Also known as: computer program
Written by attorneys — see sources below.
A category of personal property consisting of a computer program and any supporting information provided in connection with a transaction relating to the program. The category excludes any computer program that qualifies as goods because it is embedded in movable property in the manner customarily considered part of those goods.
Sterling Dynamics grants Summit Bank a security interest in its inventory of boxed accounting software. Because the programs reside on removable media and are not embedded in any equipment, the bank treats the software as separate collateral rather than goods when filing its financing statement.
Sapphire Holdings finances Stephen Shaw's acquisition of specialized design software together with the computers on which it will run. The lender obtains a purchase-money security interest in the software to the extent the obligation covers the software price in the integrated transaction.
Spectrum Financial sells Samantha Stone a license to enterprise resource planning software and retains a security interest in that software to secure the unpaid license fee. The software constitutes purchase-money collateral securing the purchase-money obligation incurred for its acquisition.
Simon Stern borrows from Sterling Dynamics and grants a security interest in all of his personal property, expressly including software. The lender perfects by filing against general intangibles because the licensed programs are not embedded in goods and therefore fall within that residual category.
Sylvia Santos orders a computer containing pre-installed operating system software from a vendor. After delivery she opens the package and the enclosed license terms govern her use of the software, illustrating how the transaction creates rights in software separate from the hardware.
Rich and Enza Hill ordered a computer from Gateway 2000 by telephone, providing a credit card number for payment. A box containing the computer along with a list of terms arrived at their residence. The Hills kept the computer more than thirty days before complaining about its components and performance. The Hills filed suit in federal court. They argued that the product's shortcomings make Gateway a racketeer, with mail and wire fraud as the predicate offenses, and sought treble damages under RICO for themselves and a class of all other purchasers. Gateway asked the district court to enforce an arbitration clause contained in the list of terms. The district court refused enforcement, writing that the present record is insufficient to support a finding of a valid arbitration agreement between the parties or that the plaintiffs were given adequate notice of the arbitration clause. Gateway took an immediate appeal. The Hills concede that they noticed the statement of terms but deny reading it closely enough to discover the agreement to arbitrate. The box from Gateway was crammed with software, including an operating system without which the computer was useful only as a boat anchor, as well as many application programs. Gateway's advertisements state that their products come with limited warranties and lifetime support.
View caseSoftware is excluded from the definition of goods when the computer program is not embedded in movable property in the manner customarily considered part of those goods. A program on removable media or a standalone license therefore falls outside goods and into the general-intangible category.
Supporting sources
Yes. A security interest in software qualifies as a purchase-money security interest to the extent it secures an obligation incurred as all or part of the price of the software or for value given to enable the debtor to acquire rights in the software, provided the value is so used.
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Software is expressly included within the definition of general intangible. It therefore falls outside the enumerated exclusions from that residual category and is perfected by filing a financing statement against general intangibles.
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A perfected purchase-money security interest in software has priority over a conflicting security interest in the same collateral to the extent the purchase-money security interest in the goods with which the software was acquired has priority in those goods and their proceeds.
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