Most companies licensing the use of their trademarks would not think that a simple license agreement, which provides nothing more than use of the trademark in exchange for a fee, would for legal purposes be treated as a franchise agreement. But if the trademark licensor is in New York then what it thought was a simple trademark license agreement relationship is likely really a franchise arrangement.
Compuserve v. Patterson, 89 F.3d 1257 (6th Cir. 1996).
Patterson, a resident of Texas (a lawyer and software programmer), sold his own software to third parties over Compuserve’s system, pursuant to the terms of a clickwrap agreement (where he had to type “I Agree” into various sections of the agreement).
Compuserve began to sell its own software that was similar to Patterson’s and Patterson demanded Compuserve pay him $100,000 as a settlement. Compuserve then filed a declaratory judgment action in Federal court in Ohio.
Patterson moved to dismiss the action due to alleged lack of personal jurisdiction, claiming he never visited, did business in, or consented to suit in Ohio.
The Sixth Circuit found that making Patterson subject to suit in Ohio due to his acceptance of the clickwrap agreement, a Shareware Registration Agreement, did not violate the due process clause of the United States Constitution.
The Court reasoned that Patterson personally availed himself to do business with Compuserve, and made money doing so, and could therefore have reasonably expected he’d have to defend himself in Ohio due to the terms of the agreement.
This is the seminal case in the shrinkwrap realm, which paved the way for the rise of the browsewrap and shrinkwrap cases. Upholding the software license as normally provided to purchasers, to get around the First Sale Doctrine under U.S. Copyright Law. Cite, facts and holding are below.