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3 Software L.J. 1 (1989-1990)

handle is hein.journals/softljou3 and id is 1 raw text is: SOFTWARE SUPPLIER'S RIGHTS IN THE USER'S BANKRUPTCYt by TERENCE W. THOMPSON* INTRODUCTION The software company who supplies software to a user naturally wants to ensure receipt of payment for the software and to protect its intellectual property rights in the software.1 These desires are not unique to a software supplier. Any company in the business of provid- ing its products expects payment. In addition, despite having provided a product to a particular user, a company generally hopes to preserve the ability to provide the product to still other users. In the latter case, this interest entails ensuring that the user of the product does not undercut the supplier's market by duplicating the product or providing it to others in contravention of the contractual or statutory rights of the original supplier. Unfortunately, after it has obtained the software, not every well-in- tentioned user can honor these expectations of the software supplier for the entire term of the agreement. Other economic and financial cir- cumstances may lead the software user into dire straits and result in the filing of a bankruptcy petition. Administration of the bankruptcy estate is facilitated by a variety of legal devices, such as the automatic stay of actions against the user or its property, the right to reject certain agreements entered into by the user, and avoidance of preferential pay- ments or other transfers. t Copyright © 1989 Terence W. Thompson * Partner, Brown & Bain, P.A., Phoenix, Arizona; J.D. Harvard Law School 1977; B.A. University of Arizona 1974. The author gratefully acknowledges the assistance and critical analysis of Richard L. Epling, Sidley & Austin, New York, New York. 1. Transactions in software may take a variety of forms, such as outright sales, licenses or leases, and may entail related services, such as correcting defects in or updat- ing the software. Accordingly, the person who owns the rights to the software and di- rectly or indirectly provides the software by sale, license or any other means for use by another person is referred to in this article as a software supplier or supplier. The user of the software is referred to as the software user or user, the software (includ- ing the media embodying it and the related documentation and services) is referred to as the software, and the writing evidencing the sale, license or other transaction is re- ferred to as the software agreement or agreement.

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