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Re: Open source - Free software

From: Alexander Terekhov
Subject: Re: Open source - Free software
Date: Fri, 29 Sep 2006 16:50:00 +0200

David Kastrup wrote:
> Software is not sold.

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

Similarly, a software vendor may contractually allow use by a single
user of a copy of "Windows NT" and, in a separate transaction, deliver a
copy of "Windows NT" under a license allowing the licensee to use the
software in a 10,000 site network or allowing it to make 20,000
additional copies for commercial distribution. In the latter case, the
provider, in effect, transferred 20,000 copies in the single tangible

21. See Microsoft Corp. v. DAK Indus., Inc., 66 F.3d 1091, 1095 (9th
Cir. 1995) (concluding that a distribution agreement involving a lump
sum payment and delivery of a master disk is more like a sale of the
right to make the stated number of copies


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