Finally, aside from various intrusions into state laws and common law claims, the most common form of software protection is a simple contract. Unlike free and open source software, most commercial software products are licensed only in object code form and may be subject to shrink-wrap or click-through agreements. Notwithstanding legitimate concerns about whether these agreements are enforceable or constitute an abuse of dominance, they:
(1) Grant limited licenses;
(2) include confidentiality obligations and restrictions against copying, modifying, redistributing and, in some cases, accessing the Licensed Software; and
(3) Prohibit reverse engineering and other means of discovering or reconstructing software source code. This allows software rights holders to contract around legal first sale, fair use (including reverse engineering), and essential use rights by licensing, rather than selling, physical copies of Owner’s Software subject to usage restrictions and Licensee’s waivers of such rights.
Another strategy with software as a trade secret is to withhold distribution of tangible copies of the software by adopting a SaaS or other remote service model. This strategy is based on the reasoning that, under the terms of a software license agreement, the licensee generally grants a license rather than owns a copy of the software, and that legal limitations of copyright protection author therefore do not apply. The software rights holder is then free to impose additional contractual restrictions on the transfer and use of copies of its software.
Breach of contract, therefore, is not equivalent or preempted by copyright infringement claims and can be a valuable additional tool to traditional intellectual property rights.
Accordingly, a software licensor may attempt to preserve both contractual and statutory intellectual property rights (e.g., copyrights and patents) by defining license agreement restrictions as:
(1) Commitments which, if breached, give rise to an action for breach of contract. These commitments are generally defined in the restrictions clause of the license agreement;
(2) Licensing terms which, if breached, suspend or terminate the license and give rise to a copyright or patent infringement action. These license terms are usually defined at the outset of the license grant; and
(3) Limitations of the scope of the license grant also giving rise to an action for infringement in the event of an overrun. These limitations are usually set forth in the license grant and may include, for example, limitations and restrictions of territory, duration, permitted use, permitted user, volume of use, and area of use.