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Used Licenses continued from page 1 this principle also apply, if for example, rights, but not products, are being sold? Yes is the answer, and some distributors have started to distribute freely defined numbers of application licenses purchased from a bulk of volume license agreements that their resellers (the first users) purchased from software manufacturers such as Microsoft and Oracle, but allegedly no longer need. An approach some others take is to “transfer” replication rights for software that the first customer was offered via download, has used, and then deletes and issues a sales document to the distributor — who then resells the “license.” Apparently, this approach makes use of some significant price deviations between fullpackaged product and software licenses that are priced more favorably as part of either volume license agreements or download offers. In the end, software manufacturers haven’t left the issue unattended, and have begun involving the courts, which have had to deal with this business model and have come to different conclusions. One can expect, then, that the Federal Court will have to decide the question. This article provides an overview of German precedents in the matter. ORACLE V. USEDSOFT GMBH Last year, the Munich Court of First Instance (Landgericht München, Jan. 1, 2006, File Number 7 0 23237/05) and the Appellate Court (Oberlandesgericht München, Aug. 3, Dr. Katharina Scheja is a partner in the IT/IP Services Department of Heymann & Partner, Frankfurt, Germany. Dr. Scheja specializes in large IT transactions such as software and telecom projects, development, distribution and licensing contracts and outsourcing. She has also been active in anti-piracy. Among her memberships, Dr. Scheja counts the German Association for Computer Law and the German Association on IP Law. She joins the e-Commerce Law & Strategy’s Board of Editors with this issue. Reach her at k.scheja@heylaw.de. 2 2006, File Number 6 U 1818/06) decided a case brought by Oracle against software reseller usedSoft GmbH (“usedSoft”). The case dealt with software that Oracle offered via the Internet by download to its customers. usedSoft sold “used licenses” of this software to customers who had physical copies of the software and intended to enlarge their license portfolio, with the “licenses” having been purchased by the first customers who had downloaded the software from the Internet. The “transfer of license rights” was documented in a certified brief issued by a German notary public who verified having checked the delivery papers of the original license owner and the delivery to usedSoft, and confirmed that the original license owner had obtained the licenses legally, and did not continue to use them. Oracle argued that this offer of “used licenses” was infringing its copyright because Oracle hadn’t agreed to the transfer. Oracle applied for a preliminary injunction to cease and desist, and further refrain from, this offer. The Munich Court of First Instance granted the preliminary injunction, with the Appellate Court in Munich affirming the ruling. After that, in accordance with provisions of German Procedural Law, Oracle had to initiate main proceedings in which the legal issues would be checked thoroughly, and subject to collection and discussion of further facts and evidence. The Landgericht München this year upheld its earlier decision (see, Landgericht München, March 15, 2007, File Number 7 O 7061/06). In their decisions, both Munich courts asserted that the exhaustion principle could not be applied to the resale of licenses and, accordingly, such resale needed the consent of the software manufacturer to be valid. In accordance with the wording of the law, both Munich courts clearly stated that the principle of exhaustion applies only to physical incorporation of protected works. These decisions have received enormous attention and been subject to intense discussion in the legal community. One of the most intensely discussed topics in German continued on page 6 e-Commerce Law & Strategy ❖ www.ljnonline.com/alm?ecomm e-commerce LAW & STRATEGY ® EDITOR-IN-CHIEF . . . . . . . . . .Michael Lear-Olimpi EDITORIAL DIRECTOR . . . . . .Wendy Kaplan Ampolsk MANAGING EDITOR . . . . . . . .Steven Salkin, Esq. MARKETING DIRECTOR . . . . .Jeannine Kennedy MARKETING COORDINATOR . . . . . . . . . . . .Beth Ann Montemurro GRAPHIC DESIGNER . . . . . . . .Louis F. Bartella BOARD OF EDITORS RICHARD BUCHBAND . . . .Juno Online Services Inc. New York JEFFREY P. CUNARD . . . . . .Debevoise & Plimpton Washington, DC WALTER A. EFFROSS . . . . . .American University Washington, DC D. REED FREEMAN JR. . . . .Claria Corp. Washington, DC ELIZABETH A. GAUDIO . . .Nat’l Federation of Ind. Bus. Legal Foundation Washington, DC PAUL R. GUPTA . . . . . . . . . .Mayer, Brown, Rowe & Maw New York THOMAS HEYMANN . . . . . .Heymann & Partner Frankfurt, Germany STANLEY P. JASKIEWICZ . . .Spector Gadon & Rosen, P.C. Philadelphia PHILIPPA LAWSON. . . . . . .Canadian Internet Policy and Public Interest Clinic Ottawa EMILE LOZA . . . . . . . . . . . .Technology Law Group Boise, ID RONALD J. MANN . . . . . . .Mitts Milavec Philadelphia JULIAN S. MILLSTEIN. . . . . Thelen Reid Brown Raysman & Steiner LLP New York JEFFREY D. NEUBURGER. . .Thelen Reid Brown Raysman & Steiner LLP New York EDWARD A. PISACRETA. . . .Thelen Reid Brown Raysman & Steiner LLP New York LUIS SALAZAR . . . . . . . . . .Greenberg Traurig LLP Miami DR. KATHARINA SCHEJA . . .Heymann & Partner Frankfurt, Germany J.T. WESTERMEIER, JR. . . . .DLA Piper Rudnick Gray Cary Northern Virginia JOSEPH P. ZAMMIT . . . . . . .Fulbright & Jaworski New York e-Commerce Law & Strategy® (ISSN 0747-8933) is published by Law Journal Newsletters, a division of ALM. © 2007 ALM Properties, Inc. All rights reserved. No reproduction of any portion of this issue is allowed without written permission from the publisher. Phone: 800-999-1916 Editorial e-mail: ssalkin@alm.com Circulation e-mail: almcirc@alm.com The publisher of this newsletter is not engaged in rendering legal, accounting, financial, investment advisory or other professional services, and this publication is not meant to constitute legal, accounting, financial, investment advisory or other professional advice. If legal, financial, investment advisory or other professional assistance is required, the services of a competent professional person should be sought. e-Commerce Law & Strategy P0000-236 Periodicals Postage Pending at Philadelphia, PA POSTMASTER: Send address changes to: ALM 345 Park Avenue South, New York, NY 10160 Annual Subscription: $395 Published Monthly by: Law Journal Newsletters 1617 JFK Boulevard, Suite 1750, Philadelphia, PA 19103 www.ljnonline.com June 2007
When the CEO Wants His ‘Hotmail’ Don’t Treat Your Business Records Like Presidential Correspondence By Stanley Jaskiewicz Many businesses today are conducted entirely by e-mail, sometimes through employees’ individual e-mail accounts. And you’ve most likely been in this spot: Often, the only place to find correspondence, contracts and other business records is in the electronic inboxes of everyone who works for a company. This is certainly convenient, because it lets all employees who need materials in their inboxes keep working, wherever they may be, without being tethered to a particular office and or cabinet full of paper files. But despite the convenience of working online, wouldn’t it be nice to have the luxury of an old-fashioned secretary to clean up your firm’s inboxes? Someone would maintain the traditional files, to store all messages arranged by client, subject and date. When something is needed, whether because a question arose about what a contract requires, a request is received to produce documents in ediscovery, or a copy of the latest or final draft of a contract is needed, it would be a simple matter of asking the secretary to assemble messages from that neatly sorted file. (Sophisticated document-management systems purport to create this result, but they are only as good as the documents that make it into the system. For reasons discussed in this article, many documents and e-mail messages might never make it there.) When all Stanley P. Jaskiewicz, a business lawyer, helps clients solve e-commerce, corporate contract and technology-law problems, and is a member of e-Commerce Law & Strategy’s Board of Editors. He can be reached at the Philadelphia law firm of Spector Gadon & Rosen P.C., at sjaskiewicz@lawsgr.com. business correspondence took place on paper, in a 9-to-5 work world, that system made perfect sense. Unfortunately, that world (and its secretaries) hasn’t existed for many years. Not only do most of us not have a secretary tidying up our email inbox each evening, but we also have many alternative inboxes for our business correspondence. For work, a busy executive may have an office e-mail account, a Blackberry for around-the-clock access and an online mail account (such as through Gmail, Hotmail or Yahoo!) for convenience when traveling. He or she probably also has a personal account for non-business e-mail that must be kept out of the firm’s accounts. Going through “the file” has become an exercise not only in finding the appropriate messages and attachments, but in simply identifying all places and accounts where “the file” might exist. Indeed, multiple accounts often are created by employees to bypass the hassles of security measures and record-retention policies diligently created by IT departments who often diligently enforce these polices and whose employees read and apply the information in publications like this one. (My IT staff would call those hassles “necessary inconveniences” to comply with the rules that lawyers perpetrate.) If the most convenient e-mail device — typically the Blackberry — is supplied by the employee herself, or by a third party, then the IT department might not know about all the accounts on which it is used, much less be able to monitor them, or apply the firm’s retention or other policies. Yet the rabbit-like multiplication of e-mail accounts has grave implications, not only for business, but, as we have seen in recent news, for anyone who uses e-mail — including even our government leaders. The pitfalls recently encountered by the politicos who apparently tried to keep secret their machinations about the replacement of various U.S. Attorneys, and dealings with lobbyists, by using private Republican National Committee (“RNC”) accounts, rather than White House e-mail accounts — with all their monitoring, recordkeeping and other oversight — mirror the risks businesses run when they allow employees, especially key employees, to bypass the company e-mail system. (See, http://online.wsj.com/article/ SB117651545625969906.html?mod= googlenews_wsj; http://online.wsj. com/article/SB117615846511864432search.html?KEYWORDS=congress+f ollows+e-mail+trail&COLLEC- TION=wsjie/6month; and www.salon .com/opinion/blumenthal/2007/03 /29/attorney_firings/.) The RNC’s email pratfalls provide an instructive lesson on what not to do when private businesses allow (or tolerate) an employee’s alternative online account, rather than the “official” employersanctioned one. RECENT DEVELOMENTS Even worse, consider how the White House’s and RNC’s problems with outside e-mail — and their staffers’ actual quotes about it — would appear if the situation involved your company, or a client’s, and you had to read about your employees and IT department defending your company’s e-mail snafus, using the same language as the widely reported actual quotes cited below. How it would play in the press and the concerns of unhappy clients would be the least of your worries, particularly compared to your legal headaches. You could have to give explanations to opposing counsel conducting discovery (and feeling misled by your formal responses), or worst of all, respond to subpoenas if the “alternative” e-mails trigger a regulatory investigation. (The following quotes all are actual statements reported in the press, but any of them could easily have come from well-meaning and bottom-line oriented employees — or IT staff who simply have not had adequate training on legal issues in records management, particularly as it applies to electronic records.) For example, an assistant to presidential advisor Karl Rove said in an e-mail (that was widely quoted in The Wall Street Journal, and other publications): “I now have an RNC blackberry which you can use continued on page 4 June 2007 e-Commerce Law & Strategy ❖ www.ljnonline.com/alm?ecomm 3
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