Francisco-Simbillo, Rebecca: Legal Implications on Software Resale and License Transfer

ABSTRACT

Software is the non-tangible aspect of a computer that is necessary for it to perform any function. Software includes the programs that instruct the computer what to do, the configuration files where important system information is stored, and user files which hold the end result of the computers’ functions. (http://what-is-what.com/what_is/software.html).

A software license on the other hand, is the legal right to install, use, access, display, run or otherwise interact with a software program. (http://www.microsoft.com/philippines/customerassistance)

Purchase of a software license does not vest the purchaser ownership over the software but only the right to use it. When however the purchaser is a multinational corporation having its affiliates in various parts of the world, does it give the parent company the legal right to distribute to its subsidiaries its software license acquired in volume?

A Parent company in Germany desiring to save on cost acquires various used Windows software from UsedSoft GmbH (a company engaged in the sale of used software). It intends to distribute those used software to its affiliates one of which is located in the Philippines.

This paper will expound on the possibility of using used software imported from another country without violating the rights of Copyright owner, else a need to move for a more practical considerations of buying a new software directly with the supplier in the Philippines.

THE PROBLEM AND REVIEW OF RELATED LITERATURE

Is the assignment by the Parent Company of newly acquired used software license from Germany to its affiliate in the Philippines constitutes legal transfer?

As defined in the abstract above, software is the non-tangible aspect of a computer that is necessary for it to perform any function. Software includes the programs that instruct the computer what to do, the configuration files where important system information is stored, and user files which hold the end result of the computers’ functions. On the other hand, software license is the legal right to install, use, access, display, run or otherwise interact with a software program.

Purchase of a used software license does not vest the purchaser ownership over the software but only the right to use it. The right to use the software license is also subject to certain limitations. For instance, most software packages are licensed for single use. Similarly, typical software packages must be installed and used on a single machine (seat).

Software packages may have different licensing policies. Some software packages are licensed by the number of named users. In such cases the number of users (concurrent or otherwise) cannot exceed the limit specified by the license policy. There are many such license types including open licensing, OEM, per PC (non-concurrent), per user (concurrent), volume licensing and subscription licensing for software as a service, as among others. (www.cognizant.com)

DISCUSSION

LEGALITY OF RESALE OF USED SOFTWARE

In the point of view of assigning entity (Parent Company in Germany)

UsedSoft GmbH, a company in Germany engaged in the buy and sell of used software is confident in informing its potential buyers that registration with the supplier is neither compulsory nor technically necessary in order to use the used software licenses provided by them and they warrants that the installation of the licenses is possible though UsedSoft GmbH has no influence over registration of the licenses with the supplier.

On June 2, 2008, Peter Schneider, Managing Director of usedSoft announced in their website- http://www.usedsoft.com/en/news/press-information-2008.html that the Regional Court of Hamburg issued a prohibitory injunction against Microsoft. As a result, the software monopolist is prohibited from spreading certain, misleading assertions regarding the lawfulness of the trade with used software. “This decision is a clear signal for a free software market within Europe and against the monopoly policy of the American software giants”.

There was also a press release made by the Managing Director of usedSoft on April 2008 that individual software licenses originating from Microsoft volume license contracts are allowed to be resold “second hand”. This decision was rendered by the Regional Court of Munich I on April 4, 2008. The judgment has become final and absolute. The court decided “that the sale and successive resale of individual Microsoft software licenses which had been delivered within the scope of volume license contracts is possible in an effective way even without Microsoft’s consent in principle.” By means of this judgment the court rejected Microsoft’s legal viewpoint that the buyer of a volume license does not buy individual licenses, but only a right to reproduce.

In the light of the above legal grounds, the parent company insisted that its Affiliate in the Philippines can legally use its assigned used software.

In the point of view of receiving entity (Affiliate Company in the Philippines)

Copyright laws are territorial in nature. Though there are certain precepts that applicable internationally, judgments rendered in a particular jurisdiction are enforceable only within said jurisdiction and doesn’t necessarily bind Philippine courts. It will undermine the concept that the company in the Philippines wherein the used software will be transferred by the buyer, its Parent Company in Germany, is almost 100% owned by the latter, hence it is as if the Parent Company is the one that will used the used software.

Intellectual Property Code of the Philippines (RA 8293) Sec. 181.provides that “The copyright is distinct from the property in the material object subject to it. Consequently, the transfer or assignment of the copyright shall not itself constitute a transfer of the material object. Nor shall a transfer or assignment of the sole copy or of one or several copies of the work imply transfer or assignment of the copyright”

Computer program is one of the Original Works copyrightable in the Philippines -172.1 (n).

However we have to make it clear that computer software is a computer program in order to be entitled to the protection of copyright law.

Computer software, or just software is a general term primarily used for digitally stored data such as computer programs and other kinds of information read and written by computers. (http://en.wikipedia.org/wiki/Software)

Software is the non-tangible aspect of a computer that is necessary for it to perform any function. Software includes the programs that instruct the computer what to do, the configuration files where important system information is stored, and user files which hold the end result of the computers’ functions.
The terms ‘software’ and ‘program’ are often confused, yet the distinction is to be made. Computer programs are not mean to be changed during the normal course of operation. Any value or information that is changed during the operation of a computer is data, which read by a program, not part of it. However, during routine maintenance a computer program may be updated. This is generally done to correct bugs and add new features. Thus the stable, non-changing software components are often programs, whereas anything that is updated, created, deleted, or otherwise modified on a regular basis is not a program. (http://what-is-what.com/what_is/software.html)

FINDINGS

Having established that a computer software includes computer program, the affiliate company in the Philippines can argue that the assignment of used software otherwise legal in Germany, cannot validly made in the Philippines without the consent and licensing permit of the copyright owner, else the affiliate company can be a subject of copyright infringement due to the territoriality nature of Copyright laws. Having its personality separate and distinct from its parent company it can be held liable by the authorities here in the Philippines if licensing requirement are not met, hence software resale and license transfer cannot be legally made in the Philippines.

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