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Chapter 12 — Licensing

12.2 Scope of the Licensing Guidance

12.2 Scope of the Licensing Guidance

ASC 606-10
55-54 A license establishes a customer’s rights to the intellectual property of an entity. Licenses of intellectual property may include, but are not limited to, licenses of any of the following:
  1. Software (other than software subject to a hosting arrangement that does not meet the criteria in paragraph 985-20-15-5) and technology
  2. Motion pictures, music, and other forms of media and entertainment
  3. Franchises
  4. Patents, trademarks, and copyrights.

Footnotes

4
When used in the context of cloud capacity, the term “cloud instance” refers to the cloud environment in which the software operates.
5
The first sale doctrine, codified in 17 U.S.C. Section 109, provides that an individual who knowingly purchases a copy of a copyrighted work from the copyright holder receives the right to sell, display, or otherwise dispose of that particular copy notwithstanding the interests of the copyright owner. However, the right to distribute ends once the owner has sold that particular copy (see 17 U.S.C. Sections 109(a) and 109(c)). Since the first sale doctrine never protects a defendant who makes unauthorized reproductions of a copyrighted work, the first sale doctrine cannot be a successful defense in cases that allege infringing reproduction. Further, 17 U.S.C. Section 109(d) provides that the privileges created by the first sale principle do not “extend to any person who has acquired possession of the copy or phonorecord from the copyright owner, by rental, lease, loan, or otherwise, without acquiring ownership of it.” Most computer software is distributed through the use of licensing agreements. Under this distribution system, the copyright holder remains the “owner” of all distributed copies. For this reason, alleged infringers should not be able to establish that any copies of these works have been the subject of a first sale. That is, sales of software will typically not be subject to the first sale doctrine.