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Adobe Loses Courtroom Battle

By David Foxen | January 22, 2016

David Foxen and Snow’s Adobe Expert Matt Williams look at the recent court case between Adobe and Software Surplus, and what the outcome means for the industry.

At the end of December 2015, Adobe took a company called Software Surplus to court in the US over a reported case of copyright and trademark infringement. Adobe claimed that Software Surplus actively sold Adobe software, which they had purchased from a third party, and then sold it on their website without any approval from Adobe.

Courthouse News reported that the jury found in favor of Software Surplus on both the copyright and trademark infringements as  “Adobe could not prove that ‘it merely licenses and does not sell’ the relevant software”. The courts claimed that “once a copy of a work is lawfully sold or transferred, the new owner has the right to sell or otherwise dispose of that copy without the copyright owner's permission”.

Analysis from the SAM & Licensing expert

One of Snow Software’s resident Adobe experts, Matt Williams, provides his analysis on the ruling:

Courthouse News stated that "Adobe's primary problem is that it confuses the claim that it made - trademark infringement - with the claim it wishes it made - unfair competition, or false advertising". Effectively they are saying that Adobe did have a claim, however they wasted their opportunity by making the wrong claim. This isn’t the first time that Adobe have failed to demonstrate that they licence the right to use the software rather than outright sale of the software, see Softman Products Co. v. Adobe Systems Inc. from 2001. In this case it was ruled that Adobe had sold rather than licensed software; almost 15 years on and they haven’t bolstered their legal position effectively enough to protect their IP (Intellectual Property).

Whilst on the face of it this looks like a dream for organizations that offer audit defence there are other things to consider:

  1. The region in which the case was heard. Being a California based company, Adobe chose to protect its IP under California Law which isn’t as sympathetic to IT companies and specifically the protection of IP in comparison to, for instance, Washington State Law. Just because the Californian courts haven’t upheld the claim it doesn’t meant that Adobe wouldn’t have success with the same claim outside of the region. A good example of a vendor successfully taking legal action against a customer in breach of IP is Attachmate Corporation vs Minister of Water and Environmental Affairs from May 2015. This case was heard in South Africa with the ruling ordering the defendant to Pay circa US $500k plus interest of a similar figure.
  2. This is only specific to Adobe. Other Software vendors may not have the same challenges when demonstrating that they licence rather than sell the software, however under European law this still may not prevent resale of licences. Snow Software experts have suggested that 2016 may see the first landmark case for the resale of second-hand software licenses in the 2016 Predictions Blog, after years of legal battles between software vendors and second-hand software resellers.

Second-hand Licensing questions remain

The appeal of resale of licences to date has proven to be limited. Authorized resellers shy away from the concept of reselling agreements predominantly because of the conflict it creates with the vendor. Specialist second-hand software resellers can sometimes be difficult to differentiate from organizations offering outright illegal copies of software, making the concept of buyer-beware very relevant in this market place.Matt says that he did encounter customers attempting to resolve licence shortfalls with second-hand licensing in the periods 2004-2008, when he worked as a Licence Compliance Manager for Microsoft. He successfully argued that the purchase of second-hand licences does not address historic non-compliance issues as the licence in question would have been in use by a different customer during the time period which the breech occurred.

Microsoft, as an example, has successfully claimed against second-hand resellers on a number of infringements, making it difficult, or at the very least uncomfortable, for them to trade. The second-hand software licensing market have continued to try and grow and become a sustainable method for cheaper software licenses, however organizations are failing to use such a market as there are too many concerns around software compliancy and software use rights. All the second-hand software market needs is one success story where a large organization has successfully gone through the process of buying or selling second-hand licenses before other organizations will follow suit.

Purchasing legitimate licenses

It is important that all of your software licenses within your organization are legitimate copies. If you are offered a deal on software licenses that seems too good to be true, it probably is. Always use approved resellers or third parties, or go directly to the vendor. It may also be relevant to look at the country of origin for some licenses; there have been instances in the past whereby purchasing a license in one territory may not be valid in another thus causing compliance issues.  

If you have any questions around second-hand software licensing and how it will impact SAM and license management, contact our team of software licensing experts today.

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