(a) If an agreement transfers ownership of informational property rights and does not specify when ownership is to pass, ownership passes to the licensee:

(1) when the contract becomes enforceable, if the informational property rights are is then in existence and is identified to the contract; or

(2) when the information and the informational property rights are is identified to the contract, if the information is not in existence or is not identified to the contract when the contract becomes enforceable.

(b) Transfer of a copy does not transfer ownership of informational property rights in the information.

(c) In a license, tThe following rules apply to copies:

(1) In a license:

(B)(2) A licensee's right to possession or control of a copy is governed by the contract and does not depend on title to the copy.

(C3) Reservation of title to a copy reserves title in that copy and any copies made of it by the licensee unless the license grants the licensee a right to make and transfer copies to others, in which case reservation of title reserves title only to copies delivered to the licensee by the licensor.

(2d) If the parties agree intend to transfer title to a copy and the agreement does not specify when title transfers, the following rules apply:

(A1) Delivery of a copy on a physical medium transfers title to the copy at the time and place at which the licensor completed its obligations with respect to delivery of that copy.

Uniform Law Source: Section 2-401; section 2A-302. Revised.

"Agreement": Section 1-201. "Contract": Section 2B-102. "Copy": Section 2B-102. "Delivery": Section 2B-102. "Electronic": Section 2B-102. "Identified": Section 2-501. "Information": Section 2B-102. "Informational property rights": Section 2B-102. "License": Section 2B-102. "Licensee": Section 2B-102. "Licensor": Section 2B-102. "Rights": Section 1-201. "Sale": Section 2B-102.

a. Voted 11-0 to delete a sentence restricting exercise of rights until licensee pays according to terms of contract. Concept transferred to comments in form that accommodates in kind and other value.

1. Copy vs. Rights Ownership. This section distinguishes title to the copy from ownership of the intellectual property rights. That point is made explicit in subsection (b). The distinction flows from the Copyright Act and other law. It means that, while ownership of a copy may carry with it some rights with respect to that copy, it does not convey ownership of the underlying rights to the work of authorship or the patented technology. This represents a basic theme in differentiating intangibles and tangible objects. The media is not the message, but merely the conduit.

2. Timing of Rights Ownership Transfer. Subsection (a) deals with intellectual property rights and when ownership of the rights transfers as a matter of state law. This deals with cases where there is an intent to transfer title to intellectual property rights (as compared to title to a copy). If federal law requires a writing to make this ownership transfer; state law is subject to that limit.

The subsection solves the problem in In re Amica, 135 Bankr. 534 (Bankr. N.D. Ill. 1992) (court applied Article 2 theories of title transfer to goods to hold that title to an intangible (a computer program) being developed for a client could not pass until the program was fully completed and delivered.). Transfer of rights ownership (as compared to ownership of a copy) does not hinge on delivery of a copy. Rather, it refers to identification to the contract, including completion to a sufficient level that separates the transferred property from other property of the transferor. See In re Bedford Computer, 62 Bankr. 555 (Bankr. D.N.H. 1986) (no transfer of ownership where "new" code could not be separately identified from old).

3. Ownership of a Copy. Although separate from a transfer of ownership of informational property rights, the location of title to copies of the information may be important. In a license, under subsection (c), title to the copy of information depends on the intent and the terms of the contract. As in Article 2A, this article does not create a presumption of a transfer of title with reference to licenses. The determination of intent on whether or not title to a copy transfers may require consideration of the entire terms of the transfer and the nature of the marketplace. Especially in commercial licenses, it is inappropriate to presume that title passes to the licensee in the absence of an express contractual reservation. See Applied Information Management, Inc. v. Icart, 1997 WL 535813 (EDNY March 3, 1997); DSC Communications Corp. v. Pulse Communications, Inc., 1997 US Dist. LEXIS 10048 (ED Va. 1997).

4. Reservation of Title. Under subsection (c)(3), a reservation of title in a copy extends that reservation to all copies made by the licensee. That presumption is altered in cases where the license contemplates the licensee making copies for sale or other distribution. Thus, for example, a license of a manuscript to a book publisher contemplating production of books and sale of the copies, does not reserve in the author title to all the books. This concept does not apply where the expectation is that the licensee will transfer copies by a further license.

5. When Title to a Copy Passes. Subsection (d) deals with cases involving an intent to sell a copy and states various presumptions relating to when title passes to copies. The contract controls. Absent contract terms, the Section distinguishes between tangible and electronic transfers. The rule for tangible transfers of a physical copy parallels current Article 2. The electronic transfer approach defers to federal law on a potentially controversial issue. The White Paper on copyright in the Internet suggests and legislation is being considered to implement that the electronic delivery of a copy of a copyrighted work is not a first sale because it does not involve transfer of a copy from the licensor to the licensee.