back to article Software re-sale restricted by US Court of Appeals

Software company Autodesk can stop a man from re-selling second-hand copies of its software because the programs are licensed to users, not owned by them, a US appeals court has ruled. Software producers who clearly impose restrictions on buyers and make it clear that buyers are only licensing material rather than buying it …

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FAIL

Sorry, Beak, What I buy, I own

Apart from not being subject to U.S. law, whatever I buy, I own.

Nothing on my software says I am renting it, a principle I understand as I have rented vehicles and tools. The transaction is recorded on a form entitled Rental Agreement. The terms of the rental agreement usually state the longer I use whatever is the subject of the Rental Agreement will cost me.

When I give money over for software I get a receipt, there is no rental agreement. In fact the receipt I get for handing over money for software is no more different, other than the figures, for a bar of chocolate or a book. Therefore it must be a sale.

This is why I would never buy a Lemon 4 (or 3 or 2) as Job's gives me the impression he is actually only lending me the device as I don't have total control over it.

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Anonymous Coward

No title req'd.

I don't suppose anyone know the stance of UK law is on such a issue?

Has it ever been tested?

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FAIL

FAIL

I completely agreed with you up till your iPhone "comment". I'm amazed that someone could somehow crowbar an iPhone comment into something that has nothing to do with iPhone, therefore your credibility has been shot to pieces.

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Thumb Up

Thanks for letting us know...

...that this is really a story about Steve Jobs!

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FAIL

You cannot help yourself.

Read the damned licenses. You do not own the software. this is true of OSS licenses too. You are not renting it either. You are purchasing a **license** to use the software, and if you buy the physical media, it often comes with a printed user manual too. This isn't hard to understand.

"When I give money over for software I get a receipt, there is no rental agreement." And when you install the software you have to agree to a license. This license agreement is a form of contract between you and the developer or publisher of the software. Next time, before installing the software, read the license. Seriously, you might learn something.

As for the 'Lemon' comments. It's old mate. Move on. We all know that you don't like Apple (not liking a business in itself is quite childish) and you are getting really boring.

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Unhappy

You'll be a rent boy soon...!

"Nothing on my software says I am renting it..."

Not at the moment. But by next week every software vendor will have reprinted their terms & conditions to take account of this decision.

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Boffin

Leasing?

Great argument that software is (generally) not rented. Pity it's completely irrelevant.

Licensing (pehaps you read 'leasing'?) is not renting. Renting is temporally-limited use of property with no ownership transfer. Licensing is rights-limited use of property with no ownership transfer. Licenses may include a time limit, rentals may include rights limits, but the primary limitation on a rental is time, and the primary limitation on a license is rights.

"When I give money over for software I get a receipt, there is no rental agreement."

No, but there is a license agreement. If you don't see it, it's probably inside the box. If it's not a separate piece of paper, it's probably on the CD or DVD or whatever medium the software is stored on.

When you "buy" software from a store, you're paying for the right to enter the license. You can, if you so desire, choose not to enter the license by following the return instructions usually included with the software. You might even get a refund.

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Flame

Autodesk is not a EULA decision

I just noticed an interesting post by PJ on Groklaw:

The problem with Autodesk software, in this fact pattern,

is that there was no EULA. There was a contract between

Autodesk and the folks Vernor got his copies from, and

that contract, or license agreement, specifically said

that it was a license deal, not a sale, and that the folks

had no right to sell to anybody.

The URL is (breathe deeply);

http://www.groklaw.net/comment.php?mode=display&sid=201009101658045&title=Vernor%20v.%20AutoDesk%20-%20Vacated%20%28first%20sale%29%20and%20remanded%20%28copyright%20misuse%29&type=article&order=&hideanonymous=0&pid=874510#c874529

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Silver badge

At least one case has gone in favour of the customer

I know that way back in the 80s DEC took this issue to caught about VMS licenses. They were trying to block the sale of second hand VAXes by universities. Without a VMS license the box was basically useless (sure you could run BSD Unix but most people ran VMS).

They pointed out that the license couldn't be re-sold.

The judge didn't agree and allowed the sale.

Germany also allows the sale of second hand software. This has been covered on El Reg.

The UK case pre-dates El Reg, even as an an email circular. I read it in either Computer Weekly or Computing.

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Go

RTFL

Read the license you agreed to. If it says you don't own it, and you agreed to the, thenguess what? You don't own it. Personal whims aside, you really need to read and understand what you agree to.

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Gates Horns

"whatever I buy, I own."

Any idea how W. Gates III became (at one time) the world's richest man?

The sentence "The SOFTWARE PRODUCT is licensed, not sold." might give you a clue.

You did read ALL of their EULA, didn't you?

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Linux

Sorry, Beak, What I buy, I own

I have over 15 year experience as a computer specialist (programming, systems design, electrical engineering applications, and as a manager). Back in the early days of computer, software could not be copyright protected because a computer program (like C o Cobol) was view as nothing but instructions to a compiler (or assembler). Many corporations freely distributed the software that they developed. Now we have come full circle to where the owner of the software(in my book, the purchaser) has no rights and the software writer has dictatorial rights

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Anonymous Coward

You're correct but it doesn't matter

Yepp, it says precisely that on the license. That being said, it doesn't matter one bit.

I paid for it, i own it and i'll sell it as i see fit -- perhaps in a manner that won't draw the company's attention, but the point remains the same.

If the company wants to prevent me from selling it to someone else, all they have to do is implement a system somewhat like Steam that requires the purchase of a new serial number (or license, if you will).

If not, screw'em.

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FAIL

Laymen and their (overly simple) understanding of the law

I think you should probably try to understand the current law a bit better, but as the responses show you're not alone with this.

FYI: most software purchases by consumers are *sales*, no *licensing* or anything like that. Yes, software vendors like to talk about licensing and stuff and how they just provide a right to use, but in the majority of cases where software is purchased this is irrelevant. If you go to a shop and buy say a copy of Windows, there is no legal contract (and no legal obligations beyond what the current law dictates, i.e. re copyright) between the buyer and the manufacturer. The only contract is between the seller (the shop) and the buyer, and the object of sale is a cardboard box with a DVD with software on it, a product key sticker, and some paper. The EULAs (MS term for their "licensing agreement") are irrelevant because they are not part of the contract (as they are hidden in the box and can't be recognized by all parties and therefore can never become part of the contract) and because there is no legal relation between the buyer and the manufacturer. However, this is not true for licensing contracts (which specifically state at the time they are closed that its about licensing, not purchasing), something which would apply to the case discussed in the article.

So yes, unless you specifically agree to a licensing contract the majority of software sales are just that - sales. There is no licensing involved, and what the "licensing agreement" in the box says is highly irrelevant.

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Alert

My software doesn't have EULA's

It's removed by the copy shops I buy my software from. In fact some of the software was sold to the Chinese market and most everything other than the program - set up in English - is in Chinese so they don't mean much to me, either.

Since restrictive clauses can't be read until after purchase, and opening the package makes them invalid for return, I would not feel constrained by them.

Why are you so afraid of using your handle?

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Problem....

This is where things start going awry.

I am not asked to sign the 'agreement' before I buy. I actually only get to read said agreement AFTER I have handed over my money.

To add insult to injury, once I have opened the 'original packaging', not only have I accepted said 'agreement' which Is INSIDE the packaging, but upon rejecting it, I cannot take it back to the store for a refund because it is not in its 'original, unopened packaging'.

Unfortunately, i do not have the resources to take the manufacturers to task over this in a court of law.

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FAIL

WRONG! BRIMMING OVER WITH WRONG-A-BILITY!

You license software, it says on the little sheet of paper, clearly underneath the cellophane. When you install it, while skpping over the NEXT, NEXT, NEXT buttons, you will be given a EULA. You click AGREE/OK/DUH YEAH! or whatever, you agree to license, you agree to a contract between you and the developer to use the software, not buy it or rent it, but use it under their terms and conditions.

Almost every single piece of software is licensed, you NEVER own it.

Got that?

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@ Davidoff

A nice enough summation of the general law on contract in this area, but there are exceptions. If you buy a ticket for e.g. a railway journey, it is subject to the rules of carriage, even though you may not have seen them. The courts will create new exceptions if they are needed, and in the UK, that usually means where there is commercial justification for it. The fact that for the last 20 odd years nearly every piece of software has been sold with a EULA would very likely be taken as evidence that everyone knows that they are buying no more than the right to use.

What is perhaps more interesting is the concept of consideration i.e. the price, in contract law. Generally, if there is no consideration for something then there is no contract. If you have contracted with the retailer to acquire the medium, what consideration has passed from you to the manufacturer? Absent consideration, there is no contract.

As to Sale of Goods Act cases mentioned elsewhere, these are not really relevant to this. It might (subject to what I have said above) give you a remedy against the retailer for not selling you what they said you were getting, but it would be unlikely to afford a defence against a claim by the manufacturer.

I suspect that the dearth of cases on this subject in the higher courts in the UK is because the manufacturers have no wish to face these arguments, and they will settle rather than risk having the points decided against them.

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Anonymous Coward

In the U.S.

Those licenses aren't entirely legal in what they prohibit. You can modify or change the code, but it would be like a car... you've lost your warranty and probably any right to compensation for loss depending on what you've done. You couldn't sell copies or modified versions, but you can sell the original, hopefully with the documentation and within U.S. export control policies.

If the company was paying to use that version of the software for a specified time, which is something the company I work for does, then it was a rental the guy had no business in selling. If he had gotten it from the store and turned around and sold it online, then I doubt the court would have sided with the software company. You may not own the software, but you own the right to use it as long as you retain the original file, be it on a cd, disk, flash drive or download to an HDD. I don't own the Civilization 2 software, but I own the disk and I can re-sell that cd on the condition that I don't retain the game on my computer.

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Grenade

Software is not different!

If the legal system won't stop pandering to rich software companies that pay lawyers vast piles of dosh to claim that for some reason not understood by human beings that for some reason software is different and that the normal laws of the land that apply to everything else somehow just don't apply to it, then it is about time that the elected governments around the world started explicitly writing laws that include computer software.

1) You get the right of first sale. You may not do anything to impede the legitimate customers right to exercise their normal rights. What you put in the EULA isn't worth diddly squat, just like the introduction in book that says you can't sell that too, funny how there was 2nd hand book shops but no 2nd hand software shops.

2) The sale of goods act applies to you too guys, if you sell shit you are responsible for making it work and you are responsible for it not working. In much the same way that if you make a car then find that the brakes don't work you have to issue a recall and you have to fix the damn things.

And before you start whinging that writing software is difficult, it isn't - Stop whinging. Try designing a bridge or a new commercial airliner or anti-cancer drug. They cope with quality laws why are you unique?

That is will put the price of software up through the roof, It won't, it will reduce the price significantly. Almost all products are priced at "what the market will stand" pricing. Once there is a healthy market in second hand software then there will be legitimate competition and this will keep the price down since vendors will have to compete against it.

PS, I have and do still sometimes write software for a living.

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Big Brother

Don't get all huffy

Consider banks. The legal system is pandering to rich bank companies by allowing them to counterfeit money (i.e. hand out more money than they actually own) leading to all sorts of ill effects, including economic crashes.

Same here. Special interest groups get special interest. Yes, software would be cheaper if resale were permitted, but that would just be in the little sucker's interest. So no.

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Anonymous Coward

Come and see the flaw in the system

This is why judgements based on case law are a major flaw in the judicial system here and the US. It's hard enough to get a sensible law passed, but once passed it only takes one error by one judge or jury to render the law worse than useless as ever succeeding judge has to take the error as gospel.

Hope this gets appealed, and quickly.

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Silver badge

UK law different?

I thought that in this country EULAs that said silly things like "although you bought this in a shop, and it came in a box and you took it away, just like any other good, it's really a service" were thrown out by the courts here? But I don't know, because IANAL, as most people here!

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Headmaster

For now....

"We hold today that a software user is a licence rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use restrictions,"

Seems at least for now consumer software is safe. The software is pruchased in the store, unless it was made clear you were buying a licence at the time it seems they can't restrict second hand sales. The EULA is really a collateral contract and unenforcable since it's viewed after the purchase.

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FAIL

Anyone else smell...

Anyone else smell lobbyists at work?

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Grenade

@JaitcH - wrong

You can only buy what is being sold to you. ISTM that in this case Autodesk never sold the original software. From that, it follows, you can only sell what you own.

AFAICS the only issue is whether the original customers of Autodesk were made aware of the nature of the deal before they paid up. As long as they were, and there was no fraud or misrepresentation, I can't see a problem.

"When I give money over for software I get a receipt, there is no rental agreement" is a very naive point of view. When you give money over for *anything* you are entering into a contract which will have T&Cs. Whether they are fair or legal is another matter.

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Gold badge

This...

...cannot be good.

Ever more the reason to continue trying to replace everything I use with open source. I agree with JaitcH. What I buy I OWN. If you want to rent me software; show me a rental agreement. (I will promptly not rent your software.) Creators deserve to be compensated for the creation of their works…but regular citizens deserve to own what they purchase.

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Media only

There are two aspects to this which can be demonstrated quite nicely with MS software, and indeed many others.

Firstly you get the media kit which has all the software on the CDs. For example Veritas backup, that would contain all the library options, open file backup drivers etc

You then need the licence keys in order to unlock the functionality you have paid the licence for.

You have paid for the CD with the software on – should you be able to run everything on that?

If you do buy it second hand, would you expect to get support and updated from the manufacturer, even though you haven't actually paid THEM anything?

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Gold badge

"support and updated from the manufacturer"

@bitmap animal

"If you do buy it second hand, would you expect to get support and updated from the manufacturer, even though you haven't actually paid THEM anything?"

So if I buy a Ford car from a car shop, I shouldn't expect to get a warrantee from FORD, or for FORD to replace the defective brakes when there is a recall, because I didn't give the money directly to FORD?

Should I not get any service from MICROSOFT because I only gave my money to PC World?

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cars

When you buy a used or new car you don't buy a license to use the car, it is your's. If you buy a used car (Ford) you may be offered an extended warranty, usually at a high price. And, Ford will fix certain defects on used cars because they want to maintain good customer relations and, in some cases, the federal government requires them to do the repair for safety considerations.

Perhaps if everyone stopped buying software under the lecensing agreement the software companies would change their terms and make it a sale.

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@bitmap animal

If you buy a copy secondhand, that does not alter the fact that the manufacturer has been paid for that copy.

If the original purchaser has installed that program from that copy and has not removed it before reselling it, that is be a different story; there are now two users of one copy. Otherwise, once the publisher has gotten their nickel from that copy, the payer of that nickel should be free to do what they please with it as long as it does not involve duplication for others' use, and whoever is in legitimate possession of that copy should receive as much support as the original purchaser did.

I cannot understand how this court could fail to recognize this as first sale.

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Anonymous Coward

No one said anything about renting

Dear Jaitch,

No one said, or needed to say, anything about renting. If you don't understand the difference in principle between purchasing a limited set of rights granted (and/or apparently legally restricted, in some jurisdictions) by a licence, and renting a product or service, your legal insight may perhaps be better appreciated elsewhere.

Big Commerce 0, GPL 1. Yet again. One day it will eventually sink in with the people who think they are buying something they aren't: common sense, justice, and the law, entirely unrelated.

Yours,

Not A Lawyer

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Anonymous Coward

Is this case relevant to the Autodesk ruling?

http://www.out-law.com/page-2128

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J 3
Joke

Western Hemisphere?

"could not be transferred outside the Western Hemisphere"

So it's OK to send it to Morocco, Cameroon, Portugal, (almost all of) Spain and the UK, but not to Germany, Ethiopia, Egypt, and most of France? Interesting...

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Troll

Any one else tempted

To buy a copy of Autodesk, with a check that says, "Non negotiable, non transferrable"? They're only getting a license to your money, but can't actually transfer it.

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FAIL

Sale of Goods Act

Well luckily in the UK we have the Sale of Goods Act that will clear this up for you.

When you buy something in the UK from a shop, online, reseller or distributor you are covered under the Sale of Goods Act. If I went into Currys and bought a Copy of Norton or MS Office my sales contract is with Curry's and NOT the Manufacturer / Publisher. The fact that the manufacturer grants me a license to use the software is irrelavant, the Sale of Goods Act supersedes any other contracts. Just my 2 eggs in the basket for you. And anyway how well do you think the secondhand games market is coping with licensed software?

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Well there is still copyright issues.

Even if you do consider it a sale (as I certainly think it should be), how about copyright? The company that made the software owns the copyright, which means only they are allowed to make copies of it (or those they license to do so). You bought _one_ copy on some kind of media.

So to actually install the software on your computer, you have to copy it. You need a license to do that. You can happily own the CD with the software on it, but you are not allowed to make any copies of it without that license. I think used video games might be getting around this by the fact the game isn't actually installed in the case of game consoles and runs from the media itself. Now you may consider getting it into ram to be a copy, in which case things get more complicated again.

Perhaps one could argue fair use permits you to install that software copy you bought so that you can make use of it. Fair use doesn't seem to be handled very well in general though and certainly not getting much respect by things like the DMCA (in the US).

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Go

So rent it on

Figure a reasonable price if you were able to sell the kit, then offer it for lease for a one time payment equal to the selling price. You continue to be the original owner of the hardware and software licenses. You got all the money up front so you don't worry about collection problems normally associated with monthly leasing. You would want to clean personal data off before handing it over.

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Companies Should Play Fair

Well, I think they should require all software manufacturers to refrain from the use of the word "buy" in all television, radio, web, print and other ads and use the word "lease" instead.

Second, software manufacturers should be required to print the EULA on boxed software. The problem here is that you have to open the box to read the EULA and once opened cannot get a refund.

Last, in reality, the only thing that the EULA should state is that since the software is copy written, you simply can't make make and sell copies of the program.

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Anonymous Coward

The Law According to Microsoft

Has, for ages, been that you have a licence to use the copy of Windows that came with a machine on that machine only. You cannot even move it to another machine of your own, let alone sell it to someone else.

So, nothing new here, surely? And no... retail software, obviously, is not safe from this.

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Flame

Fantastic ruling

I think this is a great ruling. Courts and companies have been pussyfooting around this issue for a long time now. Now that it's black and white, there is a basis for making legal challenges and laws. I very much hope that this will cause a huge uproar that ultimately changes the laws that govern software.

Then again, we've been hoping for the same with patents for a long time now, to no effect. So may be I shouldn't hold my breath...

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FAIL

Autodesk licensing a judge

Exactly what kind of EULA do judges have?

If you accept judgement does that mean you have to abide by the EULA?

Someday we will all find out how this judge was paid off, does he own stock or was it cash on the barrelhead?

Why else would the court blatantly ignore how every other type of transaction assumes right of first sale and decide this way for software?

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Linux

Old arguement, see 1980s.

I had this conversation when $DEFUNCTCORP tried to sell off its vaxes and SGI stations. I'd told them when we bought it that the software wasn't an asset, but they had put it in the asset register & the liquidators kept refusing offers for the hardware because the system was on the books at a much higher price.

Long, long arguments, but since they stopped paying me after 12 days I stopped trying to explain.

Go gpl! it's the only answer.

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Silver badge

Other things with software

> funny how there was 2nd hand book shops

The publishers did try this 100years ago and the same court ruled that first sale doctrine applied.

The problem with this ruling is that everything has software in it. You bought your car but you only licensed the ECU software, so the dealer gets to decide who you can sell it to?

Same for your iPod, phone, PC CPU with embedded microcode ?

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Silver badge

So if it gets referred to the entire panel...

...it may put them in a dilemma, since you would imagine Vernor and/or his attorneys will use the book angle next. The entire Court of Appeals would have to declare either shrinkwrap licenses unenforceable...or most libraries in breach of copyright.

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Anonymous Coward

Past history

Wouldn't Mr Vernor have a case with respect to the fact that Autodesk has allowed transfer in the past, therefore their claim that it's not transferable is moot, regardless of sale, rent or lease?

There surely must have been cases where a company gets purchased by another and the license is continued to be honoured, effectively approving the transfer of the license to the new "owner".

I'm neither a lawyer, nor play one on TV.

--Pete

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Grenade

A little perspective perhaps?

For those of you that think this is horrible; please note this form of 'purchase' has been common in both the mainframe and server spaces for decades.

Don't try to resell that copy of Oracle. Forget even attempting to move that copy of CA-Datacom to another machine you own, let alone another location.

Right now my company is fighting a 3rd party vendor who's getting all pissy about the fact that we're using somebody other than employees to run the machines on which their precious stuff executes.

If your company gets bought by somebody else, you better hope your legal department did a good job on your existing contracts or you'll be re-licensing a potful of software. I've seen it happen, it's ugly.

You think EULAs are restrictive? Try negotiating with a CA, IBM or Oracle someday.

Leasing of software (rather than purchase) has been generally the case since the 70s, if not earlier. This ain't new, and just because you wish it doesn't make it so.

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Silver badge

But a lease usually has a key element...

...pen to paper. Most rentals, leases, etc. are contracts that include signatures. ALL the terms are spelled out and agreed to before the transaction takes place. Furthermore, the transaction is usually direct between supplier (or via a legally-designated representative) and client. Going through a retail channel tends to murk that water significantly. So does the lack of pen-to-paper (or some EXPLICIT consent) that would normally be required to make the contract legally binding.

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Go

Distinctly the 9th

Don't worry, everybody. Considering this was a 9th Circuit decision and they are overturned by the Supremes 75% of the time then there is a good chance this won't stand.

It seems almost as if they even specifically worded their decision TO be overturned - ie "we don't write policy" is just gagging for it.

IANAL, but only on Sundays.

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Gold badge
FAIL

Software and copying

IIRC, the issue is that one day a very, very stupid judge was convinced that when software loads from the disk to RAM, then a copy is made. Then they said that this copy could only be made if the person doing it had authorisation to make acopy. The license from the SW company gives that authorisation, but only in certain circumstances.

Now if the same stupid judge ruled in other cases, just imagine it! If you read a newspaper or book then you are guilty of copyright infringement, because there is a copy of it made on you retina. Similarly if you hear anything, then there is a copy of what you hear on your nerves to your brain.

<Troll remark>

Quick, lock everyone up!

</Troll>

Back to the real world, that means that any money spent on software is not a capital asset, because it has no value. What are the company operating / tax implications of this?

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