“License” for 3 Annual Payments Treated as Sale of Copyright Rights

Corp A, a U.S. corporation, transfers a disk containing Program X to Corp B, a Country Z corporation, and grants Corp B an exclusive license for the remaining term of the copyright to copy and distribute an unlimited number of copies of Program X in Country Z, prepare derivative works based on Program X, make public performances of Program X, and publicly display Program X.

Corp B will pay Corp A a royalty of $y a year for three years, which is the expected period during which Program X will have commercially exploitable value.

Although Corp A has transferred a disk with a copy of Program X on it, under paragraph (c)(1)(i) this transfer is accompanied by copyright rights identified in paragraph (c)(2)(i), so the transaction is a transfer solely of copyright rights, not of a copyrighted article — the disk is a de minimis component under paragraph (b)(2). Applying the all-substantial-rights test of paragraph (f)(1), Corp A is treated as having sold copyright rights to Corp B, which has acquired all of the copyright rights in Program X, exclusively within Country Z, for the remaining life of the copyright. Under paragraph (g)(1), the “license” and “royalty” labels are not controlling, and the fact that payments cease before the copyright term expires does not change the result.

• Shrink-Wrap License Sold on Disk Treated as Copyrighted Article
• Use of Computer Disk for One Week Treated as Lease of Copyrighted Article
• Use of Computer Program Downloaded Over the Internet Treated as Lease of Copyrighted Article