IP Tech Knowledgy
A Product’s Software License Could Restrict Resale
The ability to resell any device or product is dependent on the license terms of the software embedded in that device. Depending on the goals of the original seller, the license may be innocuous and not impact resale, or it could impose restrictions on transferring the underlying product or how a transferee’s use may be limited. Read the accompanying license.
A vast array of items operate using embedded software in some manner. Many manufacturers have a consumer-friendly business model, and the device includes a stated or implied license that the user, and any transferees, have free rein to use the software as it is integrated into the product. In this situation, the manufacturer is not reserving any claim to control the usage or assignment of the physical item, and the consumer/purchaser should not be concerned.
The opposite approach some purveyors take is when the software license restricts transfer or types of usage, in which case the original purchaser may not be able to give away or sell the underlying product without breaching the license agreement. In this case, the recipient does not have a right under the license to use the product. This occurs more often when a product is more unique or significantly derives its value from the software. Similarly, if embedded software is in need of updates or maintenance, the manufacturer is more likely to include restrictions. These are valid reasons why the purveyor may determine that any new users need to buy their own product, and thus their own license.
Under copyright law, the “First Sale Doctrine” is that when someone purchases an item, such as a book or photograph, that purchaser owns that copy of the reproduction, and can resell the item without infringing on the copyright. However, one generally licenses software rather than purchases it, and the First Sale Doctrine does not apply.
Manufacturers should determine how necessary it is to impose restrictions on what consumers might otherwise believe to be a freely transferable product, and the purveyor should provide clear and conspicuous notice that right to use and assign the product is subject to the rights in the license.
Ned T. Himmelrich
410-576-4171 • nhimmelrich@gfrlaw.com