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Factual Background Edit
Vault manufactured and sold a product called PROLOK, which prevented unauthorized copying of 3.5 inch floppy diskettes. Quaid manufactured and sold a product called CopyWright, which contained an algorithm that defeated PROLOK and allowed diskettes protected with Vault's software to be copied.
Vault distributed its product with a shrinkwrap license that provided that "the license agreement prohibits reverse engineeding as provided by the Louisiana Software License Enforcement Act [SLEA]."
Trial Court Proceedings Edit
The district court held, without explanation, that the shrinkwrap license at issue was "a contract of adhesion which could only be enforceable" if the provisions of a Louisiana statute (which made such license agreements enforceable) was valid and not preempted by federal copyright law. The district court concluded that the Louisiana statute was invalid, since it sought to make enforceable various provisions of standard shrinkwrap licenses that were contrary to federal copyright law, and therefore, was preempted.
Appellate Court Proceedings Edit
On appeal, the Fifth Circuit Court of Appeals affirmed the district court's ruling on the ground that the Louisiana law prohibited decompilation or disassembly of the licensed software, which could prevent the owner of a copy of the software from exercising the rights granted to it under Section 117 of the Copyright Act — to make an "adaptation of the program as an essential step in the utilization of the computer program."