Impact of Article 2B

logo

  MAIN PAGE

  CONFERENCE
    Program Description
    Schedule of Events
    Speaker Bios
    Registration Info
    CLE Credit
    Travel Info
    Bulletin Board

  DRAFT
    Table of Contents
      Previous Section
      Section 2B-715
      Next Section
    Search Draft

  RESOURCES
    Background Articles
    Press Room
    Related Sites

  ACKNOWLEDGEMENTS
    Sponsors
    Conference Team
    Email Webmaster


This is an unofficial draft of Article 2B from April 15, 1998. For the current official version, see the University of Pennsylvania Law School (Official NCCUSL) site at http://www.law.upenn.edu/library/ulc/ulc.htm

SECTION 2B-715. RIGHT TO POSSESSION AND TO PREVENT USE.

(a) On cancellation of a license because of breach by the licensee, the licensor has the right:

(1) to possession of all copies of the licensed information provided by it to the licensee and all copies in the possession or control of the licensee whether delivered to or made by it, and any other materials pertaining to that information that by contract were to be returned or delivered by the licensee to the licensor; and

(2) to prevent the continued exercise of informational property and other rights in the licensed information and informational property rights provided to the licensee pursuant to the agreement.

(b) A licensor may exercise its rights under subsection (a) without judicial process only if this can be done:

(1) without a breach of the peace;

(2) without a foreseeable risk of personal injury or significant damage to information or property other than the licensed information; and

(3) when applicable, in compliance with Section 2B-716.

(cb) In a judicial proceeding, a court may enjoin a licensee in breach of contract from continued use of the information and the informational property rights and may order that the licensor or an officer of the court take the steps described in Section 2B-627. If the agreement license so provides, the court may require the licensee party in breach to assemble all copies of the information and any other materials relating thereto and make them available to the licensor at a place designated by the licensor that party which is reasonably convenient to both parties.

(dc) A party has a right to an expedited judicial hearing on prejudgment relief to enforce or protect its rights under this section.

(ed) The right to possession under this section subsections (a) and (b) is not available to the extent that the information, before breach of the license contract and in the ordinary course of performance under the license, was so altered or commingled that the information is no longer identifiable or separable.

(fe) A licensee that provides information to a licensor subject to contractual restrictions on the use of that information has the rights and is subject to the limitations of a licensor under this section and Section 2B-716 with respect to the information it providesd.

Uniform Law Source: Section 2A-525, 526; Section 9-503.

Reporter's Notes:

1. Scope and Policy of the Section. This section only applies to licenses and only if the license was canceled for breach. It authorizes judicial action to assert the rights stated in subsection (a). The right to possession and to control use of information in the hands of the other party in commercial practice may run either to the benefit of the licensor or the licensee. This is true because in many commercial settings, the licensee provides information to the licensor. The principle which gives the injured party a right to recover and control use of its information should not be restricted to a licensor.

Within this structure, this section recognizes the injured party's right to recover the information and prevent further use by the other party. This reflects the conditional nature of the license relationship, which makes it more analogous to a lease of goods, than to a sale. The remedies here are, in an intangibles context, analogous to the remedies recognized in Article 2A.

2. Rights Recognized. Subsection (a) recognizes two distinct rights for the injured party. It can obtain possession of all copies of the information and, when appropriate, obtain an injunction against further use of the information. This combination is necessary to fully implement the intent that, on cancellation of the license, the injured party has a full right to preclude further benefits to the breaching party resulting from the licensed information. In many cases involving informational content, merely returning all copies does not achieve that result.

3. Self-help. A license is a conditional transfer. Subsection (b) reflects that fact and provides for a right of self-help consistent with remedies under current Article 2A and Article 9. The self-help right is constrained by 1) there being a breach sufficient to cancel the license and 2) the ability to exercise self-help without causing a "breach of the peace" or a foreseeable risk of personal injury or significant damage to information or property other than the licensed information.

Subsection places more restrictions on general self-help than exist in reference to leases under Article 2A or security interests under Article 9. While the "breach of peace" limitation exists under Article 2A and Article 9, the further "foreseeable risk" standard is adopted here.

4. Expedited Hearing. To reduce the need for self-help, subsection (d) provides for a right to an expedited hearing to enforce rights or possession and restriction of use. No effort has been made to define the contours of what that hearing timing may entail. This is left to state procedural law.

5. Identifiability. The rights under 2B-715 arise only in the case of a license and only in the event of cancellation. Furthermore, as indicated in subsection (e), there must be something with reference to which the rights can be applied. The right to possession of copies obviously cannot exist to the extent the copies of the information cannot be identified because they have been commingled. This deals, for example, with cases where data are thoroughly intermingled with data of the other party and that intermingling occurs in the ordinary performance under the license. In such cases, repossession is impossible because of the expected performance of the parties under the contract.

This does not necessarily apply to the right to prevent use. For example, if trade secret information was provided to the licensee under use restrictions, the ability to prevent further use hinges solely on whether a particular activity can be identified as involving use of the information. If an image, trademark, name or similar material is incorporated and inseparable from other property of the party in breach, that does not preclude the injured party from preventing further use of the information by the party in breach. Thus, a license of the "Mickey Mouse" character which results in placing that image in a video game produced by the party in breach does not prevent the other party from barring continued use of the image on the hats in commerce.