under no
obligation to make available the source code for its modifications to
the Mongrel Mix code or the original, unmodified source code.
Enterprising end users, of course, can track down the original source
code for themselves.

The final provision contains a merger provision and a bar on oral
modifications, as previously described.

12. Complete Agreement; Governing Language. This License constitutes
the entire agreement between the parties with respect to the Software
licensed hereunder and supersedes all prior or contemporaneous
understandings regarding such subject matter. No amendment to or
modification of this License will be binding unless in writing and
signed by Mildew.

A proprietary license, because it authorizes so few actions beyond
the use of the program for the purpose for which it was intended, is
usually simple to describe and to understand, despite the legal
language. As described in Chapter 1, because
the underlying code is kept closed, these licenses tend to create
evolutionary dead ends. Every year, as software companies like Mildew
go out of business, all of the utility of their code dies with them.
Even after the rights under copyright or patent have expired, that
code is essentially buried (assuming anyone, at that point, is still
interested in it), because the source code for the program is
unlikely to be available.

The proprietary license described here is a
”
shrinkwrap” license
typical to single license sales of programs to individual members of
the public. Like any other license, however, proprietary licenses are
subject to significant variation. For example, it would not be
impossible for a proprietary license to make available the source
code for the licensed program but prohibit any use of that source
code for some defined period of time, such as five years. This would
preserve much of the benefit of the proprietary license
model—the ability to make income off of a monopoly—while
avoiding at least one negative outcome of the proprietary model.

As in everything else,

negotiating power has
considerable effect on the terms of the license in question. This
license presumes highly asymmetric bargaining power. The seller of
the software in question has the better bargaining position: the
incremental profit increase associated with the additional sale of a
single license, from its point of view, is far too little to justify
individual negotiation. The buyer of the software is left essentially
in a take-it-or-leave-it position and the result is a license highly
favorable to the seller.

This is not always the case. In a situation in which the poles of
power are reversed, such as when the seller is a small software
cooperative and the buyer is a Fortune 500 company, the buyer will
probably demand a number of benefits not included in this license,
such as express warranties that the software will work as described,
access to the source code, and perhaps the right to make changes to
the source code, or even to distribute modified versions of the
program.

Thus, while the Mildew proprietary license is not an atypical license
for the class of licenses it represents—that is,
“shrinkwrap” licenses for sales of
individual licenses to the public—it is not intended to
describe all proprietary licenses. Individually negotiated licenses,
particularly between parties with more equal bargaining power, may
contain substantially different terms and avoid some of the negative
consequences of proprietary licensing.