RE: Resale of Software

Be careful not to overstate the Court's holding, or gloss over the two key factual findings underpinning the Court's decision to deny Adobe's motion for preliminary injunction on the copyright infringement claim. The Court held, inter alia: (1) the First Sale Doctrine applied because, based on the evidence of the economic reality of the transaction before the Court, "the substance of the transaction at issue here is a sale and not a license" (emphasis added); and (2) Softman was not subject to the terms of the End User License Agreement because it did not assent to it, as assent to the EULA was available only when the software was installed, and Softman never installed the software (rather, it merely purchased a suite of Adobe software, and separately resold the individual programs that made up the suite). Indeed, the Court stated specifically that it "finds it unnecessary to reach the question of the general validity of shrink-wrap licenses at this stage because the Court has determined that Softman is not bound by the EULA because there was no assent to its terms." (emphasis added).

Robert R. Baron, Jr., Esquire
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street
51st Floor
Philadelphia, PA 19103

phone: (215) 864-8335
fax: (215) 864-9836

-----Original Message-----
From: Aker, Susan [mailto:Susan.Aker[_at_]goldkist.com] Sent: Wednesday, December 19, 2001 10:16 AM To: Multiple recipients of list
Subject: RE: Resale of Software

Marvin,

A recent case in California, Adobe vs. Softman, says that 'First Sale' Doctrine applies to software. Here is the writeup from The Register:

The judge, in the case Adobe vs Softman heard in the Central District of California, has ruled that consumers can resell bundled software, no matter what the EULA, or End User License Agreement, stipulates. Specifically, the ruling decrees that software purchases be treated as sales transactions, rather than explicit license agreements. In other words, consumers should have the same rights they'd enjoy under existing copyright legislation when buying a CD or a book. They can't make copies, but they can resell what they own.

"The balance of rights in intellectual property law is already tilted
heavily in favor of the intellectual property owner," ruled Judge Dean Pregerson, in a burst of enlightenment.

In the case SoftMan was reselling Adobe software it received in bundles or
"collections". Adobe claimed this was a breach of its trademark. Judge
Pregerson wasn't convinced, and decided that existing copyright law should apply:

"... the purchaser commonly obtains a single copy of the software, with
documentation, for a single price, which the purchaser pays at the time of the transaction, and which constitutes the entire payment for the 'license.' The license runs for an indefinite term without provisions for renewal. In light of these indicia, many courts and commentators conclude that a
"shrinkwrap license" transaction is a sale of goods rather than a license."

Hope that helps,
Susan Aker
http://www.amfcc.org

-----Original Message-----
From: Marvin L. Egolf [mailto:megolf[_at_]home.com] Sent: Tuesday, December 18, 2001 9:56 AM To: Multiple recipients of list
Subject: Resale of Software

I am working with a colleague who is a CPA, assisting him with the receivership of a company in
Baltimore. Part of the tasks is selling the assets to satisfy a debt owed a secured lender. My
question to the list: What are the intricacies of selling software that the company possesses?
Can we do it? Is it a no no? I suppose that when we sell a PC, if it has NT loaded on it, we
can and should sell the related CD if it is a single user license. On the other hand, if it is
a multi-user license, unless we sell the entire PC collection to one buyer, we should delete the
software prior to sale. Please offer your thoughts regarding such issues. Of course I will
read the documentation that accompanies the actual source media for the software, but I would
like to get a broad commentary.

In any event, I hope everyone is enjoying all that this time of the year brings.

--
Marvin L. Egolf
Cellular 410-808-8240
Text to cell 4108088240[_at_]messaging.nextel.com
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