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Re: Adobe open source license -- is this licence free?

On 1/26/06, Yorick Cool <yorick.cool@fundp.ac.be> wrote:
>  And licensing software is not selling it.

Yorick, Yorick. The courts disagree.

Adobe asserts that its license defines the relationship between Adobe
and any third-party such that a breach of the license constitutes
copyright infringement. This assertion is not accurate because
copyright law in fact provides certain rights to owners of a
particular copy. This grant of rights is independent from any
purported grant of rights from Adobe.

                (2) Sale v. License

                    (a) Historical Background

Historically, the purpose of "licensing" computer program copy use was
to employ contract terms to augment trade secret protection in order
to protect against unauthorized copying at a time when, first, the
existence of a copyright in computer programs was doubtful, and,
later, when the extent to which copyright provided protection was
uncertain. (See Rice Decl. ¶ 6.) Computer program copy use "licensing"
continued after federal courts interpreted the Copyright Act to
provide substantial protection for computer programs as literary
works. (Id. at ¶ 7.) In Step-Saver Data Systets, Inc. v. Wise
Technology, the Third Circuit examined the historical development of
the use of licensing in the software industry and concluded that
subsequent changes to the Copyright Act had rendered the need to
characterize the transaction as a license "largely anachronistic." 939
F.2d 91, 96 n.7 (3d Cir. 1991).10


    10 The court in Step-Saver explained: "When these form licenses
were first developed for software, it was, in large part, to avoid the
federal copyright law first sale doctrine . . . . Under this doctrine,
one could purchase a copy of a computer program, and then 'Lease it or
lend it to another without infringing the copyright on the program. .
. . Consumers, instead of purchasing their own copy of the program,
would simply rent a copy of the program, and duplicate it . . . .
[S]oftware producers wanted to sue the companies that were renting the
copies of the program to individual consumers, rather than the
individual consumers. Th: first sale doctrine, though, stood as a
substantial barrier to successful suit against these software rental
companies, even nder a theory of contributory infringement. By
characterizing the original transaction between the software producer
and the software rental company as a license, rather than a sale, and
by making the license personal and non-transferable, software
producers hoped to avoid the reach of the first sale doctrine and to
establish a basis in state contract law for suing the software rental
companies directly. Questions remained, however, as to whether the use
of state contract law to avoid the first sale doctrine would be
preempted either by the federal copyright statute (statutory
preemption) or by the exclusive constitutional grant of authority over
copyright issues to the federal government (constitutional
preemption). [Citations.] Congress recognized the problem, and, in
1990, amended the first sale doctrine as it applies to computer
programs and phonorecords. [Citations.] As amended, the first sale
doctrine permits only non-profit libraries and educational
institutions to lend or lease copies of software and phonorecords.
[citations.] (Under the amended statute, a purchaser of a copy of a
copyrighted computer program may still sell his copy to another
without the consent of the copyright holder.)." 939 F.2d at 96, n.7.

                    (b) Adobe Sells its Software

A number of courts have held that the sale of software is the sale of
a good within the meaning of Uniform Commercial Code. Advent Sys. Ltd.
v. Unisys Corp., 925 F.2d 670, 676 (3d Cir. 1991); Step-Saver, 929
F.2d at 99-100; Downriver Internists v. Harris Corp., 929 F.2d 1147,
1150 (6th Cir. 1991). It is well-settled that in determining whether a
transaction is a sale, a lease, or a license, courts look to the
economic realities of the exchange. Microsoft Corp. v. DAK Indus., 66
F.3d 1091 (9th Cir. 1995); United States v. Wise, 550 F.2d 1180 (9th
Cir. 1977). In DAK, Microsoft and DAK entered into a license agreement
granting DAK certain nonexclusive license rights to Microsoft's
computer software. The agreement provided that DAK would pay a royalty
rate per copy of computer software that it distributed. Subsequently,
DAK filed a petition for bankruptcy, and failed to pay the final two
out of a total of five installments. Microsoft filed a motion for the
payment of an administrative expense, claiming that it should be
compensated for DAK's post-bankruptcy petition use of the license
agreement. On appeal, the Ninth Circuit held that the economic
realities of the agreement indicated that it was a sale, not a license
to use. Thus, Microsoft simply held an unsecured claim and not an
administrative expense. The court found that the agreement was best
characterized as a lump sum sale of software units to DAK, rather than
a grant of permission to use an intellectual property. The court in
DAK noted:

    Because we look to the economic realities of the agreement, the
fact that the agreement labels itself a "license" and calls the
payments "royalties," both terms that arguably imply periodic payment
for the use rather than sale of technology, does not control our

DAK, GG F.3d at 1095, n.2. Other courts have reached the same
conclusion: software is sold and not licensed. See, e.g., RRX Indus.,
Inc. v. Lab-Con Inc., 772 F.2d 543, 546 (9th Cir. 1985); Applied Info.
Mgmt., Inc, v. Icart, 976 Supp. 149, 155 (E.D.N.Y. 1997) finding that
whether a transaction denominated a "license" was in act a sale
conveying ownership was a disputed question of fact); Novell, Inc. v.
CPU Distrib., Inc., 2000 U.S. Dist. Lexis 9975 (S.D. Tex. 2000). In
Novell, a software manufacturer was pursuing a discount retailer for
copyright infringement. Like Adobe, CPU argued that it purchased the
software from an authorized source, and was entitled to resell it
under the first sale doctrine. Novell claimed that it did not sell
software but merely licensed it to distribution partners. The court
held that these transactions constituted sales and not a license, and
therefore that the first sale doctrine applied. 2000 U.S. Dist. Lexis
9975 at *18.

Adobe frames the issue as a dispute about the ownership of
intellectual property. In fact, it is a dispute about the ownership of
individual pieces of Adobe software. Section 202 of the Copyright Act
recognizes a distinction between tangible property rights in copies of
the work and intangible property rights in the creation itself.11 In
this case, no claim is made that transfer of the copy involves
transfer of the ownership of the intellectual property within. (See
SoftMan's Suppl. Brief at 9-10) ("Adobe has ownership rights in the
copyright of [its] software.").) What is at stake here is the right of
the purchaser to dispose of that purchaser's particular copy of the

First sale, my friend.

(German court ruling triggers 30% price cuts on Windows)


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