Licenses
To license or grant license is to give permission. A license is the document demonstrating that permission. License may be granted by a party ("licensor") to another party ("licensee") as an element of an agreement between those parties. A shorthand definition of a license is "a promise (by the licensor) not to sue (the licensee)." A licensor may grant license under "intellectual property" to do something (such as copy software or use a patented invention) without fear of a claim of intellectual property infringement brought by the licensor. A license under intellectual property commonly has several component parts, including a term, territory, renewal, as well as other limitations deemed vital to the licensor. Many licenses are valid for a particular length of time. This protects the licensor should the value of the license increase, or market conditions change. A license may stipulate what territory the rights pertain to. For example, a license with a territory limited to "North America" (United States/Canada) would not permit a licensee any protection for actions in Japan.
Software License
A software license comprises the permissions, rights and restrictions imposed on software (whether a component or a free-standing program). Use of software without a license could constitute infringement of the owner's exclusive rights under copyright or, occasionally, patent law and allow the owner to sue the infringer. Under a software license, the licensee is permitted to use the licensed software in compliance with the specific terms of the license. If there is a breach of the license, depending on the license it may result in termination of the license, and potentially the right of the owner to sue.
A software vendor may offer a software license unilaterally (without giving the licensee the opportunity to negotiate for more favorable terms) such as in a shrink wrap contract, or even as part of a software license agreement with another party. Virtually all mass produced proprietary software is sold under some form or fashion of software license agreement. One off, or custom software is often licensed under terms of which are specifically negotiated between the licensee and licensor.
In addition to granting rights and imposing restrictions on use of the software, software licenses typically contain provisions which allocate liability and responsibility between the parties. In enterprise and commercial software transactions these terms (such as limitations of liability, warranties and warranty disclaimers, and indemnity if the software infringes intellectual property rights of others) are often negotiated by attorneys specialized in software licensing. The legal field has seen the growth of this specialized practice area due to unique legal issues with software licenses, and the desire of software companies to protect assets which, if licensed improperly, could diminish their value.
Shrink Wrap Contract
Shrink wrap contracts are license agreements or other terms and conditions of a (putatively) contractual nature which can only be read and accepted by the consumer after opening the product. The term describes the shrinkwrap plastic wrapping used to coat software boxes, though these contracts are not limited to the software industry. Web-wrap, click-wrap and browse-wrap are related terms which refer to license agreements in software which is downloaded or used over the internet. Software licenses are commonly called End User License Agreements or EULAs.
The legal status of shrink wrap contracts in the US is somewhat unclear. One line of cases follows ProCD v. Zeidenberg which held such contracts enforceable (see, e.g., Brower v. Gateway) and the other follows Klocek v. Gateway, Inc., which found the contracts at hand unenforceable (e.g., Specht v. Netscape Communications Corp. [2]), but did not comment on shrink wrap contracts as a whole. These decisions are split on the question of consent, with the former holding that only objective manifestation of consent is required while the latter require at least the possibility of subjective consent. In particular, the Netscape contract was rejected because it lacked an express indication of consent (no "I agree" button) and because the contract was not presented directly to the user (users were required to click on a link to access the terms). However, the court in this case did make it clear that "Reasonably conspicuous notice of the existance of contract terms and unambiguous manifestation of assent to those terms by consumers are essential if electronic bargaining is to have integrity and credibility." Specht, 356 F.3d 17.
It may be worth noting that the user in the Zeidenberg case had purchased and opened the packages of multiple copies of the product, and therefore could not easily prove he remained ignorant of the contract/license; whereas in many cases, the so-called shrink-wrap "license" agreement has not been reviewed at the time of purchase (having been hidden inside the box), and therefore is arguably not part of the sale of the copy, and thus not enforceable by either party without further "manifestation of assent" to its terms. In general, a user is not obligated to read, let alone consent to any literature or envelope packaging that may be contained inside a product; otherwise such transactions would unduly burden users who have no notice of the terms and conditions of their possession of the object purchased, or the blind, or those unfamiliar with the language in which such terms are provided, etc.
Clickwrap Agreement
A clickwrap agreement (also known as a "clickthrough" agreement or clickwrap license) is a common type of agreement (often used in connection with software licenses). Such forms of agreement are mostly found on the Internet, as part of the installation process of many software packages, or in other circumstances where agreement is sought using electronic media. The name "clickwrap" came from the use of "shrink wrap contracts" in boxed software purchases, which "contain a notice that by tearing open the shrinkwrap, the user assents to the software terms enclosed within." Click-wrap is the electronic equivalent of the shrink-wrap method which allows users to read the terms of the agreement before accepting them. This was presented in the ProCD v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996), shrinkwrap case.
The content and form of clickwrap agreements vary widely. Most clickwrap agreements require the end user to manifest his or her assent by clicking an "ok" or "agree" button on a dialog box or pop-up window. A user indicates rejection by clicking cancel or closing the window. Upon rejection, the user can no longer use or purchase the product or service. Classically, such a take-it-or-leave-it contract was described as a "contract of adhesion, which is a contract that lacks bargaining power, forcing one party to be favored over the other". The terms of service or license do not always appear on the same webpage or window, but they are always accessible before acceptance. If the terms of service are not visible, courts have found the notice requirement to be lacking.
End-User License Agreement
Most end-user license agreements (EULAs) accompany shrink wrapped software that is presented to a user sometimes on paper or more usually electronically, during the installation procedure. The user has the choice of accepting or rejecting the agreement. The installation of the software is conditional to the user accepting the agreement and thereby agreeing to abide by its terms.
Many EULAs assert extensive liability limitations. Most commonly, a EULA will hold harmless the software licensor in the event that the software causes damage to the user's computer or data, but some software also includes limitations on whether the licensor can be held liable for damage that arises through improper use of the software (for example, incorrectly using tax preparation software and incurring penalties as a result). One case upholding such limitations on consequential damages is M.A. Mortenson Co. v. Timberline Software Corp., et al. Some EULAs also include restrictions on venue and applicable law in the event that a legal dispute arises.
Some copyright owners use EULAs in an effort to circumvent limitations the applicable copyright law places on their copyrights (such as the limitations in sections 107-122 of the United States Copyright Act), or to expand the scope of control over the work into areas for which copyright protection is denied by law (such as attempting to charge for, regulate or prevent private performances of a work beyond a certain number or beyond a certain period of time). Such EULAs are, in essence, efforts to gain control, by contract, over matter upon which copyright law precludes control.
Enforceability
The enforceability of an EULA depends on several factors, one of them being the court in which the case is heard. Some courts that have addressed the validity of the shrinkwrap license agreements have found some EULAs to be invalid, characterizing them as contracts of adhesion, unconscionable, and/or unacceptable pursuant to the U.C.C. —see, for instance, Step-Saver Data Systems, Inc. v. Wyse Technology (939 F.2d 91), Vault Corp. v. Quaid Software Ltd. (at harvard.edu) and Rich, Mass Market Software and the Shrinkwrap License (23 Colo. Law 1321.17). Other courts have determined that the shrinkwrap license agreement is valid and enforceable: see ProCD, Inc. v. Zeidenberg (at findlaw.com), Microsoft v. Harmony Computers (846 F. Supp. 208, 212, E.D.N.Y. 1994), Novell v. Network Trade Center (at harvard.edu), and Arizona Cartridge Remanufacturers Association Inc. v. Lexmark International Inc. may have some bearing as well. No Court has ruled on the validity of EULAs generally; decisions are limited to particular provisions and terms.
The 7th Circuit and 8th Circuit subscribe to the "licensed and not sold" argument, while most other circuits do not [citation needed]. In addition, the contracts' enforceability depends on whether the state has passed the Uniform Computer Information Transactions Act (UCITA) or Anti-UCITA (UCITA Bomb Shelter) laws. In Anti-UCITA states, the Uniform Commercial Code (UCC) has been amended to either specifically define software as a good (thus making it fall under the UCC), or to disallow contracts which specify that the terms of contract are subject to the laws of a state that has passed UCITA.
Recently, publishers have begun to encrypt their software packages [citation needed] to make it impossible for a user to install the software without either agreeing to the license agreement or violating the Digital Millennium Copyright Act (DMCA) and foreign counterparts.
The DMCA specifically provides for reverse engineering of software for interoperability purposes, so there was some controversy as to whether software license agreement clauses which restrict this are enforceable. The Eighth Circuit case of Blizzard v. BnetD (at eff.org) determined that such clauses are enforceable, following the Federal Circuit decision of Baystate v. Bowers.
Brand Licensing
Brand licensing is well-established, both in the area of patents and trademarks. Trademark licensing has a rich history in American business, largely beginning with the rise of mass entertainment such as the movies, comics and later television. Mickey Mouse's popularity in the 1930s and 1940s resulted in an explosion of toys, books, and consumer products with the lovable rodent's likeness on them, none of which were manufactured by the Walt Disney Company. So successful has the process become that some companies like Harley-Davidson and Nathan's make more money from licensing than from manufacturing.
This process accelerated as movies and later television became a staple of American business. The rise of brand licensing did not begin until much later, when corporations found that consumers would actually pay money for products with the logos of their favorite brands on them. McDonalds play food, Burger King t-shirts and even ghastly Good Humor Halloween costumes became commonplace. Brand extensions later made the brand licensing marketplace much more lucrative, as companies realized they could make real dollars renting out their equity to manufacturers. Instead of spending untold millions to create a new brand, companies were willing to pay a royalty on net sales of their products to rent the product of an established brand name. Breyers yogurt, TGI Friday's frozen appetizers, Dodge power tools, and Lucite nail polish are only a fraction of the products carrying well-known brand names which are made under license by companies unrelated to the companies who own the brand.
Cross-Licensing
In patent law, a cross-licensing agreement is an agreement according to which two parties grant a license to each other for the exploitation of the subject-matter claimed in patents. In other words, cross-licensing is the mutual sharing of patents between companies without an exchange of a license fee if both patent portfolios are about equal in value. Large corporations like Microsoft use this method to pile up more licenses for technology developed by other companies. They have many patents that can be used for such cross-licensing. Large corporations can force small companies to share their patents with the large company in a cross-licensing agreement or face legal problems from the large company which has patents that are infringed by the small company.
For example, if Sony owns a patent of interest to IBM, and IBM owns a patent of interest to Sony, Sony may grant a license to IBM for the Sony patent while at the same time IBM grants a license to Sony for the IBM patent. Then Sony and IBM will have concluded a cross-licensing agreement, in this hypothetical example. This means each company can make, use, and sell products claimed in each other's licensed patents and that will not constitute an infringement.
If a third party, let's call it InfringerCorp, infringes the Sony patent, Sony can sue InfringerCorp for infringement. In most jurisdictions, a licensee, IBM for example, can become party to the court proceedings and also claim damages from InfringerCorp.
To a large extent, cross-licensing agreements are legal, otherwise this could completely block the exploitation of a technology of which two or more inventions are patented by different companies. As one lawyer for a large electronics company put it: "Everybody invents. They need our stuff, we need their stuff. And so instead of suing each other, we have a meeting every few years and cross-license." This can easily become a complex issue, involving (as far as the European Union is concerned) Art. 81 and 82 of the EC Treaty (abuse of dominant position, etc) as well as licensing directives, cartels, etc. To insure they will have plenty of patents to cross-license, each large company may do "patent flooding" which is to patent every conceivable way of doing something. Some non-patent Intellectual property such as computer software can also be cross-licensed.
Music Licensing
Music licensing is the process by which songwriters, in theory, get paid for their work. In much the same way you don't own that copy of Doom or Windows, a purchaser of recorded music does not own the music, they own the media that music is stored on, and they have a limited right to use the music for themselves, so long as 'using' doesn't mean 'making unlicensed copies of' or 'broadcasting' the recorded work.
There has long been a school of thought that those who buy music have the right to do as they please with it. By the same token there is school of thought that says that an artist or composer has the sole exclusive right to decide how and when their work will be used, and for what price.
While the arguments on both sides are loud and have both valid, positive points and invalid, negative points, it is not the intent of this article to engage that particular debate. However, it is worth noting that the debate exists; at its very basic level, it comes down to a question of the right of an artist to be paid versus the right of a consumer to own what they purchase. An example of a company that has taken this debate to the next level, is BeatPick.com. Beatpick is a fair play independent music label proving that there is profit in fair music licensing, where both the buyer and the artist have creative rights.
What Is Broadcasting?
There are, of course, many different definitions of 'broadcasting,' but for the purposes of a discussion of music licensing, 'broadcasting' may be considered to mean the playback of pre-recorded or live music for groups of people other than the licensed purchaser of a given work, beyond what might be normally expected in a social setting. Playing music in your car is not broadcasting, unless you're playing it out of your car for a large group of people, for instance at a tailgate party. There has been some legal wrangling over the years about what, exactly, constitutes a 'broadcast' for the purpose of license/copyright enforcement. Legal claims are filed nearly every day across the world against bookstores, bars, and live music venues which broadcast music without paying for it.
In a nutshell: If you are playing music in so that people outside of your close, immediate area can hear it, you're broadcasting, and by law you are required to keep track of what you play and pay for it. This is equally true of non-profit organizations, live music bars, bars or clubs that feature pre-recorded music, bookstores that play music, coffee shops that play music, roller-skate rinks, podcasts...anyone.
How Are Payments Calculated?
The easiest way to look at this issue is by examining the day-to-day operations of the average music radio station. At various points throughout the year an audit of the music being played is carried out. This is submitted to the relevant body for that territory. This information is used to calculate the average number of plays each artist has received. There is a fairly complex series of calculations involved. First, the total number of songs played is tabulated. Then the total amount of license income is calculated. The second number, divided by the first, represents a single 'share' - a value equaling the percentage of cash that a single play of a single song amounts to (this is, of course, a minuscule number). This 'share' is then multiplied by the number of times a given song is played to arrive at the total value of that song's license royalties during that quarter.
For instance,let's say that in Q12005, 100 songs were played (this is, of course, a very, VERY small fraction of the total number of songs played in a quarter, but we're going for ease of calculation here). Let's further say that the total amount of royalties collected in that quarter was $200. Therefore, each song played is worth two dollars. So, if Aerosmith's "Dream On" was played 3 times, Aerosmith gets six dollars as their share for that quarter.
This constitutes a dramatic oversimplification of the process, and the processes for each PRO are slightly different, as are the percentages, but in a nutshell, this is how it's figured.
Compulsory License
In a compulsory license, a government forces the holder of a patent, copyright, or other exclusive right to grant use to the state or others. Usually, the holder does receive some royalties, either set by law or determined through some form of arbitration.
Copyright
A compulsory copyright license is an exception to copyright law that is usually philosophically justified as an attempt by the government to correct a market failure. As an exception to copyright, another party can exercise one or more of the copyright's exclusive rights without having to obtain the copyright holder's permission (hence "compulsory") but will have to pay a licensing fee.
Some compulsory licenses protect those who wish to use a work for educational or non-commercial purposes. In cases when it is judged too burdensome for scattered or small-scale buyers and sellers to find one another and negotiate a price, governments sometimes issue a compulsory license for the use so that the relative difficulty of obtaining permission for it does not extinguish it. For instance, the copyright law of Canada has a compulsory license scheme for orphan works. This is in contrast to orphan drugs, which often get more protection. In these types of cases, the license must often pass the Berne three-step test.
The common saying among musicians that one can always "cover" someone else's song is, though not entirely correct, a reflection of the fact that in the United States, musical works are subject to compulsory licenses. United States copyright law establishes compulsory licenses as purchase methods or strong market influences in the entertainment industry, such as playing popular music on a radio station or webcast, and for many television transactions, like the use of broadcast audiovisual works such as television shows in cable television systems. It works like this: someone finds a recording in a pawnshop or tag sale and can't find the copyright owner so they pay a filing fee to the copyright office and are free to use or incorporate it into another work without it being an infringement, only paying royalities if the original composer comes forward with an infringement lawsuit, then only paying royalties from the time the copyright claim is made, legal fees exceeding royalties. Proposed legislation would limit these options. There are many orphaned works because few people are aware of this obscure provision of the mechanical license for musical compositions, that isn't extended to other artistic copyright, or even internet music file sharing.
Patents
Many patent law systems provide for the granting of compulsory licenses in a variety of situations. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) sets out specific provisions that shall be followed if a compulsory license is issued, and the requirements of such licenses. All significant Patent systems comply with the requirements of TRIPs.
The principal requirement for the issue of a compulsory licence is that attempts to obtain a licence under reasonable commercial terms must have failed over a reasonable period of time. Specific situations in which compulsory licences may be issued are set out in the legislation of each patent system and vary between systems. Some examples of situations in which a compulsory licence may be granted include lack of working over an extended period in the territory of the patent, inventions funded by the government, failure or inability of a patentee to meet a demand for a patented product and where the refusal to grant a licence leads to the inability to exploit an important technological advance, or to exploit a further patent.
TRIPs also provides that the requirements for a compulsory licence may be waived in certain situations, in particular cases of national emergency or extreme urgency or in cases of public non-commercial use.
An area of fierce debate has been that of drugs for treating serious diseases such as malaria, HIV and AIDS. Such drugs are widely available in the western world and would help to manage the epidemic of these diseases in the third world. However, such drugs are hugely expensive to produce and generally well protected by patents. In order to recover the development costs, the patent holding companies charge prices for the drugs which prevent their purchase by third world countries. Although the national emergency provisions of TRIPs allow the grant of compulsory licences in those third world countries, the countries often lack the technology to be able to manufacture the drugs. However, TRIPs requires that compulsory licences be used to fulfill a local requirement, and so it is not possible to manufacture the drugs overseas and import them to the place of need.
This issue was addressed by the Doha declaration which recognised the problem and required the TRIPs council to find a solution. On 17 May 2006 the European Commission's official journal published Regulation 816/2006, which brings into force the provisions of the Doha declaration. This means that the declaration now has legal effect in the European Union, and also in Canada who implemented it in 2005. The declaration allows compulsory licences to be issued in developed countries for the manufacture of patented drugs, provided they are exported to certain countries (principally, those on the UN's list of least-developed countries and certain other countries having per-capita incomes of less than US$745 a year).
In designing defenses against pandemics or bioterrorism, planners sometimes seek huge supplies of certain drugs. Here, the issue is not so much the cost per dose as the number of doses on the market. Many modern drugs have long production cycles, sometimes as long as a year, so the drug companies must always estimate future demand for their patented drugs and vaccines. The number of victims in a flu pandemic or anthrax attack could exceed any reasonable prediction, and for the original maker to increase production could itself be a lengthy process. The issue of compulsory licences allows the number of manufacturers to be increased, thereby allowing greater volumes of supplies to be manufactured.
