How liability for intellectual property defects in computer software transactions affect an efficient allocation of resources. A journey in the protection, transaction, infringement and uncertainty of copyright protected software.

Abstract

Copyright has been used for over a hundred years to provide authors and artists with incentive to create and share their works, and the system of copyright is a flexible legal phenomenon that has adapted to new forms of creations as society has developed. When software emerged and was recognized as valuable to society, copyright was chosen as the mean for protecting the incentives for further innovation and development in this field. This thesis investigates, from a legal constructivist approach, how this form of protection creates uncertainty and how this uncertainty is transferred in a simplified value chain, from the software developer or licensor as seller to the end-user or licensee as buyer.

As seen in the thesis, developing modern software is quite different from (the illusion of) the sole author creating a work of art, which is the classic matter that copyright would be suitable for. Thus when applying principles of copyright as a legal phenomenon to protect interest behind software this creates uncertainty for the entities that act in an environment of software transactions. In legal constructivist terms I conclude that copyright protection of software is a phenomenon not reified to a satisfactory level in society. This is combined with the uncertainty of intellectual property defects, as shown in this thesis, another phenomenon not satisfactory reified in the Swedish or European jurisdictions. I have investigated how one can argue regarding these uncertainties with and without agreements regulating the matter.

When transacting software the buyer must commonly agree to an end-user license agreement that often stipulates whether the seller will be responsible or not for the properties of the software, for example, who should bear the risk if the software infringes a third party intellectual property right. However if the parties in a transaction of software have not regulated these matters in an agreement it is also uncertain to whom this risk is allocated in the transaction. When applying economic theory to these matters, I have found that there are transaction costs hindering successful bargaining between the parties and I argue that if the seller is liable for intellectual property defects, resources will be more efficiently allocated. Because of this, changes in the copyright legislation should be made to increase the possibility of an efficient allocation of resources.