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  "The only thing necessary for the triumph of evil is for good men to do nothing"
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Last updated February 22, 2010

Licensing and licenses

What is a license? Under copyright law, it is a written permission from the copyright holder granting the licensee privileges that are normally reserved to the copyright holder. You need a license to drive a car or to fly airplanes. Fictional licenses include a license to kill, a license to steal, and so on. There are many trademark and copyright owners who want you to believe they retain the "right" to limit your use of their product by labeling the product with a "license". This simply is not true. A license requires affirmation of the terms by all parties before it is enforceable.

We have encountered people who don't "believe" the lawful purchaser of an item should be allowed to do certain things with that item and they are vocal and persistent in letting others know. What they fail to do is provide any proof of their beliefs in the way of logic, federal law, or court cases. We will do just that here.

Some trademark and copyright owners, such as those who market fabric, patterns, and software, put on the product (or make the claim) that the product is licensed for personal home use only and that it cannot be used for commercial purposes or resold.

In UMG Recordings vs Troy Augusto (2008 9th Cir Cent Calif), the judge outlined what constitutes a license:

In determining whether a transaction is a sale or a license, courts must analyze the "economic realities" of the transaction. Microsoft Corp. v. DAK Indus., 66 F.3d 1091, 1095 (9th Cir. 1995). "[T]he fact that the agreement labels itself a 'license' . . . does not control our analysis." Id. at 1095 n.2.
  1. The right to perpetual possession is a critical incident of ownership. See Krause v. Titleserv, Inc., 402 F.3d 119, 123 (2d Cir. 2005) (describing a person's "degree of ownership of a copy" as "complete" when "he may lawfully use it and keep it forever, or if so disposed, throw it in the trash"). Accordingly, the distributor of a copyrighted product's intent to regain possession is strong evidence that the product was licensed, not sold, to the recipient. The absence of this intent is strong evidence that the product was sold.
  2. Generally, licenses provide recurring benefits for the copyright owner. Microsoft, 66 F.3d at 1096 (determining that Microsoft sold its software to DAK in part because Microsoft received a set payment independent of DAK's length of use of the software); see also SoftMan Prods. Co. v. Adobe Sys., 171 F. Supp. 2d 1075 (C.D. Cal. 2001) (determining that Adobe sold its software in part because "the license runs for an indefinite term without provisions for renewal").
  3. Finally, the only benefit to a license for (the licensor) is to restrain transfer of its music. This purpose was rejected 100 years ago by the Supreme Court. See Bobbs-Merrill Co. v. Strauss, 210 U.S. 339 (1908) (rejecting a book publisher's attempt to restrict resale of a book through a label that prohibited sales for less than one dollar); see also RCA Mfg. Co. v. Whiteman, 114 F.2d 86, 90 (2d Cir. 1940) (Hand, J.) ("[RCA] had no power to impose the pretended servitude upon [its] records [by placing a 'Not Licensed for Radio Broadcast' label upon them]."); SoftMan, 171 F. Supp. 2d at 1084 ("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.").

So, the court has defined a license, as opposed to a sale, as being one where the licensor retains ownership of the item, where the licensor receives an on-going benefit (such as a montly or annual payment for use), and the "license" is not just to restrain trade. This court also noted that the licensor made no attempt to keep records of who had their product and did not demand it be returned when the "licensee" was done with it. Under the law the physical sale of an item does not include a license on its use.

Another indicia of a sale is the of collecting the entire price of its item up-front, in a single lump-sum payment. As the Ninth Circuit recognized in Microsoft Corp. v. DAK Indus., 66 F.3d 1091 (9th Cir. 1995), licenses are typically characterized by repeating royalty payments rather than a single lump sum. That is why once a fabric company or pattern company receives the full price of its item, its interest in the exchange is complete.

Many courts also include the act of agreement between the parties in order for a license of any type to exist. "Click through" licenses have been upheld as binding where the user must "click" on an acceptance button in order to continue through and install or use the software or the web site. In these cases the courts have ruled the "click" to accept is accepting a license on the use of the product. Not all courts agree with this.

The simple act of placing the words "not for commercial use" or "for non-commercial use only" or "not for resale" on a product is not legally binding upon the purchaser. There is NO federal law that says otherwise and there is NO court decision that says otherwise. So why do fabric manufacturers, pattern manufacturers, and software manufacturers claim otherwise? Because they can and they are betting no one will take them into federal court on the issue because few, if any, non-rights owners ever get punitive damages much less expenses and legal fees. The rights owners who claim they have the right to "license" their products through standard retail outlets are either ignorant or blatantly lying about their rights.

Consider this: on Friday, June 13, 2008, at about 6pm RMT, this web site had over 600 page views and we do not have counters on every page. For the first 13 days of June, over 4,500 page views. That's over 100,000 page views a year. We have never had a lawyer or any legal official tell us what we have posted is incorrect. But we have received compliments from lawyers even though we bash corporate lawyers in general.

See also Implied Licenses, also What Is A License, also Patterns, also Licensed Fabrics and also End User Licensing Agreements (EULAs).

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