Legal ramifications of TOU on digital goods

[Cassel]

I would like to get some safe advice on TOUs on digital goods.

Here is a summary of the TOU/copyright situation i am looking at. I am a designer for digiscrap, but mostly specialising in PSP scripts. My scripts are original and often fairly complex. Most designers are NOT using PSP and several have commented to me "too bad i dont have PSP, because i love your scripts". In most cases, there is no Photoshop equivalent to my PSP scripts. That lead me to the idea of a "script4Hire service" where i would run the script on my PSP and send the end result to the customer who would pay for the service. If i am to make a barcode label or an enveloppe, the customer would simply have to provide the hex color code and the choices given (all my scripts offer many options to the user). So far, so good, nobody has any problem with it. Now, where the problem arises is that many of my scripts will transform another element (a ribbon or a piece of paper) into something else like a bow or a flower and that is where designers are screaming bloody murder. Why? because they feel that a customer who bought THEIR kit (and paid for it), could not send me that one single ribbon to turn it into a bow, as it is considered "sharing" even though i have no use for the ribbon myself and would delete it.

That brought up all kinds of "facts" about TOUs and copyrights, among them:
- the customer never owns that piece of digital good, so they cannot use it the way they would want to
- copying the file to ANY other computer is "sharing", even if the same person is to be using it herself
- the customer buys the "licence to use the digital product" and any derivative of it (say it is colorised or run through an action/script) is still bound by the original copyright of the initial designer

When this was brought up by a certain designer (i will call her ABC), i read this (i put personal comments/question in brackets):
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Commercial Use Terms of use

© 2008, ABC. All rights reserved.

Thank you for purchasing/downloading my creations. I hope you enjoy them!!

By purchasing or downloading this kit you are obtaining a “license to use” these products. are permitted to be used by those Scrapbooking for Others as a Business as well as Digital Designers and Photographers in creating items for resale for personal use, i.e. the item for resale is being sold directly to the end-user (**so we cannot do commercial use product from it**) , and provided such use is not intended to allow the re-distribution or re-use of the individual components (**and it makes sense to not be allowed to buy one thing to turn around and sell it as is**) . You may modify or alter the components as necessary for your use (**this "as necessary" is interesting for the discussion**) , provided that if such modification or alteration constitutes a derivative work, the rights to all such derivative works shall belong exclusively to ABC (**is that so or just what she decides?**) , and that you shall only use such derivative work in accordance the Terms of Use. Derivative works may not be loaned, shared, rented, redistributed or resold, individually or in a collection of any kind, unless prior permission is granted. (**is the "shared" part in here the same thing as sending me the file to run it through a script?**)

If a layout using any of my creations is submitted to a website or for publication you agree to credit the designer and copyright holder, ABC. Downloading this file signifies that you agree to my terms.
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So, someone found this piece of information on the net:

17 U.S.C. § 103(b) provides: The copyright in a compilation or derivative work extends only tothe material contributed by the author of such work, as distinguished from the preexisting material employed in the work, and does not implyany exclusive right in the preexisting material. The copyright in suchwork is independent of, and does not affect or enlarge the scope,duration, ownership, or subsistence of, any copyright protection in thepreexisting material.

So how does it match the TOU written by designers??

In addition, there was a discussion to the effect that a Script4Hire service would NOT be allowed (because of the "file sharing" issue) but if the same designer sent the same material to a "quality control service", that is allowed, and if the designer wanted to use a "preview making service", that would also be allowed. To me, if you dont allow one, you dont allow the others. And if that is the case, one store owner asked that if designers in her store, puts up a product and the owner wants to check it for quality control (without being paid) she would also have to transfer the files to HER computer (sharing??) so she can check them.

So what designers were suggesting is that in order to be "safe", i would have to ask my customer where they got that piece of ribbon, get a copy of the TOU of the designer who created the kit so i could see if the customer had to right to send it to me (and designers kept saying that it is against TOUs anyways), AND if the element was made by using a "commercial use" product, before being put into a kit, get ALSO the TOU of the initial designer since they seem to think they keep the copyrights to the original file. To me it seems to turn in circle, and just for nothing in the end.

So, sorry for the lenght of this, but you see where i am stuck? I am trying to understand the logic behind those statements, and i am basically wondering if all those designers are right in how they phrase their TOUs? are they allowed to put just about anything they want in there and decide how the purchased product is used, and processed, in ADDITION to the end use of it?

This kind of dilema will surely affect how i market my new service that i feel is legitimate and well needed in this field.

Thank you
Cassel

You may be seeking a more detailed answer as well from the lawyers but frankly the TOUs can be set up just about any way one wishes. You don't have to use and if they lay out a TOU and you dont agree the remedy is to avoid them.

But they cannot extend rights to items they don't own and control. Any work that contains their product, script, code etc. however will be subject to their claims so best to avoid or ask for new TOUs.

[Cassel]

And would you have more specific information or clarification as to what is a derivative?

And now is another question: if person A sells a digital product to person B and person B wants me to modify the product, am i the one responsible to go check with person A whether they agree for person B to use my service?

And if a designer A states in her TOU "the user can alter as necessary for her use", isn`t that in fact, just saying "you can do whatever you need to change it" and contradict their claim to control HOW it is done?