From Litigation and Trial:
Apple’s new “free” iBooks Author program, which allows authors to create their own professional layouts while they write books, includes an astonishingly greedy and overbearing clause in its end-user license agreement (“EULA”):
B. Distribution of your Work. As a condition of this License and provided you are in compliance with its terms, your Work may be distributed as follows:
- (i) if your Work is provided for free (at no charge), you may distribute the Work by any available means;
- (ii) if your Work is provided for a fee (including as part of any subscription-based product or
service), you may only distribute the Work through Apple and such distribution is subject to the following limitations and conditions: (a) you will be required to enter into a separate written agreement with Apple (or an Apple affiliate or subsidiary) before any commercial distribution of your Work may take place; and (b) Apple may determine for any reason and in its sole discretion not to select your Work for distribution.Apple will not be responsible for any costs, expenses, damages, losses (including without limitation lost business opportunities or lost profits) or other liabilities you may incur as a result of your use of this Apple Software, including without limitation the fact that your Work may not be selected for distribution by Apple.
As Bott explains, “The nightmare scenario under this agreement? You create a great work of staggering literary genius that you think you can sell for 5 or 10 bucks per copy. You craft it carefully in iBooks Author. You submit it to Apple. They reject it. Under this license agreement, you are out of luck. They won’t sell it, and you can’t legally sell it elsewhere. You can give it away, but you can’t sell it.”
. . . .
There are two types of licenses under copyright law, an exclusive license and a nonexclusive license. Here’s how they differ:
In an exclusive license, the copyright holder permits the licensee to use the protected material for a specific use and further promises that the same permission will not be given to others. The licensee violates the copyright by exceeding the scope of this license. …
By contrast, in the case of an implied nonexclusive license, the licensor-creator of the work, by granting an implied nonexclusive license, does not transfer ownership of the copyright to the licensee. The copyright owner simply permits the use of a copyrighted work in a particular manner.
IAE, INC. v. Shaver, 74 F.3d 768, 775 (7th Cir. 1996).
The iBooks Author EULA plainly tries to create an exclusive license: Apple claims, in essence, the copyright holder [that’s the author] permits the licensee [that’s Apple] to use the protected material for a specific use [the iBooks store] and further promises that the same permission will not be given to others [that’s the ‘you may only distribute the Work through Apple’ part].
Here’s the problem: under the Copyright Act, an exclusive license is defined by 17 U.S.C. § 101 as a “transfer of copyright ownership,” and under 17 U.S.C. § 204 such a transfer “is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed.”
Of course, Apple doesn’t ask anyone to sign anything before using iBooks Author.
. . . .
Apple seems to have recognized that problem: the EULA demands “you will be required to enter into a separate written agreement with Apple (or an Apple affiliate or subsidiary) before any commercial distribution of your Work may take place.”
. . . .
Which means that, in the end, the iBooks Author EULA leaves both Apple and the author in a strange stand-off: Apple doesn’t actually have the right to tell the author not to take their work somewhere else, but the author can’t do that without breaching the EULA — even though they retain full rights in their copyright.
But Apple has been too clever by half here: if an author does breach the EULA (by not subsequently signing the written agreement after having used the “free” software) and distributes their iBooks-created-work elsewhere, what are Apple’s damages? Because Apple doesn’t have a copyright interest in the book (like an exclusive license), they can’t claim lost royalties as the damage. Instead, they have to claim that an author breached the EULA of a program that users did not have to pay for in money.
Link to the rest at Litigation and Trial and thanks to Tony for the tip.
The author of this blog post is an attorney and makes a good argument for Apple backing itself into a difficult legal corner. There are lots of legal arguments going back and forth in the comments at Litigation and Trial.
The bigger picture is that Apple made a serious unforced management error in going down this road in the first place.
It is the height of stupidity to put something in a EULA that is not reasonable on its face and clearly enforceable. If you get into a fight and a judge sees something unreasonable or overreaching, you never know how far the judge will go in dismantling the contract.
As Passive Guy mentioned earlier, Apple will have written agreements with the big textbook publishers covering their use of the iBooks Author program and the iBookstore. PG is not privy to those contracts, but he bets they are not onerous because Apple needed the textbook publishers lined up before launch to give its program credibility.
This whole mess turns on the provisions that Apple wants to apply to independent authors. The net effect of this is that Apple looks extremely overreaching toward the little guys while it’s in bed with the big guys.