In light of this conclusion, the dispute regarding Shva's possibility to transfer to Keren HaTamar the ATM machines including the copies of the Software... must be examined.
Transferability
General
59. A copyright owner can transfer or sell the right and can grant a usage license regarding it.
Section 5(2) of the 1911 Act states... "provided that no such assignment or grant shall be valid unless it is in writing signed by the owner of the right..."
60. In the previous chapter, it was found that ownership in the Software was and remains in Mitug's hands. Shva was given a license to use the Software, in writing. Shva paid licensing fees for every copy for which a license for use was given.
There is no dispute that Shva transferred to Keren HaTamar ATM machines when they included copies of the Software. Mitug claims this transfer is contrary to law, while Shva claims it acted properly.
61. The relevant agreement documents do not include a reference to the possibility of transferring rights.
Each party seeks to derive a different conclusion from this fact. According to Mitug, in the absence of clear consent, there is a prohibition on transferring rights. According to Shva, in the absence of an explicit restriction, there is permission to transfer rights. Additionally, Shva seeks to rely on the doctrine of exhaustion of rights.
Contract Law
62. When a usage license regarding copyright is given, "it is desirable that the parties to the agreement note in it explicitly if the license is transferable. In accordance with the laws of assignment of obligations, a license regarding copyright, the transfer of which was not explicitly restricted, is seemingly assignable, unless the intention of the parties to prevent such a possibility arises from the circumstances..." (Tony Greenman).
The laws of assignment of obligations... are expressed in Section 1(a) of the Assignment of Obligations Law, 5729-1969, which instructs that a right is assignable "unless its transferability was negated or restricted by law, by the nature of the right, or by agreement...".
63. (Discussion on contract interpretation: language serves as the starting point).
64. In the case before us, the relevant agreements do not refer to the question of the license's transferability... The parties generally did not act through lawyers but drafted documents themselves...
65. Shitrit claims that a prohibition on transfer of the licenses was discussed in conversations between him and Milvitzky... This is an oral claim raised only by the litigant himself...
66. (Discussion on drafts exchanged between Shitrit and Milvitzky).
67. ... I did not find in the arguments... an interpretive anchor for a prohibition on transfer of rights...
68. Also here, there is no choice but to follow the written text and determine that there is no meeting of minds of the parties before us regarding the possibility or lack of possibility to transfer the rights.
69. In these circumstances, the law leads us to the provisions of Section 26 of the Contracts Law... completion of details according to practice...
70. The evidence brought... does not amount to proving a private practice or general practice...
71. Regarding general practice – Mitug refers to one agreement document... Not enough to establish a practice... No expert opinion or even examples of license agreements for organizational computer software were presented.
72. From the contractual aspect, there is therefore no infrastructure to learn of the existence of a transferability restriction... A license regarding copyright whose transfer was not restricted is seemingly assignable...
73. I did not opine that the software usage license is interwoven with personal characteristics... At the same time, it turns out in my eyes that installing Source Code "for safekeeping" at Shva is a different issue. The essence of the subject: safekeeping of source code (as opposed to use of a regular copy of software)... supports the conclusion that this part of the 2006 Agreement is not a right assignable without approval...
Copyright Laws
74. Apart from the contractual aspect, the parties addressed proprietary aspects and in particular the doctrine of exhaustion of rights...
75. The doctrine of exhaustion of rights (First Sale Doctrine) "restricts, as a rule, the right of the intellectual property owner to control actions done by others in the product... after it was sold by the owner of the right..." (CA 10717/05 Florist de Kwakel...).
76-81. (Discussion on the bundle of rights under Israeli Copyright Law. Specifically, Israeli law does not recognize the full "Distribution Right" found in the WCT treaty, but rather a narrower "Publication Right").
82. Now we return to the First Sale Doctrine... "According to this rule, after a copyright owner has transferred via sale or otherwise the ownership of a copy of his work... this copy becomes a tradable product... The owner of the copy is entitled to sell it in an additional sale... all without need for receiving authorization..." (Greenman).
83. The exhaustion rule... limits the distribution right... Since Israeli law does not grant the creator an exclusive and unique right regarding the distribution of copies of the work... sales of a copy that left the copyright owner's hands for the first time... are permitted by law.
84. If so, in Israel, a copyright owner has no vested right to prevent one who purchased a copy of the work from him from selling or transferring the copy he purchased. Resale of such a copy... seemingly does not constitute copyright infringement.
85. An additional claim by Mitug is that the exhaustion rule applies only in the case of selling copies and has no application in the case of granting a license... Mitug refers to US case law (Vernor v. Autodesk)...
86. Beyond interpretations... the discussion there was conducted in the context of US law. In US law, the copyright owner's right includes exclusivity on distribution. The exhaustion rule was intended to limit this right... The scope of copyright in Israeli law is different...
87. Furthermore, in the Vernor case... the difficulty lay to no small extent in license provisions prohibiting transfer. In the case before us, the agreement does not prohibit transfer...
88. (Discussion on the difficulty of "bypassing" restrictions by calling sales "licenses"). In the concrete case, absent a provision restricting the transferability of the usage license, the question of the validity of such a restriction does not arise.
89. In the concrete case, the right of use granted to Shva was perpetual and its scope was significant...
Interim Summary
90. Summary of this point: We have seen that the relevant agreement documents do not include reference to the possibility of transferring rights... absent an infrastructure to teach of a restriction on transferability of the license, the right is assignable.