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Negotiating a Software License In general, there are two means of conveying intellectual property rights: assignments and licenses. A license applies to intangible property rights while a “sale” applies to the transfer of tangible property. The First Sale Doctrine, which applies to the sale of a tangible copy of software, provides that such sale conveys certain rights to the buyer in the purchased tangible copy of the software, namely the buyer’s right to resell the software copy. This right is in derogation of the overall copyright and it is also “automatically” transferred to a new buyer if the copy is resold. Any transfer of ownership in a copyright must be through an unambiguous written agreement. Typically, the sale of software is not a “sale” of a copy (or anything else) within the meaning of Section 109 of the First Sale Doctrine. The only thing that is sold when software is “sold” at retail is the media on which the copyrighted work is fixed. Certain rights inherent in the work are licensed in conjunction with the sale. A copyright owner who grants a nonexclusive license to use copyrighted material generally waives the right to sue the licensee for a copyright infringement to the extent of the license granted. An assignment is an absolute conveyance of the intangible rights and equates to a “sale,” with the caveat that a sale typically only conveys the absolute right of distribution and, subject to certain exceptions, the right to display and use. A “sale” does not include, for example, the rights of performance or preparation of derivative works rights. Similar to an assignment, an exclusive license, even if limited in time or place of effect, can amount to a “transfer of copyright ownership.” Under the Copyright Act, transfer of an exclusive license is considered to be a conveyance of copyright ownership to the extent granted in the license. In short, entering into a license agreement in which the licensor reserves title is not a “sale” for purposes of the Copyright Act. For example, a licensee cannot distribute the licensor’s software without the licensor’s authorization, because the licensor is still the owner of the intellectual property. From A Practical Guide to Software Licensing for Licensees and Licensors by H. Ward Classen Click
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