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>Software licenses, assignability, and mergers

>A new case was handed down out of the Sixth Circuit last week that dealt with software licensing.

In this case, a company had licensed some software, and the license agreement contained some of the standard non-assignment language: that the license was non-transferable and that the licensee could not transfer its rights without the approval of the licensor.

The licensee underwent some corporate reorganization — it was merged into a new entity. The key thing here is that the merger was *not* with a third party entity or as part of buying assets. This case stemmed simply from a parent company consolidating a set of wholly-owned subsidiaries.

However, even though, pre- and post-merger, the software sat on the same computer, doing the same thing, at the same location, the surviving entity was in violation of the software license as a result of the merger.

So, two tips for all of the licensees out there. First, if you are doing any merger or reorganization, please be sure to look at your software licenses to see if the agreements allow you to transfer. Second, when negotiating your license agreements, get the right to transfer — at least for internal reorganization purposes. Otherwise, you might find yourself having re-license the same software.

Andy Ehmke focuses his practice on intellectual property portfolio issues facing companies in the software, computer, video game and mobile device industries. Prior to joining Haynes and Boone, Andy was an information systems manager and consultant, and also worked as a programmer designing object-oriented programs for hand-held computing devices.

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