Limiting Software Licenses

A win for software users: Krause v. Titleserv, Inc. (pdf), decided by the Second Circuit late last month, which contains a long and thoughtful analysis of Section 117 of the Copyright Act by Judge Leval. Section 117 grants certain rights to copy software to the “owner” of a particular copy, a phrasing that software companies have long seized on to justify many of the more onerous provisions of mass market software licenses. If a software user merely “licenses” the software, then (allegedly) the rights of “owners” don’t apply. Judge Leval decisively and rightly rejects the idea that Section 117 can be bypassed by the software developer’s unilateral characterization of the transaction as a “license.” Importantly, the court goes on to hold that the defendant in the case could lawfully exercise the rights of a Section 117 “owner” even though it did not possess formal title to its copy of the program.