Is the License Still the Product?
41 Pages Posted: 22 Aug 2017 Last revised: 23 Apr 2018
Date Written: December 4, 2017
The Supreme Court rejected the use of patent law to enforce conditional sales contracts in Impression Products v. Lexmark. The case appears to be just another step in the Supreme Court’s ongoing campaign to reset the Federal Circuit’s patent-law jurisprudence. However, the decision casts a shadow on cases from all federal circuits that have enforced software licenses for over 20 years, and imperils the business models on which software developers rely to create innovative products and bring them to market in a variety of useful ways. For over two decades, we could say that the license is the product—software provides the functionality but the license provides what can be done with the software. The Impression Products v. Lexmark case now raises a critical question for the software industry—is the license still the product? This Article answers that question by assessing the impact of the Impression Products case on software licensing. Fortunately, the case does not disrupt licenses used to develop products and leaves adequate room for innovative distribution licensing. Although the Supreme Court shut the door on enforcing end-user licenses using patent law, it left the door wide open for enforcing licenses using contract law. By linking the patent exhaustion and copyright first sale doctrines, the Supreme Court also seemed to shut the door on using copyright law to enforce end-user licenses. Although that linkage is accurate, a close examination of the Copyright Act reveals that the copyright first sale doctrine differs from patent exhaustion, suggesting that end-user licenses still can be enforced using copyright law. To clarify this, however, Congress should amend the Copyright Act to explicitly recognize that end-user licenses are not copyright first sales. As Congress and the courts begin to address software licensing in the aftermath of the Impression Products case, one guiding principle seems clear—both software developers and users will be better served if the license is still the product.
Keywords: first sale, conditional sale, patent exhaustion, licensing, end user license, copyright, patent, contract, remedies
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