Read Case Problem 10-16 on page 283 of your text, and the two related cases:

SoftMan Products Co., LLC v. Adobe Systems, Inc., 171 F. Supp. 2d 1075 (C.D. Cal. 2001).

Adobe Systems, Inc. v. Stargate Software, Inc., 216 F. Supp. 2d 1051 (N.D. Cal. 2002)

Reply to a classmate who reached a conclusion different than yours (i.e., if your analysis showed that SoftMan should prevail, respond to someone who chose Adobe). Your reply should explain why your analysis results in a better solution to the case.

The reply must be at least 450 words, and rely on at least two scholarly sources other than the text and the Bible, cited in proper APA form.

Micheal Stafford is the student you are responding to He is for Adobe and I was for Softman:

Facts:

The case Softman Products Company LLC., versus Adobe Systems Incorporated presents numerous complex issues in regards to contract law.  Softman, a reseller of computer software, has been selling Adobe products that Adobe believes should be distributed as part of a set if they are to be distributed at all. As a result of Softman’s actions, Adobe files a counterclaim because they believe that Softman has infringed on its trademark.  Adobe feels that it reputation is at stake because they believe that the products that Softman has been selling have been altered and consumers may have a difficult time receiving the proper technical support if they experienced problems with the software, which could cause consumers not to trust the Adobe name. Softman Products Company believes that they have committed no wrong doing since they do not have a contract with Adobe Systems Incorporated. There are various questions that the court must answer in regards to this case. First of all, what right(s) does Adobe have as owner of the intellectual property? What does Adobe actually own? Does the First Sale Doctrine apply in regards to this case?

Issue:

Adobe contends that it products are not to be sold, but distributed through licensing agreements, and the end user obtains a license to use the products; however, the end user does not own any of the copyrighted information. The end users agreement allows for the sale or transfer of the software, provided that the person or entity transfers all of the products and surrender all of their rights to use the software (Palma Decl., Ex. 1.). Softman’s case relies on the First Sale Doctrine, which was first reviewed by the United States Supreme Court in 1908, and states, “the owner of a particular copy…lawfully made under this title… is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy.” (Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 28 S. Ct. 722, 52 L.Ed. 1086 (1908). Softman legally purchased the software, and because of the company’s intent to resale the merchandise, they technically were not the end users of the product, so should they be subject to the end users agreement?

Rule of Law and Application:

There are two precedents that Adobe relies on to support their case. The first is Microsoft Corp. v. Harmony Computers and Electronics, Inc., 846 F. Supp. 208, 212 (E.D.N.Y. 1994), and this is a case where the court upholds Microsoft’s claim that Harmony was in violation of a licensing agreement by selling counterfeit products. While Adobe acknowledges that Softman was not selling counterfeit products, they were altering the original collection and selling the products in a manner that Adobe never intended its products to be sold. If a publishing company sold half of a novel or excerpts from a novel without the consent from the author then that would be grounds for copyright infringement. In the above mentioned case, Harmony Computers and Electronics, Incorporated was never a Microsoft licensee and therefore they were never authorized to sell Microsoft products.

Secondly, in the case of Adobe Systems Incorporated verses One Stop Micro Incorporated, which was another case in which Adobe’s products were being altered and the resold, the court stated that, “while One Stop is not a signatory to an Adobe licensing agreement, it is nevertheless subject to the restrictions of those agreements” (Adobe Sys. Inc. v. One Stop Micro, Inc., 84 F. Supp. 2d 1086, 1093 (N.D. Cal. 2000). Softman was not a signatory to an Adobe licensing agreement either, but still should have been subject to the terms and conditions that were set forth by Adobe. Lastly, the court upheld that One Stop could not use the First Sale Doctrine as a defense because the end user was not the actual owner of the product, they only bought a license to use the product.

Conclusion:

In Conclusion, Adobe Systems Incorporated must be allowed to have some control over the way their copyrighted products are distributed. While Softman was not altering the physical software or willingly peeling off stickers to deceive the public like Harmony Computers and Electronics and One Stop Micro were doing, Softman was still guilty of unbundling products that were meant to be distributed together as a bundle, and they should have been held accountable to the restrictions of the licensing agreement, just as One Stop Micro Incorporated was held accountable for their actions. Secondly, the consumers that purchased software from Softman received only a license to use the software, therefore the First Sale Doctrine defense should be null and void just as it was in the One Stop Computers Case.

References:

Adobe Sys. Inc. v. One Stop Micro, Inc., 84 F. Supp. 2d 1086, 1093 (N.D. Cal. 2000).

Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 28 S. Ct. 722, 52 L.Ed. 1086 (1908).

Microsoft Corp. v. Harmony Computers and Elec., Inc., 846 F. Supp. 208, 212 (E.D.N.Y. 1994)

My response supporting Softman:

Softman

Issue

The Issue presented here is whether Softman is justified to distribute individual pieces of the Adobe collection package acquired from them or it is indeed bound by Adobes EULA that that prohibits redistribution of individual parts.  Adobe Systems is a producer of softwares whereas Softman Products Company distributes these softwares through its website.  The software under discussion was initially sold to Softman as one collection (Kubasek, Brennan, & Browne, (2015). p.283). This is one of the means through which Adobe distributes its products mainly through licensing.  A debatable issue that arises in this case is whether the collection given to Softman was licensed or sold.  Moreover, Adobe collections are essentially accompanied by End User License Agreements, which tends to lay out requirements or licensing terms between Adobe and the end user for that particular product.  In this case, the Adobe software is accompanied by EULA which is found on a computer disk and can only be found and agreed to upon running the program.  This presents another contentious issue in the case as to whether Softman installed the software and are therefore bound by the EULA terms or not.  Finalmly, the EULA terms prohibit distribution of individual parts from the collection.  The main debatable issue therefore is whether Softman violates Adobes terms of service by distributing versions of the software.

Rule

In this case, Softman should prevail.  In the issue of whether Softman are bound by terms of the EULA, it can be determined that since Softman did not run the software before distribution, they did not agree to the terms and are therefore not bound by it.  For a contract to be valid there must be assent on the part of the user.  Since Adobe does not provide a hard copy of the terms of its EULA, users essentially can only agree to these terms during the installation process (Kwong, 2003).  Consequently, Softman could only have assented if they attempted to install the software and were required to do so.  It therefore implies that they cannot be bound by the terms.  On the issue of whether the collection was a sale or a license, it can be determined that the collection was sold rather than licensed to Softman.  This is done considering the financial issue of the transfer.  In this case, the collection was obtained at a particular time for a particular price.  Moreover, there was no particular agreement requiring that ownership of the product expires at the end of a certain period of time.  The distributor essentially paid for the ownership of the product and accepted risks accompanied by its use.  Consequently ownership of the product is transferred from the owner to the distributor.  Being the sole owners of the product and not bound by EULA terms, Softman can therefore distribute single copies of the software.

Analysis/Application

In the case of Adobe Systems and Stargate Software Inc., Stargate obtained Educational versions of softwares from Adobe which required them to sign an Off or On Campus Educational Reseller Agreement.  This agreement explicitly laid out that the distributor is bound by a licensing agreement contained in the package.  The signing of the agreement is a form of consent, which binds the distributor to the terms as a licensed individual and not an owner.  Consequently, in this particular case, Stargate is not the rightful owner of the adobe software.  Adobe does not give ownership interests in these case rather only licenses the distributor.  Moreover, the restrictions imposed by Adobe to limit redistribution indicate their intention to license rather than sell their product.  This distinguishing feature in this case is the signing of the OCRA agreement, which explicitly determines the distributor as a licensed individual and not an owner.

According to the first sale doctrine, once ownership of a product is transferred from the original owner, the original owner ceases to have distribution control over the product (Keenan & Riches, 2007).  Consequently, this rule applies to this case in that once Adobe relinquished ownership of the software to Softman by indirectly selling it to them they ceased to have any controlling interest in its distribution.  In this case therefore, Softman does not infringe on ownership rights of Adobe by redistributing the product.

Conclusion

Adobe essentially failed to protect their own ownership interests by not clearly laying out the terms of a sale or licensing agreement in the case between them and Softman.  Moreover, they also failed to consider the limitations to the EULA requirements for particular users.  Software vendors therefore need to reconsider their negotiating terms when dealing with distributors by among other things ensuring it is clear whether the contract is a sale or a license and what distribution requirements the distributor is bound to (Keenan & Riches, 2007).

References

Keenan, D. J., & Riches, S. (2007). Business law. Harlow: Pearson Longman.

Kubasek, N. K., Brennan, B. A. & Browne, M. N. (2015). The legal environment of business: A critical thinking approach (7th ed.).

Kwong, D. L. (2003). The Copyright -Contract Intersection: Softman Products Co . v . Adobe Systems, Inc. & Bowers v . Bays t a t e Technologies, Inc. Retrieved from http://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=1411&context=btlj

Here is a sample reply to a student post

After reviewing the case I have sided with Softman Co. I have read and understood your main reasons for siding with Adobe as being: the product was licensed and not sold, which therefore, does not allow the first sale doctrine to be applied, and that there should be different standards of copyright infringement for software companies. I will challenge your points in these next few paragraphs.

Firstly, the software was not licensed it was sold. According to Degner (2012), the transaction failed to meet the main contractual notions of assent in order to properly establish. In order for a contract to be established there must be genuine assent. In order for genuine assent to occur, there has to be a meeting of the minds between both sides. Softman denied experiencing a meeting between the two minds. Softman attested to never seeing the licensing agreement nor at any point being presented with the licensing agreement. Because Adobe failed to ensure that the licensing agreement was presented to Softman, Adobe failed to establish a contract of licensing. Not only did was the product sold because it was not properly licensed but the court felt that it met the conditions of a sale. The conditions examined whether the copy of the software was lawfully produced, whether the copy was lawfully transferred, whether the defendant qualifies as the legal owner, and whether the defendant distributed that copy. I believe that the lack of proper establishment of the licensing contract, and all the considerations that the court took into account, are more than enough justification for their decision that the software was sold and not licensed, thus allowing the first sale doctrine to apply.

Secondly, you argued that the court does not take into account the uniqueness of the software industry in making decisions about copyright infringement. However, I believe they do. According to, Hadan (2004), in order for someone to use a piece of software it must be copied from one computer’s storage to another. The purchaser then becomes the owner of the product. On the other hand, for example, if a book was borrowed from the library, it would not be resalable because it still belongs to the library. However, because the software is purchased it is resalable, and because it can only be sold if copied, it is then allowed to be transferred to others through the use of copying.

I believe that you are the one guilty of not seeing that the court took into account the uniqueness of software products. You said that even though the product is in the hands of the consumer, it belongs still to the creator Adobe. I don’t think that is seeing software products as different; I believe that is like seeing a software product as a book that is borrowed from a library, when clearly it is not. In my opinion, the court took into account that according to Hadan (2004), many companies that sell software, license their products to defeat the first sale doctrine and to maximize the value of their software while minimizing their liability. You have defended the software industry saying they should be given more favor because software can be easily ‘stolen’ and ‘copied’; however, I think you need to take into account that these same software companies license their products to selfishly prohibit buyers from selling the product which they have purchased. Adobe does not lend their software, they sell it. Therefore, a purchaser should be allowed to sell it if he or she desires. If you purchase a house, would you not wish to have the right to sell it if you desired?

In conclusion, I challenge your arguments for the reasons that the software was sold and licensed because it failed to meet the establishment of a licensing contract, and that it met the court’s considerations of a sale. Furthermore, the court took into consideration the uniqueness of the software industry and rightfully gave Softman, a purchaser of Adobe’s software, the right to resell the product as is granted by the first sale doctrine, even though many software companies are trying to sidestep the first sale doctrine by licensing their products. This court wisely and rightfully, did not buy into that.

References

Degner, Andrew, Columbia Journal of Law & the Arts, Vol. 35, Issue 4 (2012), pp. 581-606

Nadan, Christian H., AIPLA Quarterly Journal, Vol. 32, Issue 4 (Fall 2004), pp. 555-656

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