SoftMan v. Adobe

Is there any case law that supports my theory that software is actually sold, not licensed? Yes, there is, although the courts are apparently not necessarily in complete agreement. Let's first present a case that rules in favor of "sold, not licensed". In a future post, we'll look at a conflicting case and point out some flaws in their reasoning.

In 2001, the case SoftMan Products Co. v. Adobe Systems Inc. went before a U.S. District Court in California. In this case, one of the arguments Adobe used to try to support their position was that they do not sell their software, but instead merely "license" it. The judge dismissed this argument stating, "It is well-settled that in determining whether a transaction is a sale, a lease, or a license, courts look to the economic realities of the exchange." The judge then pointed out many ways in which the economic realities plainly indicated that Adobe's software is sold, not licensed:

• The purchaser obtains a single copy at the time of the transaction and for a single price
• The transfer of possession is indefinite with no terms for renewal
• Distributors and end-users pay full value for the software and accept the risk that copies in their possession may be damaged or destroyed.

The judge also included a quote from an expert on the subject:

The pertinent issue is whether, as in a lease, the user may be required to return the copy to the vendor after the expiration of a particular period. If not, the transaction conveyed not only possession, but also transferred ownership of the copy.

Clearly this is at odds with the view that software is licensed. As such, the judge ruled that Adobe was selling their software, not licensing it. Most other commercial software sold at retail is still sold in exactly the same way that Adobe was selling their software in 2001. Yet more evidence that most software is sold, not licensed.