Software Lease Agreements in Brazil
Our purpose with this text
is to present the possibility of using the leasing structure as an alternative
to finance the acquisition and distribution of computer software licenses in
Brazil. The reason for this discussion is that, although there is no legal
restriction under Brazilian law regarding such kind of transaction, leasing is
not commonly used in the acquisition of software, without the simultaneous
acquisition of computers (hardware).
The use of leasing, in this
sense, would be more appropriate for the acquisition of software above a
certain amount, where financing of such acquisition through a lease may be
regarded by the end user as a feasible alternative for obtaining the software.
In general, software is distributed
to the consumer market through license for use agreements. By this kind of
transaction, the owner of the software’s copyright authorizes the licensee to
use the software (for a determined or undetermined period of time), in exchange
for license payment. The title of the software remains with the licensor, and
licensee has the right to use a determined number of copies of the software.
Other restrictions to the right of use may be agreed in the license agreement.
In financial or operating
lease agreements, specially those governed by Brazilian laws, which have a
different structure, the party interested in acquiring a given asset (lessee),
instructs the leasing company (lessor) to purchase such asset from a
supplier/manufacturer also chosen by the lessee. The lessor, on its turn,
leases the referred asset to the lessee. The title to the asset remains with
the lessor during the lease. At the end of the lease, the lessee may exercise
its right of option to acquire the asset (the other options for the lessee
being the return of the asset or the renewal of the lease).
Taking into consideration
the structure of a leasing transaction and the peculiarities involving software
licenses (at least from the Brazilian legislation perspective), the asset to be
acquired and leased (with the restrictions we will mention below) is the
property of the license for use, not the property of the software itself. The
property of the software (with its corresponding right to grant licenses of use
of the software) remains with its copyright owner.
Legally, computer programs
(software) are intellectual creations. They are protected by copyright law, in
the same way as a literary work. Their protection in Brazil is regulated by Law
no. 9610/98 (the Copyright Act) and by Law no. 9609/98 (the Software Act). All
rights related to the use, possession, and property of the software are
regarded as being the copyright of the software owner.
Copyrights, according to Section 3 of the Copyright Act
are deemed as equivalent to movable goods, for legal purposes (similar to
credit rights, for instance). Therefore, both the ownership of the software and
the license to use such software are considered copyrights (and, consequently,
movable goods). Leasing operations may be contracted over movable goods as well
as realty (Law no. 6099/74 – which regulates the tax treatment of leasing
transactions), there being no restriction related to goods that may be regarded
as intangible.
However, while considered
movable goods, copyrights have some specific characteristics regarding their
legal transferability. Such characteristics are provided by the aforementioned
Software Act and Copyright Act, especially in the latter’s Sections 24 (“moral
rights”) and 29 (“patrimonial rights”). Among such characteristics is the
restriction of the destination that the user of a software license may give to
its copy of the software.
For leasing purposes, the
most important restriction relates to the transfer of possession of the user’s
copy to any third party. The validity of any transfer of possession (or
property) of a software license depends on the express authorization of the
software’s copyright owner. This authorization must be interpreted in a
restrictive way.
Considering this fact, and
also considering that in the leasing structure above referred, the leasing
company would acquire the software license and then lease it to the lessee, it
is imperative that the software owner expressly authorize the leasing company
to execute such transaction (another possible structure would be including the
software owner as an intervening party in the lease agreement, between the
leasing company and the end-user/lessee of the software).
The contract in which the software owner authorizes the
leasing, may also provide that the software owner is to be required to purchase
the license back from the lessor, should the lessee decide to: (i) substitute
the software related to the lease license for improved versions (in case such
improvements cannot be retrofitted to the leased version); or (ii) not to
purchase the license at the end of the lease. Identical obligation could also
be undertaken by the software owner in case of default by the lessee, where the
lessor recovers the possession of the software license.
The interest of the lessor in recovering the software
license may be limited by the contract with the software owner to the mere
repossession of the media where the software was delivered at the beginning of
the lease, as well as, of the documentation regarding the software license. The
software owner, in this case, would purchase the license back from the lessor,
and be free to take any legal measure if the lessee continues to use the
software, after the end/or termination of the lease.
The only peculiarity regarding software in leasing
operations is that, in Brazil, for income tax purposes, the software’s cost of
acquisition of the software license is not subject to “depreciation”, which is
a concept applicable to tangible assets. Software license’s acquisition costs
are subject to “amortization”. The minimum term for amortization of the
software’s acquisition cost is of 5 (five) years, according to Brazilian
federal tax regulations presently in force, but it is our belief that such term
might be reduced in a near future, by the Brazilian authorities.
Notwithstanding this peculiarity, the sole difference in
the legal effects between depreciation (generally used by the Brazilian leasing
companies) and amortization, is that there is no possibility for an accelerated
amortization of the software license’s acquisition cost. This possibility is
admitted for depreciation of leased assets and permits the reduction in 30%
(thirty percent) of the asset’s useful life.
In any event, since this peculiarity in the accounting of
the software license’s acquisition cost represents no restriction for the
execution and performance of lease agreements, we may conclude that there are
no conflicts between the nature of copyrights and the regulation of leasing
transactions in Brazil.
This legal possibility is
also reinforced by the Brazilian Constitution’s provisions that guarantee the
freedom of enterprise (exercise of any economic activity), in the limits
provided by law, i.e., unless there is any legal stipulation restricting a
specific activity, such activity must be regarded as legal (Sections 5, II, and
170, sole paragraph, of the Federal Constitution).
Therefore, in our opinion, it is fair to conclude that, as
long as the software’s owner authorizes the execution of a lease agreement
involving its software (or it being a part in such transaction), there are no
legal restrictions for the execution of leasing transactions involving,
exclusively, software licenses, which as a consequence, must be regarded as a
valid transaction, and legally admitted under the Brazilian laws.
José
Augusto de Araujo Leal
Partner to Castro, Barros, Sobral, Vidigal, Gomes
Advogados
Paulo
Lanari Prado
Associate to Castro, Barros, Sobral, Vidigal, Gomes Advogados