license v license v /license/

[Alexander Terekhov]

Nice paper: 

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1586580&download=yes 
(Why License Agreements Do Not Control Copy Ownership: First Sales and
Essential Copies) 

I especially like this part: 

"When "license" is used as a noun in the copyright context, it means
something like, "a grant by the holder of a copyright to another of any
of the rights embodied in the copyright short of an assignment of all
rights" as in "The agreement contained a license to reproduce 20 copies
of the photograph." 

When "license" is used as a verb it typically means "to give permission
or consent" as in "The author licensed her publication right to the
nation's largest distributor." 

These uses of the word relate only to the intangible copyright. 

The word "license" is also, unfortunately, used in conjunction with
tangible things. First, as a noun it is often used synonymously with the
terms "agreement" or "contract" when that underlying agreement contains
grants of copyright permissions, as in "Did she sign the license?" This
usage seems to lead to confusion less often and I will not address it
further here. 

However, particularly in the software context, the word "license" is
used as a verb in yet another way that I wish to focus on. Software
distributors often say, "We only license our software. We do not sell
it." This is a difficult sentence to parse because of the layers of
ambiguity involved, but particularly from reading the cases, one comes
to understand that the intended definition is not just that described
above of "to give permission or consent" with respect to some right of
copyright, but instead is used in a way that means something more like: 

to transfer to another possession of a tangible object in which a
copyrighted work is embodied, for a specified period of time or
perpetually, without transferring title to the tangible object, and
typically providing at least some copyright permission. 

It would be useful to have a different term to indicate this unique use
of "license." Something like "no title to the copy license" would
perhaps convey the intended meaning, but would be exceedingly
cumbersome. For purposes of clarity in this section, when I talk about
this sense of "license" I will place the word in italics, like so:
/license/.140 

Usage of the word /license/ has caused rampant confusion. Before
considering some examples of this confusion, it is worthwhile to provide
some historical context on the development of this usage of the term
/license/. The Third Circuit explained, in an opinion from 1991, that: 

When these form licenses were first developed for software, it was, in
large part, to avoid the federal copyright law first sale doctrine...
[Court describes software rental companies.] The first sale doctrine,
though, stood as a substantial barrier to successful suit against these
software rental companies, even under 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... This amendment renders the need to characterize the
original transaction as a license largely anachronistic.141 

But the usage, even if anachronistic, has persisted, in part because
software distributors wanted more than to defeat the first sale doctrine
in the case of software rental companies. Even after Congress responded
to that concern, software distributors were unwilling to give up the
/licensing/ fiction because it appeared to provide a means to other
desirable ends such as price discrimination, controlling ancillary
markets, and preventing competition in related goods.142 

The merits of permitting copyright owners these additional benefits are
not my focus. I am concerned with how the ambiguous use of the word
"license" has created a land mine for courts who end up speaking
imprecisely or in the worst case scenarios, reaching erroneous
conclusions. 

The Microsoft Corp. v. Software Wholesale Club, Inc. opinion provides
one example. The court wrote, "However, a party that licenses its
products rather than selling them may avoid the application of the
first-sale doctrine. See, e.g., Harmony Computers & Elecs., (the fact
that Microsoft licenses rather than sells its products likely precludes
application of the first-sale doctrine); Novell, Inc., 2000 U.S. Dist.
LEXIS 9975, at *7-18 (the first-sale defense applied, but only because
Novell sold, rather than licensed, its software product)."143 

What does the phrase "licenses its products" mean here? Both "license"
and "products" could have two meanings.144 If it just means that a
license, as in a grant of permission, is provided with respect to some
right of copyright, then it has fallen into the error of ignoring 17
U.S.C. § 202, by failing to recognize the possibility of ownership of a
copy independent from ownership of the copyright, to be discussed more
fully next. But, if it instead means /license/, that is, a transfer of
possession without a transfer of title to the copy, then one has
presumed the answer to the question being asked, that is, in trying to
determine whether someone is an owner of a copy, it is not much use to
say that those who are not owners of a copy do not have the rights of
owners of a copy. We knew this at the outset. What was wanted was a
feature of the transaction that would distinguish the owners from the
non-owners, other than the label applied by the copyright holder.145" 

regards,
alexander.

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