Unconscionability 2.0 and the IP Boilerplate: a Revised Doctrine of Unconscionability for the Information Age

Unconscionability 2.0 and the IP Boilerplate: A Revised Doctrine of Unconscionability for the Information Age By Amit Elazari A dissertation submitted in partial satisfaction of the requirements for the degree of Doctor of the Science of Law in the Graduate Division of the University of California, Berkeley Committee in charge: Professor Steven Davidoff Solomon, Chair Professor Deirdre K. Mulligan Professor Chris Jay Hoofnagle Professor Robert P. Merges Professor Molly Shaffer Van Houweling Fall 2018 Unconscionability 2.0 and the IP Boilerplate: A Revised Doctrine of Unconscionability for the Information Age © 2018 by Amit Elazari Abstract Unconscionability 2.0 and the IP Boilerplate: A Revised Doctrine of Unconscionability for the Information Age by Amit Elazari Doctor of the Science of Law University of California, Berkeley Professor Steven Davidoff Solomon, Chair In the information age, where fewer goods and more innovations are produced, intellectual property law has become the most crucial governing system. Yet, rather than evolving to fit its purpose, it has seemingly devolved—standard form contracts, governing countless creations, have formed an alternative de facto intellectual property regime. The law governing the information society is often prescribed not by legislators or courts, but rather by private entities, using technology and contracts to regulate much of the creative discourse. The same phenomena persist in other emerging areas of information law, such as data protection and cybersecurity laws. This dissertation offers a new analytical perspective on private ordering in intellectual property (IP) focusing on the rise of the IP boilerplate, the standard form contracts that regulate innovations and creations. It distinguishes between contracts drafted by the initial owners of the IP (such as EULAs) and contracts drafted by nonowners (such as platforms’ terms of use), and highlights the ascendancy of the latter in the user-generated content era. In this era, the drafter of the contract owns nothing, yet seeks to regulate the layman adherent’s creations, and sometimes even to redefine the contours of the public domain. Private ordering is expanding its governing role in IP, creating new problems, undermining the rights that legislators bestow on creators and users. While scholars often discuss the problems caused by IP boilerplate, solutions are left wanting. Inter-doctrinal solutions have been unjustly overlooked. IP scholars reject general contract doctrines as ill- equipped. Contracts scholars discard IP considerations, perpetuating consumerist perspectives. This dichotomy, deepened by the preemption doctrine, has led to the underutilization of the prominent doctrine governing standard form contracts, Unconscionability. Yet, in the aftermath of ProCD, preemption has failed to solve problems created by contracts in IP settings, while Unconscionability has evolved from a legal marginality to a coherent concept. Inspired by the Israeli purposive approach to unconscionability, this analysis aims to resurrect unconscionability as a pragmatic solution to problems created by IP boilerplate. According to this solution, the question of unconscionability is examined by asking, substantially, whether the provision benefits the relevant IP policies or negates them. Drawing on moral foundations, this solution seeks to avoid utilitarian biases and invites discourse between competing approaches. As a legal standard applicable to various relationships, even those that are nonconsumer based, it accommodates the dynamic adjustments often required when IP policies seek to address contemporary problems. 1 1 While IP scholarship has discarded unconscionability as ill-equipped, this dissertation suggests that it is an accessible solution that can accommodate extra-contractual notions. Precisely because the doctrine is rooted in contract law, its flexibility and broad applicability is why it could serve as a universal solution to myriad problems created by appropriating contracts. Adopting Unconscionability 2.0 would allow U.S. case law to align the roots of the doctrine with the needs of the information age. 2 To my family and my mentors. i TABLE OF CONTENTS I. Introduction ........................................................................................................................... 1 II. Introducing IP Boilerplate: When the Fine Print Undermines Creativity and Innovation ..... ............................................................................................................................... 14 A. The Adherent-User and the Adherent-Creator Distinction ............................................ 18 B. Adherent-Users IP Boilerplate........................................................................................ 21 i. Some Examples from Fair Use Waivers to the “Right-to-Repair” your Smartphone .. 23 ii. The Rise (and fall?) of the “Patent-Wrap” Boilerplate: Limitations on the First-Sale Doctrine, Ownership, and the Sale/License sham……………………………………......31 C. Adherent-Creators IP Boilerplate ................................................................................... 36 i. Social Networks and User-Generated Content: Cognitively Overburdened Creators . 36 ii. “Gag” Boilerplate: Assignment of Copyright in Consumers’ Reviews ...................... 40 iii. Some other Adherent-Creators: Students, Artists, Consultants and Employees ........ 42 D. The Technological Boilerplate: Unconscionability by Design ...................................... 48 E. The Rising Opposition: When the Fine Print Supports Creativity and Innovation ........ 50 F. A Game of Catch? Some Existing Solutions and the IP Boilerplate Paradox ................ 52 III. Unconscionability 1.0—A Brief History of an Alienating Discourse between Contracts and IP Law............................................................................................................................... 59 A. Why Unconscionability? ................................................................................................ 59 B. The Underutilization of the Unconscionability Doctrine in IP Settings ......................... 65 I. The Chicken and the Egg: The Dismissal of Unconscionability in IP Scholarship ..... 65 ii. The Preemption Doctrine and the Contract-IP “Dichotomy” ..................................... 72 iii. A Limited Tool Set: From ProCD and Preemption to Lexmark and Exhaustion ...... 80 iv. The Dialogue of the Deaf ........................................................................................... 89 v. Theoretical Tendentiousness—The Utilitarian Bias.................................................... 95 IV. Unconscionability 2.0—Towards A Revised Doctrine of Unconscionability Derived from Intellectual Property Rationales.......... ....................................................................................97 A. The Proposed Doctrine of Unconscionability 2.0 .......................................................... 98 i. Theoretical Background and Comparative Insights: Adopting A Purposive Approach to Unconscionability.................................................................................................. ........... 98 ii. Unconscionability 2.0: The Advantages of the Purposive Approach ....................... 105 iii. The Adoption of Unconscionability 2.0 in U.S. Law............................................... 113 iv. Unconscionability 2.0 in Negotiated Contracts and Between Sophisticated Parties 116 v. Unconscionability 2.0 in “Unconscionable Technology” ......................................... 118 ii B. A Robust Vision for Unconscionability 2.0 ................................................................. 121 i. Presumptions of Unconscionability 2.0 ...................................................................... 121 ii. Creating an Affirmative Right of Action .................................................................. 124 C. Some Case Studies—The Application of Unconscionability 2.0 ................................. 127 D. Unconscionability 2.0 in Other Technological Realms................................................ 131 E. Unconscionability 2.0: A “Wild Card” or a Winning Hand—Some Objections and Responses………………………………………………………………………………... 134 V. Conclusion ....................................................................................................................... 139 Bibliography .......................................................................................................................... 140 iii “[The] deployment of boilerplate to achieve widespread cancellation of user rights contributes to democratic degradation . the []EULA can override . what the federal intellectual property regimes enacted as appropriate user rights.”1 “[T]he rule-making process regarding the use of information is privatized, and the legal power to define the boundaries of public access to information is delegated to private parties.”2 “[T]he fine print is not a contract. It is nothing but paperwork and should have the legal fortune of junk mail.”3 “[F]reedom of contract must mean different things for different types of contracts. Its meaning must change with the social importance of the type of contract. .”4 I. INTRODUCTION In early 2013, at the age of twenty-seven, an emerging creator from Jerusalem directed a video- clip of the famous Dylan song, “Like a Rolling Stone.”5 The video allowed viewers a unique interactive experience as they flipped between sixteen channels of a

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