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ITA No.299/Bang/2011
Page 5 of 13
"20. Having regard to the above said definition of 'royalty', we
have to consider the contents of software licence agreement
entered into by non-resident with Samsung Electronics and also
respondents in the case represented by Sri Ganesh, learned senior
counsel and Sri Aravind Dattar, wherein it is a case of purchase,
sale or distribution or otherwise of the off-the-shelf software. It is
described as a 'software licence agreement', wherein it is averred
that customer accepts an individual, non-transferable and non-
exclusive licence to use the licensed software program(s)
progam(s) on the terms and conditions enumerated in the
agreement. It is further averred that the customer - Samsung
Electronics shall protect confidential information and shall not
remove any copyright, confidentiality or other proprietary rights
provided by the non-resident. However, what is granted under the
said licence is only a licence to use the software for internal
business without having any right for making any alteration or
reverse engineering or creating sub-licences. What is transferred
under the said licence is the licence to use the software and
copyright continue to be with the non-resident as per the
agreement. Even as per the agreement entered into with the other
distributors as also the end-user licence agreement, it is clear that
the distributor would get exclusive non-transferable licence
within the territory for which he is appointed and he has got right
to distribute via resellers the Software, upon payment of the
licenses set forth in Exhibit A to the agreement only to End Users
pursuant to a valid Actuate shrinkwrap or other Actuate license
agreement and except as expressly set forth in the said agreement,
distributor may not rent, lease, loan, sell or otherwise distribute
the Software the Documentation or any derivative works based
upon the Software or Documentation in whole or in part.
Distributor shall not reverse engineer, decompile, or otherwise
attempt to derive or modify the source code for the Software.
Distributor shall have no rights to the Software other than the
rights expressly set forth in the agreement. Distributor shall not
modify or copy any part of the Software or Documentation.
Distributor may not use sub-distributors for further distribution of
the Software and Documentation without the prior consent of
Actuate. What is charged is the licence fee to be paid by the
Distributor of the Software as enumerated in Exhibit A to the
agreement. Further, Clause 6.01 of the agreement dealing with
title states that the Distributor acknowledges that Actuate and its
suppliers retain all right, title and interest in and to the original,
and any copies (by whomever produced), of the Software or
Documentation and ownership of all patent copyright, trademark,
trade secret and other intellectual property rights pertaining
thereto, shall be and remain the sole property of Actuate.