Revoking an “Implied” Software License

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A license can be granted without any written agreement. It happens more often than you might think. For example, a license by verbal agreement and a “course of conduct” was granted by one party in the case of  Planification-Organisation-Publications Systèmes (POPS) Ltée and Elizabeth Posada v. 9054-8181 Québec Inc., 2013 FC 427. In that case, the lack of a written agreement was irrelevant. The court found that there was an “implied” license. The next question was whether that license could be revoked or terminated? The software owner asserted it was entitled to revoke the licence that it had previously granted, because that licence had been granted for no consideration (or “à titre gracieux” - sounds better in French).

The court disagreed. It’s true that a license granted for no value or no consideration can be revoked unilaterally. The B.C. Court of Appeal came to this conclusion in Katz (c.o.b. Michael Katz Associates) v. Cytrynbaum, [1983] B.C.J. No. 2421 (C.A.), where an architect revoked consent to the transfer of copyright where it was given without any consideration. However, in the Planification decision, the court found significant value had been transferred over many years by the licensee, though it was never documented in writing as “consideration” for the grant of a license. This came in the form of “conceptual contributions” to the software, software testing, compensation for developers, contributions of macros and other inputs for the software.

The lessons for business?

  • Be aware that a software license can be granted verbally or through a course of dealing between the licensor and licensee. This results in an “implied” software license.
  • Terminating or revoking such a license may be possible if the grant is gratuitous and there is a complete absence of any value flowing back to the licensor. However, consideration can also be implied. In this case, it was pieced together from various sources to make up valid consideration for the grant of the license.
  • Any “free” licenses - including licenses between joint-venture partners, or licenses for beta or pre-release versions of software - should be handled carefully to avoid these pitfalls.

Topics:  Course-of-Conduct, Licenses, Oral Contracts, Software

Published In: General Business Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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