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Vernor v. AutoDesk - Vacated (first sale) and remanded (copyright misuse)
Friday, September 10 2010 @ 08:44 PM EDT

There is a ruling [PDF] from the US Court of Appeals for the Ninth Circuit in Vernor v. Autodesk, and some of you will hate it. The second-hand copies Timothy Vernor was selling on eBay are not protected by first sale after all. That is the decision by the appeals court:
We hold today that a software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user's ability to transfer the software; and (3) imposes notable use restrictions.
I am sorry that some will feel upset, but I did warn you that the underlying legal tide was flowing this way and that I did expect that the lower court's decision would be reversed. EULAs are generally upheld, from all I know and have seen. Here's the end of the order:
We vacate the district court’s grant of summary judgment in Vernor’s favor and remand. We hold that because CTA is a licensee, not an owner, the “sale” of its Release 14 copies to Vernor did not convey ownership. Vernor is accordingly not entitled to invoke the first sale doctrine or the essential step defense, on behalf of his customers. We remand for further proceedings consistent with this opinion, including consideration of Vernor’s copyright misuse defense.
Morrison & Foerster's Michael A. Jacobs was on the team for AutoDesk, and after reading many of the documents in the lower court and in the appeal, some of which I have for you, I did believe his team was more likely to prevail in the end. It's never prudent to bet against Mr. Jacobs. So, the first sale decision by the lower court in favor of Vernor is vacated and the case is now remanded to look at the issue of whether Vernor has a copyright misuse defense.

Since one of the most active of the antiGPL operatives had a dream to undermine the GPL, and hence Linux, by first sale using this case, I am personally gratified.

Ars Technica says only Congress can change this now:

So, to recap: EULAs are binding, they can control just about everything you might dream up, and only Congress can change the situation.
But the truth is, you have a more immediate solution solution. Here it is:
Stay away from software that comes with EULAs that restrict you in ways you don't like.
Why do you think a world of volunteers worked so hard to provide you with FOSS? It's called Free as in Speech for a reason.

Just switch if you want freedom, and the market will follow you, if enough of you do so. It's really that simple. But don't wait for proprietary companies to take the lead and care more about your freedom than you do. They never will. But they *do* want your business. You do the math.

Here are some of the documents in the appeal, all PDFs:

There were a number of amicus briefs, some strongly on Vernon's side, like eBay and EFF, which the court took seriously, but in the end, the court is bound by the law and the case law around it. Congress is free to change the law, of course, the court pointed out, but until it does, it's not the court's job to change the law, even if there seem some very strong policy reasons for doing so. When Viacom sued Google and YouTube, I viewed it as trying to get a court to change the law without the hassle of having to go to Congress to ask it to do so. But in the US, Congress is who gets to write the laws, not the courts. Separation of powers is bedrock America. So just as I was against Viacom's strategy, I felt the same way here. And the court, while taking the arguments to heart, nevertheless felt it was bound by law. And that's frankly what you want courts to do.

Here's a very quick text version of the order, but as always, for anything that really matters, go by the PDF:

***********************************

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

TIMOTHY S. VERNOR,

Plaintiff-Appellee,

v.

AUTODESK, INC.,

Defendant-Appellant.

___________________

No. 09-35969

D.C. No.
2:07-cv-01189-RAJ

OPINION

Appeal from the United States District Court
for the Western District of Washington
Richard A. Jones, District Judge, Presiding

Argued and Submitted
June 7, 2010—Seattle, Washington

Filed September 10, 2010

Before: William C. Canby, Jr., Consuelo M. Callahan and
Sandra S. Ikuta, Circuit Judges.

Opinion by Judge Callahan

COUNSEL

Jerome B. Falk (argued), Clara J. Shin, and Blake J. Lawit of
Howard Rice Nemerovski Canady Falk & Rabkin P.C., and
Michael A. Jacobs and George C. Harris of Morrison & Foer-
ster LLP, for defendant-appellant Autodesk, Inc.

Gregory A. Beck (argued) and Deepak Gupta of the Public
Citizen Litigation Group, for plaintiff-appellee Timothy S.
Vernor.

Randi W. Singer, Mark J. Fiore, and Lisa R. Eskow of Weil,
Gotshal & Manges LLP, for amicus curiae eBay Inc.

Fred von Lohmann of the Electronic Frontier Foundation and
Sherwin Siy and John Bergmayer of Public Knowledge, for
amicus curiae American Library Association, Association of
College and Research Libraries, Association of Research
Libraries, Consumer Federation of America, Electronic Fron-
tier Foundation, Public Knowledge, and U.S. PIRG.

Scott E. Bain, Keith Kupferschmid, and Mark Bohannon, for
amicus curiae Software & Information Industry Association.

Robert H. Rotstein, Patricia H. Benson, and J. Matthew Wil-
liams of Mitchell Silberberg & Knupp LLP, for amicus curiae
Motion Picture Association of America, Inc.

______________________________________

OPINION

CALLAHAN, Circuit Judge:

Timothy Vernor purchased several used copies of Autodesk, Inc.'s AutoCAD Release 14 software ("Release 14") from one of Autodesk's direct customers, and he resold the Release 14 copies on eBay. Vernor brought this declaratory judgment action against Autodesk to establish that these resales did not infringe Autodesk's copyright. The district court issued the requested declaratory judgment, holding that Vernor's sales were lawful because of two of the Copyright Act's affirmative defenses that apply to owners of copies of copyrighted works, the first sale doctrine and the essential step defense.

Autodesk distributes Release 14 pursuant to a limited license agreement in which it reserves title to the software copies and imposes significant use and transfer restrictions on its customers. We determine that Autodesk's direct customers are licensees of their copies of the software rather than owners, which has two ramifications. Because Vernor did not purchase the Release 14 copies from an owner, he may not invoke the first sale doctrine, and he also may not assert an essential step defense on behalf of his customers. For these reasons, we vacate the district court's grant of summary judgment to Vernor and remand for further proceedings.

13866

I.

A. Autodesk's Release 14 software and licensing practices

The material facts are not in dispute. Autodesk makes computer-aided design software used by architects, engineers, and manufacturers. It has more than nine million customers. It first released its AutoCAD software in 1982. It holds registered copyrights in all versions of the software including the discontinued Release 14 version, which is at issue in this case. It provided Release 14 to customers on CD-ROMs.

Since at least 1986, Autodesk has offered AutoCAD to customers pursuant to an accompanying software license agreement ("SLA"), which customers must accept before installing the software. A customer who does not accept the SLA can return the software for a full refund. Autodesk offers SLAs with different terms for commercial, educational institution, and student users. The commercial license, which is the most expensive, imposes the fewest restrictions on users and allows them software upgrades at discounted prices.

The SLA for Release 14 first recites that Autodesk retains title to all copies. Second, it states that the customer has a nonexclusive and nontransferable license to use Release 14. Third, it imposes transfer restrictions, prohibiting customers from renting, leasing, or transferring the software without Autodesk's prior consent and from electronically or physi- cally transferring the software out of the Western Hemi- sphere. Fourth, it imposes significant use restrictions:

YOU MAY NOT: (1) modify, translate, reverse- engineer, decompile, or disassemble the Software . . . (3) remove any proprietary notices, labels, or marks from the Software or Documentation; (4) use . . . the Software outside of the Western Hemisphere; (5) utilize any computer software or hardware

13867

designed to defeat any hardware copy-protection device, should the software you have licensed be equipped with such protection; or (6) use the Software for commercial or other revenue-generating purposes if the Software has been licensed or labeled for educational use only.
Fifth, the SLA provides for license termination if the user copies the software without authorization or does not comply with the SLA's restrictions. Finally, the SLA provides that if the software is an upgrade of a previous version:
[Y]ou must destroy the software previously licensed to you, including any copies resident on your hard disk drive . . . within sixty (60) days of the purchase of the license to use the upgrade or update . . . . Autodesk reserves the right to require you to show satisfactory proof that previous copies of the software have been destroyed.

Autodesk takes measures to enforce these license requirements. It assigns a serial number to each copy of AutoCAD and tracks registered licensees. It requires customers to input "activation codes" within one month after installation to continue using the software.1 The customer obtains the code by providing the product's serial number to Autodesk. Autodesk issues the activation code after confirming that the serial number is authentic, the copy is not registered to a different customer, and the product has not been upgraded. Once a customer has an activation code, he or she may use it to activate the software on additional computers without notifying Autodesk.

13868

B. Autodesk's provision of Release 14 software to CTA

In March 1999, Autodesk reached a settlement agreement with its customer Cardwell/Thomas & Associates, Inc. ("CTA"), which Autodesk had accused of unauthorized use of its software. As part of the settlement, Autodesk licensed ten copies of Release 14 to CTA. CTA agreed to the SLA, which appeared (1) on each Release 14 package that Autodesk provided to CTA; (2) in the settlement agreement; and (3) onscreen, while the software is being installed.

CTA later upgraded to the newer, fifteenth version of the AutoCAD program, AutoCAD 2000. It paid $495 per upgrade license, compared to $3,750 for each new license. The SLA for AutoCAD 2000, like the SLA for Release 14, required destruction of copies of previous versions of the software, with proof to be furnished to Autodesk on request. However, rather than destroying its Release 14 copies, CTA sold them to Vernor at an office sale with the handwritten activation codes necessary to use the software.2

C. Vernor's eBay business and sales of Release 14

Vernor has sold more than 10,000 items on eBay. In May 2005, he purchased an authentic used copy of Release 14 at a garage sale from an unspecified seller. He never agreed to the SLA's terms, opened a sealed software packet, or installed the Release 14 software. Though he was aware of the SLA's existence, he believed that he was not bound by its terms. He posted the software copy for sale on eBay. Autodesk filed a Digital Millennium Copyright Act ("DMCA") take-down notice with eBay claiming that Vernor's sale infringed its copyright, and eBay terminated Ver-

13869

nor's auction.3Autodesk advised Vernor that it conveyed its software copies pursuant to non-transferable licenses, and resale of its software was copyright infringement. Vernor filed a DMCA counter-notice with eBay contesting the validity of Autodesk's copyright claim.4 Autodesk did not respond to the counter-notice. eBay reinstated the auction, and Vernor sold the software to another eBay user.

In April 2007, Vernor purchased four authentic used copies of Release 14 at CTA's office sale. The authorization codes were handwritten on the outside of the box. He listed the four copies on eBay sequentially, representing, "This software is not currently installed on any computer."5 On each of the first three occasions, the same DMCA process ensued. Autodesk filed a DMCA take-down notice with eBay, and eBay removed Vernor's auction. Vernor submitted a counter-notice to which Autodesk did not respond, and eBay reinstated the auction.

When Vernor listed his fourth, final copy of Release 14,

13870

Autodesk again filed a DMCA take-down notice with eBay. This time, eBay suspended Vernor's account because of Autodesk's repeated charges of infringement. Vernor also wrote to Autodesk, claiming that he was entitled to sell his Release 14 copies pursuant to the first sale doctrine, because he never installed the software or agreed to the SLA. In response, Autodesk's counsel directed Vernor to stop selling the software. Vernor filed a final counter-notice with eBay. When Autodesk again did not respond to Vernor's counter-notice, eBay reinstated Vernor's account. At that point, Vernor's eBay account had been suspended for one month, during which he was unable to earn income on eBay.

Vernor currently has two additional copies of Release 14 that he wishes to sell on eBay. Although the record is not clear, it appears that Vernor sold two of the software packages that he purchased from CTA, for roughly $600 each, but did not sell the final two to avoid risking further suspension of his eBay account.

II.

In August 2007, Vernor brought a declaratory action against Autodesk to establish that his resales of used Release 14 software are protected by the first sale doctrine and do not infringe Autodesk's copyright. He also sought damages and injunctive relief. On January 15, 2008, Autodesk moved to dismiss Vernor's complaint, or in the alternative, for summary judgment. The district court denied the motion, holding that Vernor's sales were non-infringing under the first sale doctrine and the essential step defense. See Vernor v. Autodesk, Inc., 555 F. Supp. 2d 1164, 1170-71, 1175 (W.D. Wash. 2008).

Following discovery, the parties filed cross-motions for summary judgment. The district court granted summary judgment to Vernor as to copyright infringement in an unpublished decision. However, the district court declined to resolve

13871

Vernor's affirmative defense that Autodesk had misused its copyright, reasoning that a misuse defense would not benefit Vernor since he had prevailed on copyright infringement. In October 2009, the district court entered judgment for Vernor, and Autodesk timely appealed.

III.

[1] Copyright is a federal law protection provided to the authors of "original works of authorship," including software programs. 17 U.S.C. §§ 101-103. The Copyright Act confers several exclusive rights on copyright owners, including the exclusive rights to reproduce their works and to distribute their works by sale or rental. Id. § 106(1), (3). The exclusive distribution right is limited by the first sale doctrine, an affirmative defense to copyright infringement that allows owners of copies of copyrighted works to resell those copies. The exclusive reproduction right is limited within the software context by the essential step defense, another affirmative defense to copyright infringement that is discussed further infra. Both of these affirmative defenses are unavailable to those who are only licensed to use their copies of copyrighted works.

This case requires us to decide whether Autodesk sold Release 14 copies to its customers or licensed the copies to its customers. If CTA owned its copies of Release 14, then both its sales to Vernor and Vernor's subsequent sales were non- infringing under the first sale doctrine.6 However, if Autodesk only licensed CTA to use copies of Release 14, then CTA's and Vernor's sales of those copies are not protected by the

13872

first sale doctrine and would therefore infringe Autodesk's exclusive distribution right.

A. The first sale doctrine

The Supreme Court articulated the first sale doctrine in 1908, holding that a copyright owner's exclusive distribution right is exhausted after the owner's first sale of a particular copy of the copyrighted work. See Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 350-51 (1908). In Bobbs-Merrill, the plaintiff-copyright owner sold its book with a printed notice announcing that any retailer who sold the book for less than one dollar was responsible for copyright infringement. Id. at 341. Plaintiff sought injunctive relief against defendants-booksellers who failed to comply with the price restriction. Id. at 341-42. The Supreme Court rejected the plaintiff's claim, holding that its exclusive distribution right applied only to first sales of copies of the work. Id. at 350-51. The distribution right did not permit plaintiff to dictate that subsequent sales of the work below a particular price were infringing. Id. The Court noted that its decision solely applied to the rights of a copyright owner that distributed its work without a license agreement. Id. at 350 ("There is no claim in this case of contract limitation, nor license agreement controlling the subsequent sales of the book.").

[2] Congress codified the first sale doctrine the following year. See 17 U.S.C. § 41 (1909). In its current form, it allows the "owner of a particular copy" of a copyrighted work to sell or dispose of his copy without the copyright owner's authorization.7 Id. § 109(a) (enacted 1976). The first sale doctrine does not apply to a person who possesses a copy of the copyrighted work without owning it, such as a licensee. See id. § 109(d);

13873

cf. Quality King Distribs., Inc. v. L'Anza Research Int'l Inc., 523 U.S. 135, 146-47 (1998) ("[T]he first sale doctrine would not provide a defense to . . . any non-owner such as a bailee, a licensee, a consignee, or one whose possession of the copy was unlawful.").

B. Owners vs. licensees

We turn to our precedents governing whether a transferee of a copy of a copyrighted work is an owner or licensee of that copy. We then apply those precedents to CTA's and Vernor's possession of Release 14 copies.

1. United States v. Wise, 550 F.2d 1180 (9th Cir. 1977)

In Wise, a criminal copyright infringement case, we considered whether copyright owners who transferred copies of their motion pictures pursuant to written distribution agreements had executed first sales. Id. at 1187. The defendant was found guilty of copyright infringement based on his for-profit sales of motion picture prints.See id. at 1183. The copyright owners distributed their films to third parties pursuant to written agreements that restricted their use and transfer. Id. at 1183-84. On appeal, the defendant argued that the government failed to prove the absence of a first sale for each film.8 If the copyright owners' initial transfers of the films were first sales, then the defendant's resales were protected by the first sale doctrine and thus were not copyright infringement.

To determine whether a first sale occurred, we considered multiple factors pertaining to each film distribution agreement. Specifically, we considered whether the agreement (a) was labeled a license, (b) provided that the copyright owner retained title to the prints, (c) required the return or destruc-

13874

tion of the prints, (d) forbade duplication of prints, or (e) required the transferee to maintain possession of the prints for the agreement's duration. Id. at 1190-92. Our use of these several considerations, none dispositive, may be seen in our treatment of each film print.

For example, we reversed the defendant's conviction with respect to Camelot. Id. at 1194. It was unclear whether the Camelot print sold by the defendant had been subject to a first sale. Copyright owner Warner Brothers distributed Camelot prints pursuant to multiple agreements, and the government did not prove the absence of a first sale with respect to each agreement. Id. at 1191-92, 1194. We noted that, in one agreement, Warner Brothers had retained title to the prints, required possessor National Broadcasting Company ("NBC") to return the prints if the parties could select a mutual agreeable price,9 and if not, required NBC's certification that the prints were destroyed. Id. at 1191. We held that these factors created a license rather than a first sale. Id.

We further noted, however, that Warner Brothers had also furnished another Camelot print to actress Vanessa Redgrave. Id. at 1192. The print was provided to Redgrave at cost, and her use of the print was subject to several restrictions. She had to retain possession of the print and was not allowed to sell, license, reproduce, or publicly exhibit the print. Id. She had no obligation to return the print to Warner Brothers. Id. We concluded, "While the provision for payment for the cost of the film, standing alone, does not establish a sale, when taken with the rest of the language of the agreement, it reveals a transaction strongly resembling a sale with restrictions on the use of the print." Id. There was no evidence of the print's whereabouts, and we held that "[i]n the absence of such

13875

proof," the government failed to prove the absence of a first sale with respect to this Redgrave print. Id. at 1191-92. Since it was unclear which copy the defendant had obtained and resold, his conviction for sale of Camelot had to be reversed. Id.

Thus, under Wise, where a transferee receives a particular copy of a copyrighted work pursuant to a written agreement, we consider all of the provisions of the agreement to determine whether the transferee became an owner of the copy or received a license. We may consider (1) whether the agreement was labeled a license and (2) whether the copyright owner retained title to the copy, required its return or destruction, forbade its duplication, or required the transferee to maintain possession of the copy for the agreement's duration. Id. at 1190-92. We did not find any one factor dispositive in Wise: we did not hold that the copyright owner's retention of title itself established the absence of a first sale or that a transferee's right to indefinite possession itself established a first sale.10

2. The "MAI trio" of cases

Over fifteen years after Wise, we again considered the distinction between owners and licensees of copies of copyrighted works in three software copyright cases, the "MAI trio". See MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993); Triad Sys. Corp. v. Se. Express Co., 64 F.3d 1330 (9th Cir. 1995); Wall Data, Inc. v. Los Angeles County Sheriff's Dep't, 447 F.3d 769 (9th Cir. 2006). In the MAI trio, we considered which software purchasers were

13876

owners of copies of copyrighted works for purposes of a second affirmative defense to infringement, the essential step defense.

[3] The enforcement of copyright owners' exclusive right to reproduce their work under the Copyright Act, 17 U.S.C. § 106(1), has posed special challenges in the software context. In order to use a software program, a user's computer will automatically copy the software into the computer's random access memory ("RAM"), which is a form of computer data storage. See MAI, 991 F.2d at 513. Congress enacted the essential step defense to codify that a software user who is the "owner of a copy" of a copyrighted software program does not infringe by making a copy of the computer program, if the new copy is "created as an essential step in the utilization of the computer program in conjunction with a machine and . . . is used in no other manner." 17 U.S.C. § 117(a)(1).

The Copyright Act provides that an "owner of a copy" of copyrighted software may claim the essential step defense, and the "owner of a particular copy" of copyrighted software may claim the first sale doctrine. 17 U.S.C. §§ 109(a), 117(a)(1). The MAI trio construed the phrase "owner of a copy" for essential step defense purposes. Neither Vernor nor Autodesk contends that the first sale doctrine's inclusion of the word "particular" alters the phrase's meaning, and we "presume that words used more than once in the same statute have the same meaning throughout." Moldo v. Matsco, Inc. (In re Cybernetic Servs., Inc.), 252 F.3d 1039, 1051 (9th Cir. 2002). Accordingly, we consider the MAI trio's construction of "owner of a copy" controlling in our analysis of whether CTA and Vernor became "owner[s] of a particular copy" of Release 14 software.

In MAI and Triad, the defendants maintained computers that ran the plaintiffs' operating system software. MAI, 991 F.2d at 513; Triad, 64 F.3d at 1333. When the defendants ran the computers, the computers automatically loaded plaintiffs'

13877

software into RAM. MAI, 991 F.2d at 517-18;Triad, 64 F.3d at 1333, 1335-36. The plaintiffs in both cases sold their soft- ware pursuant to restrictive license agreements, and we held that their customers were licensees who were therefore not entitled to claim the essential step defense. We found that the defendants infringed plaintiffs' software copyrights by their unauthorized loading of copyrighted software into RAM. MAI, 991 F.2d at 517-18 & n.5; Triad, 64 F.3d at 1333, 1335-36. In Triad, the plaintiff had earlier sold software outright to some customers. 64 F.3d at 1333 n.2. We noted that these customers were owners who were entitled to the essential step defense, and the defendant did not infringe by making RAM copies in servicing their computers. Id.

In Wall Data, plaintiff sold 3,663 software licenses to the defendant. Wall Data, 447 F.3d at 773. The licenses (1) were non-exclusive; (2) permitted use of the software on a single computer; and (3) permitted transfer of the software once per month, if the software was removed from the original computer. Id. at 775 n.5, 781. The defendant installed the software onto 6,007 computers via hard drive imaging, which saved it from installing the software manually on each computer. It made an unverified claim that only 3,663 users could simultaneously access the software. Id. at 776.

[4] The plaintiff sued for copyright infringement, contending that the defendant violated the license by "over-installing" the software. Id. at 775. The defendant raised an essential step defense, contending that its hard drive imaging was a necessary step of installation. Id. at 776. On appeal, we held that the district court did not abuse its discretion in denying the defendant's request for a jury instruction on the essential step defense. Id. at 784. Citing MAI, we held that the essential step defense does not apply where the copyright owner grants the user a license and significantly restricts the user's ability to transfer the software. Id. at 784-85. Since the plaintiff's license imposed "significant restrictions" on the defendant's

13878

software rights, the defendant was a licensee and was not entitled to the essential step defense. Id. at 785.

In Wall Data, we acknowledged thatMAI had been criticized in a Federal Circuit decision, but declined to revisit its holding, noting that the facts of Wall Data led to the conclusion that any error in the district court's failure to instruct was harmless. Even if the defendant owned its copies of the software, its installation of the software on a number of computers in excess of its license was not an essential step in the software's use. Id. at 786 n.9 (citing Nimmer on Copyright § 8.08[B][1][c] at 8-136; DSC Commc'ns Corp. v. Pulse Commc'ns, Inc., 170 F.3d 1354, 1360 (Fed. Cir. 1999) (criticizingMAI)).

We read Wise and the MAI trio to prescribe three considerations that we may use to determine whether a software user is a licensee, rather than an owner of a copy. First, we consider whether the copyright owner specifies that a user is granted a license. Second, we consider whether the copyright owner significantly restricts the user's ability to transfer the software. Finally, we consider whether the copyright owner imposes notable use restrictions.11 Our holding reconciles the MAI trio and Wise, even though the MAI trio did not cite Wise. See Cisneros-Perez v. Gonzales, 451 F.3d 1053, 1058 (9th Cir. 2006) ("[W]e are required to reconcile prior precedents if we can do so.")

13879

In response to MAI, Congress amended § 117 to permit a computer owner to copy software for maintenance or repair purposes. See 17 U.S.C. § 117(c); see also H.R. Rep. No. 105-551, pt. 1, at 27 (1998). However, Congress did not disturb MAI's holding that licensees are not entitled to the essential step defense.

IV.

A. The district court's decision

The district court interpreted Wise to hold that a first sale occurs whenever the transferee is entitled to keep the copy of the work. Since Autodesk does not require its customers to return their copies of Release 14, the district court found that Autodesk had sold Release 14 to CTA. It reasoned that thus, CTA and Vernor were successive "owner[s] of a copy" of the software and were entitled to resell it under the first sale doctrine. The district court also found that Vernor's customers' copying of software during installation was protected by the essential step defense.

The district court acknowledged that were it to follow the MAI trio, it would conclude that Autodesk had licensed Release 14 copies to CTA, rather than sold them. However, it viewed Wise and the MAI trio as irreconcilable, and it followed Wise as the first-decided case. See United States v. Rodriguez-Lara, 421 F.3d 932, 943 (9th Cir. 2005).

B. Analysis

[5] We hold today that a software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user's ability to transfer the software; and (3) imposes notable use restrictions.12 Applying our holding to Autodesk's

13880

SLA, we conclude that CTA was a licensee rather than an owner of copies of Release 14 and thus was not entitled to invoke the first sale doctrine or the essential step defense.

[6] Autodesk retained title to the software and imposed significant transfer restrictions: it stated that the license is nontransferable, the software could not be transferred or leased without Autodesk's written consent, and the software could not be transferred outside the Western Hemisphere. The SLA also imposed use restrictions against the use of the software outside the Western Hemisphere and against modifying, translating, or reverse-engineering the software, removing any proprietary marks from the software or documentation, or defeating any copy protection device. Furthermore, the SLA provided for termination of the license upon the licensee's unauthorized copying or failure to comply with other license restrictions. Thus, because Autodesk reserved title to Release 14 copies and imposed significant transfer and use restrictions, we conclude that its customers are licensees of their copies of Release 14 rather than owners.

[7] CTA was a licensee rather than an "owner of a particular copy" of Release 14, and it was not entitled to resell its Release 14 copies to Vernor under the first sale doctrine. 17 U.S.C. § 109(a). Therefore, Vernor did not receive title to the copies from CTA and accordingly could not pass ownership on to others. Both CTA's and Vernor's sales infringed Autodesk's exclusive right to distribute copies of its work. Id. § 106(3).

[8] Because Vernor was not an owner, his customers are also not owners of Release 14 copies. Therefore, when they install Release 14 on their computers, the copies of the software that they make during installation infringe Autodesk's exclusive reproduction right because they too are not entitled to the benefit of the essential step defense.1317 U.S.C. §§ 106(1), 117(a)(1).

13881

[9] Although unnecessary to our resolution of the case, we address the legislative history in order to address the arguments raised by the parties and amici. That legislative history supports our conclusion that licensees such as CTA are not entitled to claim the first sale doctrine. The House Report for § 109 underscores Congress' view that the first sale doctrine is available only to a person who has acquired a copy via an "outright sale". H.R. Rep. No. 94-1476, at 79 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5693. The report also asserts that the first sale doctrine does not "apply to someone who merely possesses a copy or phonorecord without having acquired ownership of it." Id.

[10] Our conclusion that those who rightfully possess, but do not own, a copy of copyrighted software are not entitled to claim the essential step defense is also supported by the legislative history. Congress enacted § 117 following a report from the National Commission on New Technological Uses of Copyrighted Works ("CONTU") proposing Copyright Act amendments. DSC Commc'ns Corp. v. Pulse Commc'ns, Inc., 170 F.3d 1354, 1360 (Fed. Cir. 1999) (citing Final Report of the National Commission on New Technological Uses of Copyrighted Works, U.S. Dept. of Commerce, PB-282141, at 30 (July 31, 1978)). CONTU's proposed version of § 117 was identical to the version that Congress enacted with one exception. Id. CONTU's version provided, "[I]t is not an infringement for the rightful possessor of a copy of a computer program to make or authorize the making of another copy or adaptation of that program . . . ." Id. Without explanation, Congress substituted "owner" for "rightful possessor." Id. This modification suggests that more than rightful possession

13882

is required for § 117 to apply -- i.e., that Congress did not intend licensees subject to significant transfer and use restrictions to receive the benefit of the essential step defense.

C. Vernor's four counterarguments are not persuasive

1. The district court's decision concerning indefinite possession

Vernor contends that the district court correctly concluded that (1) Wise is the controlling precedent and (2) under Wise, the key factor is whether transferees are entitled to indefinite possession of their copy of a copyrighted work. As explained supra, we disagree. In Wise, we utilized a multi-factor balancing test to distinguish between a first sale and a license of a copyrighted film print. United States v. Wise, 550 F.2d 1180, 1190-92 (9th Cir. 1977). We considered a transferee's ability to possess a print indefinitely as one factor in our analysis, but we did not treat it as dispositive. If we had, we would not have needed to consider other contractual provisions, such as retention of title, copying prohibitions, and lending restrictions. Id. Moreover, we held in Wise that two agreements were licenses rather than first sales, even though those agreements did not describe any provision requiring the transferee to return the prints to the copyright owners. Id. at 1192 (analyzing VIP agreements for The Sting and Funny Girl). 14

13883

2. Circuit split with the Federal and Second Circuits

Vernor contends that reversing the district court will create a circuit split with the Federal and Second Circuits. See DSC Commc'ns Corp. v. Pulse Commc'ns, Inc., 170 F.3d 1354 (Fed. Cir. 1999); Krause v. Titleserv, Inc., 402 F.3d 119 (2nd Cir. 2005). We disagree.

In DSC, the Federal Circuit considered the essential step defense in a case in which the plaintiff and defendant sold competing telephone systems hardware cards. 170 F.3d at 1358. Rather than develop its own software, the defendant used its hardware to download plaintiff's software into RAM upon installation. Id. The plaintiff argued that this constituted copyright infringement, and the defendant countered that the relevant customers owned plaintiff's software, entitling them to an essential step defense. Id. at 1359-60. The court rejected the defendant's essential step defense, holding that plaintiff licensed its customers' use of their copies of the software in the relevant license agreement's transfer and use restrictions. Id. at 1360-61. Although the Federal Circuit rejected MAI's "characterization of all licensees as non-owners," it deemed MAI "instructive" and determined that the agreements there in issue were licenses. Id. at 1360. Although DSC is thus narrower than MAI, it does not conflict with our holding today that a software customer bound by a restrictive license agreement may be a licensee of a copy not entitled to the first sale doctrine or the essential step defense.

The Second Circuit's decision in Krause is distinguishable. In Krause, the plaintiff-copyright owner was a software developer who sued his former employer for making allegedly infringing modifications to his software program. Krause, 402 F.3d at 120-21. The Second Circuit considered the totality of the parties' agreement to determine that the defendant was entitled to an essential step defense. Id. at 124. In Krause, unlike here, the parties did not have a written license agreement, the defendant-employer had paid the plaintiff-employee

13884

significant consideration to develop the programs for its sole benefit, and the plaintiff had agreed to allow the defendant to use the programs "forever," regardless of whether the parties' relationship terminated. Id. at 124-25. Thus, the Second Circuit found that the defendant-employer owned its copies of the work. Id. The facts and the analysis in Krause are not contrary to our determination that CTA is a licensee rather than an owner.

3. The Supreme Court's holding in Bobbs-Merrill

Vernor contends that Bobbs-Merrill establishes his entitlement to a first sale defense. See Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908). However, Bobbs-Merrill stands only for the proposition that a copyright owner's exclusive distribution right does not allow it to control sales of copies of its work after the first sale. Id. at 350. Decided in 1908, Bobbs-Merrill did not and could not address the question of whether the right to use software is distinct from the ownership of copies of software. Moreover, the Supreme Court in Bobbs-Merrill made explicit that its decision did not address the use of restrictions to create a license. Id. ("There is no claim in this case of contract limitation, nor license agreement controlling the subsequent sales of the book.")

4. Economic realities of the transaction

Finally, Vernor contends that "economic realities" demonstrate that Autodesk makes "first sales" to its customers, because Autodesk allows its customers to possess their copies of the software indefinitely and does not require recurring license payments. We held supra that neither of these factors is dispositive. Vernor cites no first sale doctrine case in support of this proposition. Rather, he cites In re DAK Indus., 66 F.3d 1091, 1095 (9th Cir. 1995), a case in which we interpreted the Bankruptcy Code to decide whether a particular transaction should be considered a pre-petition sale. We commented that "[w]hen applying the bankruptcy code to this

13885

transaction, we must look through its form to the 'economic realities of the particular arrangement.' " Id. Nothing in DAK is contrary to our reconciliation of Wise and the MAI trio.

V.

Although our holding today is controlled by our precedent, we recognize the significant policy considerations raised by the parties and amici on both sides of this appeal.

Autodesk, the Software & Information Industry Association ("SIIA"), and the Motion Picture Association of America ("MPAA") have presented policy arguments that favor our result. For instance, Autodesk argues in favor of judicial enforcement of software license agreements that restrict transfers of copies of the work. Autodesk contends that this (1) allows for tiered pricing for different software markets, such as reduced pricing for students or educational institutions; (2) increases software companies' sales; (3) lowers prices for all consumers by spreading costs among a large number of purchasers; and (4) reduces the incidence of piracy by allowing copyright owners to bring infringement actions against unauthorized resellers. SIIA argues that a license can exist even where a customer (1) receives his copy of the work after making a single payment and (2) can indefinitely possess a software copy, because it is the software code and associated rights that are valuable rather than the inexpensive discs on which the code may be stored. Also, the MPAA argues that a customer's ability to possess a copyrighted work indefinitely should not compel a finding of a first sale, because there is often no practically feasible way for a consumer to return a copy to the copyright owner.

Vernor, eBay, and the American Library Association ("ALA") have presented policy arguments against our decision. Vernor contends that our decision (1) does not vindicate the law's aversion to restraints on alienation of personal property; (2) may force everyone purchasing copyrighted property

13886

to trace the chain of title to ensure that a first sale occurred; and (3) ignores the economic realities of the relevant transactions, in which the copyright owner permanently released software copies into the stream of commerce without expectation of return in exchange for upfront payment of the full software price. eBay contends that a broad view of the first sale doctrine is necessary to facilitate the creation of secondary markets for copyrighted works, which contributes to the public good by (1) giving consumers additional opportunities to purchase and sell copyrighted works, often at below-retail prices; (2) allowing consumers to obtain copies of works after a copyright owner has ceased distribution; and (3) allowing the proliferation of businesses.

The ALA contends that the first sale doctrine facilitates the availability of copyrighted works after their commercial lifespan, by inter alia enabling the existence of libraries, used bookstores, and hand-to-hand exchanges of copyrighted materials. The ALA further contends that judicial enforcement of software license agreements, which are often contracts of adhesion, could eliminate the software resale market, require used computer sellers to delete legitimate software prior to sale, and increase prices for consumers by reducing price competition for software vendors. It contends that Autodesk's position (1) undermines 17 U.S.C. § 109(b)(2), which permits non-profit libraries to lend software for non-commercial purposes, and (2) would hamper efforts by non-profits to collect and preserve out-of-print software. The ALA fears that the software industry's licensing practices could be adopted by other copyright owners, including book publishers, record labels, and movie studios.

These are serious contentions on both sides, but they do not alter our conclusion that our precedent from Wise through the MAI trio requires the result we reach. Congress is free, of course, to modify the first sale doctrine and the essential step defense if it deems these or other policy considerations to require a different approach.

13887

VI.

The district court did not consider Vernor's claim that Autodesk misused its copyright. Copyright misuse is an equitable defense to copyright infringement which precludes the copyright holder's enforcement of its copyright during the misuse period. See Practice Mgmt. Info. Corp. v. Am. Med. Ass'n, 121 F.3d 516, 520 n.9(9th Cir. 1997). The district court reasoned that a misuse defense would not benefit Vernor since he prevailed on copyright infringement below. Since we reverse the district court's grant of summary judgment in Vernor's favor on copyright infringement, we remand for the district court to consider Vernor's copyright misuse defense in the first instance.

VII.

[11] We vacate the district court's grant of summary judgment in Vernor's favor and remand. We hold that because CTA is a licensee, not an owner, the "sale" of its Release 14 copies to Vernor did not convey ownership. Vernor is accordingly not entitled to invoke the first sale doctrine or the essential step defense, on behalf of his customers. We remand for further proceedings consistent with this opinion, including consideration of Vernor's copyright misuse defense.

VACATED AND REMANDED.

__________________________

1 Prior to using activation codes, Autodesk required users to return one disc of an earlier version of the software to upgrade to a later version. Autodesk has abandoned this return policy, deeming it slow and unwork- able.

2 Autodesk brought suit in federal district court against CTA for these sales. The parties stipulated to entry of a permanent injunction against CTA from directly or contributorily infringing Autodesk's copyrights.

3 The DMCA provides that a service provider is not liable for infringing user-posted material on its service if, inter alia, it responds expeditiously to remove or disable access to the material upon receipt of a take-down notice claiming infringement. 17 U.S.C. § 512(c)(1)(C).

4 The DMCA also provides that a user whose material has been removed or disabled may provide a "counter-notification" to the service provider, including a sworn statement that the user has a good-faith belief that the material was mistakenly removed or disabled. 17 U.S.C. § 512(g)(3)(C). After receiving a counter-notification, the service provider must do the following to retain its liability exemption. It must promptly (1) provide the person who filed the original take-down notice with a copy of the counter- notification and (2) advise that it will replace the removed material or cease disabling access to it in ten business days. 17 U.S.C. § 512(g)(2)(B). It must also timely replace the removed material or cease disabling access to it, unless the person who provided the take-down notice gives notice that he or she has filed a court action to restrain the user's infringement. 17 U.S.C. § 512(g)(2)(C).

5 Vernor acknowledged at his deposition that he did not know whether this was true.

6 If Autodesk's transfer of Release 14 copies to CTA was a first sale, then CTA's resale of the software in violation of the SLA's terms would be a breach of contract, but would not result in copyright liability. See United States v. Wise, 550 F.2d 1180, 1187 (9th Cir. 1977) ("[T]he exclu- sive right to vend the transferred copy rests with the vendee, who is not restricted by statute from further transfers of that copy, even though in breach of an agreement restricting its sale.").

7 The parties dispute who bears the burden to prove the first sale or the absence thereof in a civil case, a question we have not yet resolved. Since the facts in this case are undisputed, including the chain of software trans- fers, we need not decide the issue.

8 In Wise, we construed former 17 U.S.C. § 27, since replaced by 17 U.S.C. § 109(a), the current codification of the first sale doctrine. The pro- visions are materially similar.

9 Although the Wise defendant contended that this repurchase provision created a first sale, we held that it merely allowed Warner Brothers to compensate NBC for its out-of-pocket cost in producing additional prints. Id.

10 Cf. Hampton v. Paramount Pictures Corp., 279 F.2d 100, 103 (9th Cir. 1960) (holding in non-first sale doctrine case that the transferee of a movie print was a licensee because the parties designated their agreement as a perpetual license, even though their agreement provided for a one- time lump sum payment and imposed no requirement that the transferee would return the outstanding prints and negatives).

11 Although use restrictions were not dispositive in the MAI trio, we con- sidered them in each case. See MAI, 991 F.2d at 517 n.3 (license limited user to making one working and one backup copy of the software, and for- bade examination, disclosure, copying, modification, adaptation, and visual display of the software); Triad, 64 F.3d at 1333 (license prohibited software duplication and third-party use); Wall Data, 447 F.3d at 775 n.5 (license permitted software use on single computer, prohibited multi- computer and multi-user arrangements, and permitted transfer to another computer no more than once every thirty days).

12 We review the district court's grant of summary judgment to Vernor de novo. Padfield v. AIG Life Ins. Co., 290 F.3d 1121, 1124 (9th Cir. 2002).

13 It may seem intuitive that every lawful user of a copyrighted software program, whether they own their copies or are merely licensed to use them, should be entitled to an "essential step defense" that provides that they do not infringe simply by using a computer program that they law- fully acquired. However, the Copyright Act confers this defense only on owners of software copies. See 17 U.S.C. § 117. In contrast, a licensee's right to use the software, including the right to copy the software into RAM, is conferred by the terms of its license agreement.

14 We also note that for some of the Wise films, there was a lack of evi- dence whether transferees who had the option to purchase copies of the prints had done so. Without evidence concerning these options, the gov- ernment could not sustain its criminal burden of proof to demonstrate the absence of a first sale. See, e.g., 550 F.2d at 1191-92 ("No evidence was adduced at trial as to whether [transferee] exercised its election [to pur- chase a copy of the print], or, if it did, whether it resold that print. In the absence of such proof, the Government has failed in its burden of proving the absence of first sale of the photoplay Funny Girl.") Here, in contrast, the undisputed evidence includes the SLA between Autodesk and CTA, which reflects the absence of a first sale. The SLA evidences both the par- ties' intent to create a license and CTA's acquiescence to substantive restrictions that distinguish the transfer from an outright first sale.


  


Vernor v. AutoDesk - Vacated (first sale) and remanded (copyright misuse) | 378 comments | Create New Account
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Correction
Authored by: ankylosaurus on Friday, September 10 2010 @ 08:52 PM EDT
Post any corrections here. Mistake -> Correct in the title is often helpful.

---
The Dinosaur with a Club at the End of its Tail

[ Reply to This | # ]

Off topic thread here
Authored by: ankylosaurus on Friday, September 10 2010 @ 08:55 PM EDT
This is where to discuss issues not relevant to the main article.

---
The Dinosaur with a Club at the End of its Tail

[ Reply to This | # ]

Sounds like these guys ruined it for all of us.
Authored by: mobrien_12 on Friday, September 10 2010 @ 09:10 PM EDT
So from what I understand, they had Autocad, they wanted a newer version, they got the "upgrade" version which meant they PROMISED to destroy the old version in the agreement in exchange for a dramatically decreased price.

Then they got greedy, and sold the old copies on ebay.

Now right of first sale is gone.

Well, one more reason to use FOSS.

[ Reply to This | # ]

Deliberate tests of the waters
Authored by: Anonymous on Friday, September 10 2010 @ 09:16 PM EDT
If you had the energy to handle all the forms, is it feasilble to effectively
manufacture a situation simply to bring it to the court to get a deliberate
ruling about the vague fact?

For example, PJ says the current law and legal wind seems to be blowing in the
direction of allowing as draconian EULA as you like. So manufacture a clear test
case, as pure as possible Perhaps I write a EULA for a product I make, a hammer.
The EULA says you're not allowed to bang any nails with the hammer unless you
buy them from me. I sell the hammer to my friend for $1. He bangs someone
else's a nail. I say "ha!" and demand the hammer back. He refuses and
I file suit for the return of my hammer. Now this is a friend, and we engineered
the whole example to see if such a EULA will hold up, but what would a court do?
Kick us both out for wasting its time? Or seriously hear the case, even though
it's just about $1, and define a clear precident?

What prevents us from getting clarifications for many laws using this technique?
I sell a poem to my friend for $1, I don't explicitly have a written copyright
transfer, just a contract saying "the poem is his", and now the court
has to determine if my friend now owns the copyright or not.

[ Reply to This | # ]

Alternatives to Autocad
Authored by: Anonymous on Friday, September 10 2010 @ 09:16 PM EDT
CAD software is quite complex, with a complex user interface, the need to
print/plot with precision and repeatability, and the need to save in reliable
files.

Used in a production environment crashes are a huge cost to business.

The availability of any alternatives to Autocad (other than from the other two
or three big vendors) that have capability, reliability and precision
approaching that of software from the proprietary vendors is very doubtful.

Indeed, I believe that when asked what were the most needed free software
alternatives, Richard Stallman mentioned an Autocad alternative as one of those
most needed.

[ Reply to This | # ]

New Picks
Authored by: ankylosaurus on Friday, September 10 2010 @ 09:23 PM EDT
Discussion of items in the News Picks section of the Groklaw home page.

Please include a link to the original item since they move off the Groklaw home
page fairly quickly.

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The Dinosaur with a Club at the End of its Tail

[ Reply to This | # ]

You win some, you lose some, and sometimes they are the same one!
Authored by: The Mad Hatter r on Friday, September 10 2010 @ 09:27 PM EDT

The only issue I can see with this is a computer EULA which says you are not
allowed to modify the operating system. Nah, no one would do that. Would they?


---
Wayne

http://madhatter.ca/

[ Reply to This | # ]

If only Congress can change it, does this mean no possibility of SCOTUS review?
Authored by: Tolerance on Friday, September 10 2010 @ 10:18 PM EDT
I did notice the Ars Technica opinion that "EULAs are binding, they can
control just about everything you might dream up, and only Congress can change
the situation."

There's two problems with that summary. First, does this mean there's no
possibility that the Supreme Court will grant certiorari? Second, this was a
ninth circuit case; what happens if a different circuit rules otherwise?


---
Grumpy old man

[ Reply to This | # ]

Not selling the software?
Authored by: Anonymous on Friday, September 10 2010 @ 10:43 PM EDT
We was not selling Autocad itself (ie, the code), but his
license to use it. So let's say they claim he sold the disk
which has the code on it. So what would stop him from
selling the serial key it came with and not the disk?

How does a shrink wrap EULA play into this? It's forced
acceptance. You can't return the software after it's
opened, and you can't read the license until you open it.

What about the instance of a purchased book? Or CD? I
don't own the rights to the book or CD, but I can transfer
my copy of it.

This law was written in 1909...isn't it about time for an
update that includes non-tangible items like code/software?

[ Reply to This | # ]

Their website says "purchase"
Authored by: Anonymous on Friday, September 10 2010 @ 10:55 PM EDT
All over Autodesk's website, you will see the words "buy" or
"find a RESELLER."

Here is an example lifted straight from their site just now:

"Add Autodesk® Subscription to your software PURCHASE and
experience real benefits. For one annual fee, you’ll receive
access to new product releases during your contract period,
expert technical support direct from Autodesk, self-paced e-
Learning, and a range of exclusive technology and business
benefits."

If they are stating, on their own website, that it is a
PURCHASE, or that you can BUY it, or that you can BUY it
from a RESELLER...what gives?

Not one place on their site does it say what you are getting
for your money is a license.

Someone please explain this to me.

[ Reply to This | # ]

Very sad
Authored by: Anonymous on Saturday, September 11 2010 @ 12:42 AM EDT
So, that sales receipt means nothing, apparently.

I don't see how they can defend this. To me, this is a clear case of bait and
switch and deceptive marketing.

My reasoning as follows.
1) You walk into a store, and buy a copy of AutoCad.
a) You get a sales receipt.
b) Nothing on the outside of the box indicates you are
not purchasing the product. No one at the sales
counter informs you you are not making a purchase.
c) You get the box home and open the box. You read the
package containing the disks. Now it says you agree to
a license if you do such and such.
d) The box is open, and the store will not take back the
package.

How are you to get your money back and be made whole? I understand PJs stand and
I understand this is the courts position, but it seems irreconcilable and
unnatural. I understand they are using the concept of performance based
copyrights.

I think we should all get together and buy one copy of AutoDesk's software and
then open the boxes and read the license, try to get a full refund from the
store, and then sue Autodesk for bait and switch, abuse of copyright, deceptive
labeling, deceptive marketing, deceptive advertising, illicit gains (because you
can't return the merchandise), and anything else we can lump on them, and get a
class action suit going in say, Utah. Like that lawyer who bought a bowtie and
sued for patent marking. Let's get MoFo to represent us. How much do I need to
throw in the pot?

--Celtic_hackr

[ Reply to This | # ]

  • Very sad - Authored by: Anonymous on Saturday, September 11 2010 @ 01:09 AM EDT
  • Very sad - Authored by: Vic on Saturday, September 11 2010 @ 06:20 AM EDT
    • Very sad - Authored by: Anonymous on Saturday, September 11 2010 @ 08:52 AM EDT
      • Very sad - Authored by: Anonymous on Saturday, September 11 2010 @ 03:03 PM EDT
    • Very sad - Authored by: PJ on Saturday, September 11 2010 @ 11:37 AM EDT
      • Very sad - Authored by: Anonymous on Saturday, September 11 2010 @ 09:01 PM EDT
        • Very sad. - Authored by: Anonymous on Sunday, September 12 2010 @ 12:44 PM EDT
          • Very sad. - Authored by: Anonymous on Sunday, September 12 2010 @ 03:18 PM EDT
            • Very sad. - Authored by: Anonymous on Sunday, September 12 2010 @ 03:48 PM EDT
              • Very sad. - Authored by: Anonymous on Sunday, September 12 2010 @ 07:16 PM EDT
                • Very sad. - Authored by: Anonymous on Sunday, September 12 2010 @ 09:21 PM EDT
                  • Very sad. - Authored by: Vic on Monday, September 13 2010 @ 09:23 AM EDT
                  • Very sad. - Authored by: Anonymous on Monday, September 13 2010 @ 11:42 AM EDT
                    • Very sad. - Authored by: Anonymous on Monday, September 13 2010 @ 12:09 PM EDT
                      • Very sad. - Authored by: PJ on Monday, September 13 2010 @ 12:16 PM EDT
                      • Very sad. - Authored by: Anonymous on Tuesday, September 14 2010 @ 02:58 PM EDT
                        • Very sad. - Authored by: Anonymous on Thursday, September 16 2010 @ 03:26 AM EDT
                    • Very sad. - Authored by: PJ on Monday, September 13 2010 @ 12:15 PM EDT
                      • Very sad. - Authored by: PJ on Monday, September 13 2010 @ 12:20 PM EDT
                      • Very sad. - Authored by: Anonymous on Monday, September 13 2010 @ 03:44 PM EDT
                      • Very sad. - Authored by: Anonymous on Tuesday, September 14 2010 @ 02:51 PM EDT
    • Very sad - Authored by: jjs on Saturday, September 11 2010 @ 01:08 PM EDT
      • Very sad - Authored by: Wol on Saturday, September 11 2010 @ 07:01 PM EDT
        • Very sad - Authored by: jjs on Sunday, September 12 2010 @ 01:28 AM EDT
      • Very sad - Authored by: Anonymous on Monday, September 13 2010 @ 01:51 PM EDT
  • Very sad - Authored by: Anonymous on Sunday, September 12 2010 @ 11:34 AM EDT
    • Very sad - Authored by: PJ on Sunday, September 12 2010 @ 11:43 AM EDT
      • Very sad. - Authored by: Anonymous on Sunday, September 12 2010 @ 01:18 PM EDT
    • Interesting - Authored by: Anonymous on Sunday, September 12 2010 @ 02:25 PM EDT
Can a textbook publisher not allow resale? Or deny libraries the ability to buy a book or cd
Authored by: jsoulejr on Saturday, September 11 2010 @ 12:46 AM EDT
... or dvd? All with a simple eula?

Good bye used book stores.

[ Reply to This | # ]

Calling all Legal Eagles
Authored by: Anonymous on Saturday, September 11 2010 @ 01:18 AM EDT
Can anyone suggest a nice template to present as a bill in state and federal
legislatures to restore this first sale doctrine to where it should be. Maybe
even one illegalizing EULAs unless signed by both parties, and prevent
"forced" licensing.

Something like "No person or entity shall cause issue of a license on a
copyrighted work without prior written and informed consent of both parties.
Furthermore, no party to a license shall use coercion to effect such a license.
Violation of this statute shall be a misdemeanor punishable by no more than
$1000 and/or one year in jail for each occurrence."

Of course, I see the fix that some software companies would do to handle this.
Best Buy wouldn't be too thrilled with their solution, though.

--Celtic_hackr

[ Reply to This | # ]

Quite a statement
Authored by: Anonymous on Saturday, September 11 2010 @ 01:37 AM EDT
Separation of powers is bedrock America.

[ Reply to This | # ]

This is bad, but it's not the last word
Authored by: Anonymous on Saturday, September 11 2010 @ 03:25 AM EDT
Vernor has already announced its intention to ask for an en banc rehearing.
That doesn't mean it will get it, of course, and it doesn't mean the full panel
would rule Vernor's way.*

A Supreme Court appeal isn't a lost cause, either, as the Supreme Court has
protected first sale in its most recent decisions. Courts have gone up, down,
and sideways on EULAs and first sale with regard to software. Until the Supreme
Court weighs in (and it has not), we still have a shot.

So, to summarize, this ruling is not necessarily even the last word in the 9th
Circuit, and it is certainly not the last word for the whole country.

---linuxrocks123

*The 9th Circuit has been very hostile to first sale in recent history. See,
for instance, Omega v. Costco, for which the Supreme Court has granted
certiorari.

[ Reply to This | # ]

First sale and GPL
Authored by: shachar on Saturday, September 11 2010 @ 04:54 AM EDT
Since one of the most active of the antiGPL operatives had a dream to undermine the GPL, and hence Linux, by first sale using this case, I am personally gratified.

I fail to see the relation between an EULA and the GPL. Let's assume, for the sake of discussion, that the supreme court issues a blanket ruling that EULAs are unenforceable. How does that diminish the GPL in any way?

The GPL is not an EULA. It even states so, in so many words, in the license itself (section 5 in version 2). Anyone violating the GPL is in worse case if the GPL is not enforceable than if it is (a contract violation, which is a civil dispute, if it's enforceable. A copyright violation, which is a criminal offense, if it is not).

First sale won't get you anywhere, as it only covers the copy you received, and does not allow modifying the copyrighted work. Reading at its worst meaning for us, first sale would allow you to move along your GPL license for an unmodified version of the work without providing sources, which section 3(c) (again, version 2, as that's what Linux is using) allows you to do anyways.

I simply fail to see why PJ thinks that an anti-EULA ruling is bad for free software.

IANAL

Shachar

[ Reply to This | # ]

Can EULAs be used to boost patent defence?
Authored by: Anonymous on Saturday, September 11 2010 @ 05:24 AM EDT
Would it be possible I wonder to add an EULA to GPL style
licenses in order to require that no patent royalty
agreements pertaining to the software concerned can be
signed by end users without:

a) full public disclosure of the agreement, and full public
disclosure of the specific patent infringement(b) claimed
(this will help block anti-competitive use of patents using
the racketeering and extortion principles that
SCO/Microsoft/Oracle have adopted as their core business
strategy).

AND

b) the consent of the copyright owner before the end user
may enter into the patent royalty agreement (this may be
subject for example the condition that the patent agreement
allows royalty free patent use for all other users, or that
a percentage of the patent royalty fee is donated to the EFF
(in order to pay for prior art search or for coding around
the patent)).

[ Reply to This | # ]

Vernor v. AutoDesk - Vacated (first sale) and remanded (copyright misuse)
Authored by: Anonymous on Saturday, September 11 2010 @ 05:41 AM EDT
OK, I see where the court is going with this decision, and if I understand all
the factors here I would have to agree with the court.

There were 5 "copies" of Autodesk 14 mentioned, but only 4 of them
appear to be contended. Those particular 4 "copies" were sold to
Vernor by CTA, yet CTA did NOT have the authority to sell them. Since CTA did
not have the authority to sell them, neither did Vernor, and that is how the
court ruled.

The remaining "copy" may or may not be a legitimate sale. IF Vernor
purchased it as an unopened box or otherwise in original condition, then yes he
has the right to resell that copy provided he does not open the box and install
it himself. Vernor would not be subject to the EULA or SLA as he is not the end
user of the software and those restrictions therefore do not apply. Otherwise
the previous owner of that "copy" may not have had the right to sell
it to Vernor, and thus Vernor does not have the right to sell it to anyone
else.

The only thing here not to like is that the court does not appear to have really
clarified the difference between a sale and a license. To me, this distinction
appears to be even cloudier than before, and implies that all software sales are
actually licenses. If true this is a killing precedent on all media.

[ Reply to This | # ]

ruling is surely very limited......
Authored by: Anonymous on Saturday, September 11 2010 @ 07:58 AM EDT
...the license agreement signed by the original owner agreed that old version
would be destroyed.

what was being sold on e-bay were the 'destroyed' versions as the original
licensee had upgraded the software

[ Reply to This | # ]

First Sale Doctrine - Hypothetical (long)
Authored by: darrellb on Saturday, September 11 2010 @ 09:36 AM EDT
Assume that I'm the author and copyright owner of a book. I sell the book two
ways: printed on paper, and in digital form. My printed edition comes in a
locked case which can not be opened without a key and my digital edition comes
with technical protection measures requiring a key for access. Copies of the
book and media explicitly state that reading the book is prohibited without the
separately licensed key.

I sell both forms of book for $1, without the key. The price merely covers
media, copying, and distribution costs. Keys cost $20 for either edition. The
key for the printed book is a physical key; the digital key is an activation
code.

In both cases, to acquire a key the purchaser must enter into a contract with
me. The contract specifies that the key is licensed, not sold. In addition, the
contract specifies that the key may only be used by the licensee, that the book
may not be read except by the licensee, and that the key may not be transferred,
sold, assigned, or lent to others.

Can I legally restrict reading the book to the licensed key holder? Does it
matter if it's the printed or electronic book?

Could I prevail in court against someone who sold the book with the key? Would
it matter if it's a physical key or an electronic key?

It seems clear to me that the purchaser has rights under the first-sale doctrine
to sell, give away, or destroy the paper or electronic book. The purchaser paid
$1 for the copy which they own. However, it also seems clear to me that the
purchase may not transfer the key when selling the book. The purchaser paid $20
for an individual non-transferrable licsense.


---
darrellB

[ Reply to This | # ]

Vernor v. AutoDesk - Vacated (first sale) and remanded (copyright misuse)
Authored by: Anonymous on Saturday, September 11 2010 @ 11:36 AM EDT
It would not appear to me from some comments I read that first sale as such has
been vacated in the context of software licensing: AFAICS the Autocad company
pays the customer in order to reacquire the first sales right (the customers
bought an _upgrade_ to a previous version promising to destroy the old version).
The customer only once paid for a complete working software copy, and wants to
both keep a working copy as well as sell it?

That's not first sale.

Things would be different if the customers bought newer _full_ versions
independent of the old versions.

[ Reply to This | # ]

Look at this from a different direction.
Authored by: Anonymous on Saturday, September 11 2010 @ 05:22 PM EDT
From what I get from this is a person isn't purchasing the software, but only
purchasing a license. If this is the case then why go for false advertising?

When you go to purchase most any software from a store, I don't think I ever
have seen any software product stating that I was purchasing a license, just the
product by name.

IANAL but I think if what you are buying is just the license, it should be
stated that is what is being purchased and the software is included for you to
use.

Frankly, if all you are purchasing is a license, you should have to agree to the
terms before money is transfered.

[ Reply to This | # ]

  • Sorry - Authored by: Anonymous on Saturday, September 11 2010 @ 05:29 PM EDT
  • Outside US - Authored by: Anonymous on Thursday, September 16 2010 @ 10:00 AM EDT
    • Outside US - Authored by: PJ on Thursday, September 16 2010 @ 11:34 AM EDT
Before anybody panics... This whole case is rotten.
Authored by: BitOBear on Saturday, September 11 2010 @ 11:49 PM EDT
1) The GPL isn't a EULA. It is a (re)distribution license.

2) ...

Oh, I guess we don't need a number two.

Though, as I think about it, I cannot imagine that any sort of EULA makes any
sort of difference. Oh you won't _win_ on the argument but how many of us both
_read_ and _understood_ every EULA we were forced to click through?

IANAL and all that, but I (a) do everything I can to avoid EULAd software to
begin with; (b) like to "agree" to them only when drunk; (c) prefer to
get other people (friends etc) to click for me when possible since _they_ will
never use the software so no "end user" ever clicked anwhere; (d) I
like to click through on other peoples software that I will never use for the
same reason; and (e) since these are my standing policies announced publicly to
all who will listen, and since I try to make sure I never remember when or if I
did any such thing, I would like to see someone prove I clicked any darn thing
ever...

But again, IANAL and these are my tiny revolts over the fact that none of those
agreements really make sense to me. I also feel that I got any value to changing
the nature of my transaction with after-the-fact terms.

Why is this, IMHO, wholly consistent with the GPL? Because the GPL is not a
EULA. Nothing in it says anything about my use of the software. Nothing in it is
discernible, near as I can tell, from a sale-of-one-copy action. Under the GPL I
can find no conflict with the first sale doctrine since If I were to sell-on the
media I bought I would be completely compliant (presuming the media was
compliant in the first place).

First Sale lies effectively outside copyright (again IANAL and IMHO etc) because
no additional copy is being created (or destroyed). Selling on the single copy
you bought is a copyright no-op. If Microsoft wanted to go to Red Hat and buy a
bunch of copies of Red Hat and then sell them on unmodified for any price they
chose, then I don't think that would be a problem for anybody.

Now in this case, the whole thing where the original purchaser willfully
encumbered the individual coppies with the promise to destroy by executing an
upgrade contract with Autodesk is super questionable. This, in turn, should let
the ebay guy sue the intermediary bad actor. And yea, I think Autodesk has a
point in all this.

I just think the courts ruling was way off the mark in that it (obscure
metaphor) cut the meat with the grain instead of across it as it should have.

Neither possible outcome ever seemed to apply to anything FOSSy since in no case
was anything ever being copied. Or modified. Or anything.

First sale never (IMHO) applied to this case, and neither did any EULA, because
the original purchaser _altered_ the status of the original purchase by
"promising to pay for the upgrades" in part with the
destruction-or-attachment of the original versions.

In effect the intermediary party sold the same cow twice, they sold it back to
autodesk for the upgrade, then they sold it to Vernor; Autodesk has every right
to reclaim their cow and Vernor needs to go after the intermediary.

Beyond that simple thing, this whole case is _terrible_ law based on arguments
that are, on their face, improper.

After all, Vernor isn't even an End User, he is at best a middle man on the sale
of the media or the license or whatever.

Finally, the intermediary party didn't go to a store and buy this box. They went
to Autodesk directly and bought "a site license". It isn't like they
went to Game Stop or Best Buy and plunked down a credit card and got N-disks, in
N-boxes from off the shelf crammed into a bag. The intermediary party between
Autodesk and Vernor made a more specific and face-to-face direct deal with
Autodesk... twice in fact.

There was _literally_ no first sale to which the doctrine could apply.

In this mess, IMHO, Autodesk _should_ (morally) be the victor given the fact of
the conditional/discounted upgrade taken by the intermediary party.

The whole case is kinda poor, and will likely be misused as precedent going
forward. I am sure people _will_ try to use it to "redress" the second
hand software market (q.v. my Xbox 360 and your PS/3) but the facts of the case
come nowhere close to the normal day-to-day software market and after-market
realities.

[ Reply to This | # ]

Vernor v. AutoDesk - Vacated (first sale) and remanded (copyright misuse)
Authored by: Anonymous on Sunday, September 12 2010 @ 01:02 AM EDT
I understand the Eula, blah, blah, but isn't there something fundamentally
misleading and crooked about the way the stuff is "sold"? I mean, if
it says "buy now" or "on sale now" in the marketplace isn't
that entrapment? Shouldn't it have to say "license now"? And you know,
they know. And if a contact is a meeting of the minds, doesn't the contract
occur at the point of sale, not at the point of opening?

[ Reply to This | # ]

CTA violated its vendor agreement and Verner participated in fraud
Authored by: Anonymous on Sunday, September 12 2010 @ 02:26 AM EDT
This is not a good eula test case. CTA knowingly sold something which it no longer had a right to possess. They were given a massive discount when compared to full price. In this company's thinking, the version 14 and 15 were different copies which they owned. Should they be allowed to install them on separate computers? This was not the legal agreement to which they had subscribed.

The license is what it is. The GPL has its own baggage which directs the contribution of changes to the code back to the community. This is essentially a eula. Different license model with potential for violation in some way. And both are vigorously defended by their creators.

As to Verner, he knowingly accepted goods that CTA had no right to sell. If it were not software, this would be a crime of receiving stolen goods. He did not have clean hands because he knew about the license that originated the software on the CTA side. Just because he did not personally read these terms on each copy he received does not mean he is entitled to resell these illgotten goods. That would be like saying I knew about the statute regarding accepting a stolen car and reselling it, but I have not personally read it word for word. He is a crook.

A real eula case will need to come forth where both the seller and buyer have clean hands before this is really tested. Would AutoDesk have a problem with this if the buyer was selling a legitimate full copy of the software? What about when company A is sold to company B?

[ Reply to This | # ]

Does this also disallow purchasing software as a gift?
Authored by: Anonymous on Sunday, September 12 2010 @ 09:50 AM EDT
If I buy my son a new video game for one of my children's
friends for their birthday party and it comes with a "license"
restriction, do I violate that restriction when I hand it,
shrinkwrapped, to the kid? I bought it and then transferred
it.

[ Reply to This | # ]

Vernor v. AutoDesk - Vacated (first sale) and remanded (copyright misuse)
Authored by: Anonymous on Sunday, September 12 2010 @ 10:08 AM EDT
I put my questions on the wrong story comments section. My apologies to PJ and
her readers. Here it is, hopefully, in the right section;

"So let me see if I've got it straight...a software company can control the
resale of its software? Then that could cover anything from a GPS to a smart
phone to a used PC to any car or vehicle with software, even the software
embedded in the chips throughout the vehicle. This could lend itself to a whole
'nother battlefield in the old printer wars and lay out new battlefields on
every consumer product with embedded software. Even my house has security
software (including remote access and appliance control) embedded in the sentry
system, my fridge has Internet capability and my TV is web capable. This is
going to be a nightmare. Is that the way I read this or am I wrong?"

Later, I asked if the EULA decision is upheld and/or not overturned, is there
any provision under copyright, patent or contract law, or maybe under federal
business law that says any companies placing such limitations on end product
consumer goods must have a copy of said restrictions somewhere on the outside of
the product packaging or on the store display or on the company web site where
consumers can actually read the restrictive language BEFORE they buy the
product, get it home or at the office and see the EULA is not agreeable?

[ Reply to This | # ]

Ownership
Authored by: Anonymous on Sunday, September 12 2010 @ 04:00 PM EDT
The Ninth Circuit is probably the most overturned court
ever.

The VERNOR v. AUTODESK case is one of those appellate
decisions that
http://www.ca9.uscourts.gov/datastore/opinions/2010/09/10/09
-35969.pdf cries out for reversal. The Ninth Circuit
steadfastly refuses to acknowledge that Congress declared
ownership of material, tangible copies of works are
independent of intangible copyrights. 17 USC § 202 makes
this very clear:

"17 USC § 202.

Ownership of copyright as distinct from ownership of
material object.

Ownership of a copyright, or of any of the exclusive rights
under a copyright, is distinct from ownership of any
material object in which the work is embodied. Transfer of
ownership of any material object, including the copy or
phonorecord in which the work is first fixed, does not of
itself convey any rights in the copyrighted work embodied in
the object; nor, in the absence of an agreement, does
transfer of ownership of a copyright or of any exclusive
rights under a copyright convey property rights in any
material object."
http://www.copyright.gov/title17/92chap2.html

The ownership of material copies of copyrighted works is a
matter soley reserved for state property law. Both Nimmer on
Copyright and the non-precedential Federal Circuit has
pointed to this fact:

"[T]he court's decision has been criticized for failing to
recognize the distinction between ownership of a copyright,
which can be licensed, and ownership of copies of the
copyrighted software. See, e.g., 2 Melville B. Nimmer,
Nimmer on Copyright p 8.08[B], at 8-119 to 1-121 (3d
ed.1997). Plainly, a party who purchases copies of software
from the copyright owner can hold a license under a
copyright while still being an "owner" of a copy of the
copyrighted software for purposes of section 117." DSC COMM.
v. PULSE COMM., 170 F.3d 1354.
http://www.ll.georgetown.edu/federal/judicial/fed/opinions/9
8opinions/98-1024.html

See for example the California Civil Code section 654:

"The ownership of a thing is the right of one or more
persons to possess and use it to the exclusion of others. In
this Code, the thing of which there may be ownership is
called property."
http://law.justia.com/california/codes/2009/civ/654-663.html

Under California law, the right to possess and use material
objects is the equivalent of ownership of that tangible,
material property.

See for example the Washington state law:

"(1) Title to goods cannot pass under a contract for sale
prior to their identification to the contract (RCW 62A.2-
501), and unless otherwise explicitly agreed the buyer
acquires by their identification a special property as
limited by this Title. Any retention or reservation by the
seller of the title (property) in goods shipped or delivered
to the buyer is limited in effect to a reservation of a
security interest. Subject to these provisions and to the
provisions of the Article on Secured Transactions (*Article
9), title to goods passes from the seller to the buyer in
any manner and on any conditions explicitly agreed on by the
parties

(2) Unless otherwise explicitly agreed title passes to the
buyer at the time and place at which the seller completes
his performance with reference to the physical delivery of
the goods, despite any reservation of a security interest
and even though a document of title is to be delivered at a
different time or place; and in particular and despite any
reservation of a security interest by the bill of lading"
http://apps.leg.wa.gov/rcw/default.aspx?cite=62A.2-401

[ Reply to This | # ]

en banc
Authored by: Anonymous on Sunday, September 12 2010 @ 06:09 PM EDT
"By: Ina Steiner

Sun Sept 12 2010 16:56:51

eBay seller Timothy Vernor opened a legal can of worms when
he sued software maker Autodesk in 2007. Greg Beck, a lawyer
for the organization representing Vernor, said last week's
Appeals ruling in the case could lead to the end of
ownership of books and music.

At stake is the first-sale doctrine, which holds that the
owner of a particular copy of a copyrighted work has the
right to resell that work without permission of the
copyright owner.

However, the Ninth Circuit appeals court said Autodesk's
standard fine-print license terms were restrictive enough
that anyone in possession of the software could not be
considered its actual owner.

Public Citizen's Greg Beck wrote about the Appeals ruling:

If standard fine-print license terms like Autodesk's are
enough to withhold ownership, it is safe to assume that most
people do not own the software they believe they have
bought. And, unfortunately, there is no obvious reason why
other publishing industries couldn't begin imposing the same
terms. If they do, it may be the end of ownership of books
and music.

The Ninth Circuit acknowledged the seriousness of some of
these concerns, but held that its hands were tied by prior
circuit decisions. Hopefully, the en banc court will be
willing to reconsider those decisions.

I spoke to Tim Vernor today, he said there are "still a few
more layers," and he would be filing an appeal. Asked what
was the basis for the appeal, Vernor said he best understood
it by reading the wikipedia site, which explains there was a
precedent that the 3-judge Appeals panel had to follow. He
will appeal to the full 9-judge court, which has the
authority to overturn previous decisions, he said.

After that, the next level would be the Supreme Court, he
said.

Is he sorry he got involved in the case? "No, absolutely
not. It's been educational, and it's been fun and
interesting. And it's not over at all."

[ Reply to This | # ]

THIS IS ABOUT MUCH MORE THAN SOFTWARE
Authored by: ExcludedMiddle on Sunday, September 12 2010 @ 10:08 PM EDT
I'm surprised there hasn't been more discussion about the MPAA, the Library
association, and what is at stake here. It's much more than software.

If this is upheld, and broadly applied, all content: books, movies, music, and
anything else digitized will be licensed, not sold.

This goes far beyond first sale, as those license terms can say anything.

I take the courts suggestion seriously that this is a problem that can only be
solved by statute. No matter what the course this case takes, this is something
that might need Congress to clearly define.

You might end up seeing a serious lobbying effort happen as a result, with
Librarians on one side, and the MPAA, RIAA, and publishers on the other.

Because, after all, does anyone doubt that electronic books are the future of
publishing?

[ Reply to This | # ]

timing of eula's
Authored by: NemesisNL on Monday, September 13 2010 @ 07:02 AM EDT
Hmm What about the fact that you see most eula's for the first time when you try
to install the software after you bought it.

I think anyone should have the right to impose any restrictions they want on
their product license. I argue however that you should give the restrictions
before I pay you for the license. For most software now you pay and the eula
comes in to play when you try to install the software for which you already have
a payed for license.

The entire eula should be in writing on the box the software comes in or the
seller should have me sign something to prove he showed me the contents of the
eula before he received the money.

Eula's are sneak attacks in my opinion where the seller wants to impose
restrictions after the sale of the license. In any other industry this would not
be acceptable.

How can I say no to restrictions I'm only aware of after I say yes?

[ Reply to This | # ]

I bet textbook publishers will be all over this
Authored by: Anonymous on Monday, September 13 2010 @ 03:04 PM EDT

I expect to see textbook publishers jump all over this--textbooks in shrinkwrap with a license agreement that says you can't sell the textbook on the used textbook market.

[ Reply to This | # ]

Vernor v. AutoDesk - Vacated (first sale) and remanded (copyright misuse)
Authored by: Anonymous on Tuesday, September 14 2010 @ 08:20 AM EDT
i'd imagine it's covered, but is it possible that license is transferable, if
the owner of the media sells it? presumably, he isn't using the software
anymore, so it wouldn't be a pirate copy and the license would have been
permanent.

i am obviously not a lawyer, but the idea popped into my head, so i thought i'd
blurt it out.

[ Reply to This | # ]

Suggestion to PJ
Authored by: Anonymous on Tuesday, September 14 2010 @ 01:31 PM EDT
Here is a very educational paper, authored by Dean and Professor:

http://www.law.wayne.edu/faculty/bio.php?id=43017

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=562203

Kudos to Professor and Dean John Rothchild, really great paper.

Perhaps PJ could make a very quick text version of it?

TIA.

[ Reply to This | # ]

A court headquotered in California overruled California Civil Code?
Authored by: Anonymous on Wednesday, September 15 2010 @ 05:52 AM EDT
(to information@eff.org, action@eff.org, litigation@citizen.org)

It has been pointed out that Vernor opinion suggesting that Vernor was not an
owner of copies he bought (suggesting that it was not his property) contradicts
California Civil Code:

http://law.justia.com/california/codes/2009/civ/654-663.html

"The ownership of a thing is the right of one or more persons to possess
and use it to the exclusion of others. In this Code, the thing of which there
may be ownership is called property."

It's unbelievable... simply unbelievable.

Vernor opinion also contradicts the 2nd Cir.

http://caselaw.findlaw.com/us-2nd-circuit/1357970.html

"Several considerations militate against interpreting § 117(a) to require
formal title in a program copy. First, whether a party possesses formal title
will frequently be a matter of state law. See 2 Melville B. Nimmer & David
Nimmer, Nimmer on Copyright § 8.08[B][1] (stating that copy ownership “arises
presumably under state law”). The result would be to undermine some of the
uniformity achieved by the Copyright Act. The same transaction might be deemed a
sale under one state's law and a lease under another's. If § 117(a) required
formal title, two software users, engaged in substantively identical
transactions might find that one is liable for copyright infringement while the
other is protected by § 117(a), depending solely on the state in which the
conduct occurred. Such a result would contradict the Copyright Act's “express
objective of creating national, uniform copyright law by broadly preempting
state statutory and common-law copyright regulation.” Cmty. for Creative
Non-Violence v. Reid, 490 U.S. 730, 740, 109 S.Ct. 2166, 104 L.Ed.2d 811 (1989);
see also 17 U.S.C. § 301(a)."

Second, it seems anomalous for a user whose degree of ownership of a copy is so
complete that he may lawfully use it and keep it forever, or if so disposed,
throw it in the trash, to be nonetheless unauthorized to fix it when it develops
a bug, or to make an archival copy as backup security.

We conclude for these reasons that formal title in a program copy is not an
absolute prerequisite to qualifying for § 117(a)'s affirmative defense.
Instead, courts should inquire into whether the party exercises sufficient
incidents of ownership over a copy of the program to be sensibly considered the
owner of the copy for purposes of § 117(a). The presence or absence of formal
title may of course be a factor in this inquiry, but the absence of formal title
may be outweighed by evidence that the possessor of the copy enjoys sufficiently
broad rights over it to be sensibly considered its owner."

Please appeal to en banc/SCOTUS ASAP!

[ Reply to This | # ]

Just some questions
Authored by: Anonymous on Wednesday, September 15 2010 @ 11:29 AM EDT
1. If Mr Vernor is a "licensee," on what basis could AutoDesk claim
copyright infringement? Clearly, AutoDesk cannot have its cake and eat it too.

2. Does it mean that software copying is not copyright infringement? I am only
making a copy of the license afterall...

[ Reply to This | # ]

First sale doesn't undermine the GPL
Authored by: slcdb on Wednesday, September 15 2010 @ 05:43 PM EDT
When will people start to understand that GPL != EULA?

PJ, you need to understand that, unlike proprietary software EULAs, the GPL does
not require that the copyright owner maintain ownership of all *physical copies*
of the software.

Have you ever read a typical proprietary EULA? They invariably say something
like, "This software is licensed, not sold". And by that, they mean
the *physical copies* (yes, the *shiny plastics discs*) are not sold, but are
merely "licensed". In doing so, they claim that 17 USC 117 does *not*
apply to their "licensees". Therefore, their "licensees"
only have the right to use their software by virtue of accepting the license.
This is the only means by which proprietary software companies can attempt to
maintain complete control over their software (including the ability to decide
whether or not you are allowed to resell or otherwise transfer your copy to
someone else).

The GPL doesn't attempt any of this nonsense. There is nothing in it that
purports that the copyright holder owns each *copy* of the software. The GPL
doesn't care who owns each copy, because it doesn't attempt to exercise
tyrannical control over the software. It merely licenses *additional* rights
which the owner of a copy would not normally have. Those users who wish to have
those additional rights (the right to make more copies, the right to distribute
those copies, the right to make derivative works, etc) may *optionally* agree
with (and be bound by) the GPL.

Some concrete examples may be instructive. Let's say Bob buys a book from
Alice's bookstore. Once Bob buys the book, a first-sale has occurred. Bob may
now distribute his copy of the book (he may resell it, he may give it away, or
he may loan it to a friend). But just because Bob owns a copy of the book
doesn't mean he may now make and distribute additional copies of the book. Those
are still the exclusive rights of the publisher. If Bob wishes to be able to
make and distribute additional copies of the book, Bob must negotiate a license
with the book's publisher. Bob will likely be out-of-luck unless he has a lot of
money, because such a license is likely to be *very* expensive.

Similarly, let's imagine that Alice buys a DVD of GPL'd software from Bob's
software store. Once Alice buys the DVD, a first-sale has occurred. Alice may
now distribute her copy of the DVD (she may resell it or she may give it away).
But just because Alice owns a copy of the DVD doesn't mean she may now make and
distribute additional copies of the DVD. Those are still the exclusive rights of
the copyright owner. If Alice wishes to be able to make and distribute
additional copies of the DVD, she must first obtain a license from the copyright
owner. As luck would have it, this is GPL software so if she agrees to be bound
by the terms of the GPL she will be granted those rights. The GPL still has its
full effect and still fulfills its intended purpose, even though her copy has
been sold via a first-sale.

The first sale doctrine has *no* bearing on the GPL whatsoever. Please, please,
stop misinforming people with regard to this.

Cheers,

slcdb

[ Reply to This | # ]

9th Cir. confused mind regarding copyright licensing...
Authored by: Anonymous on Monday, September 20 2010 @ 11:40 AM EDT
Recent opinion:

http://www.ca9.uscourts.gov/datastore/opinions/2010/09/03/09-55817.pdf

"Under our case law interpreting and applying the Copyright Act, too, it is
well settled that where a copyright owner transfers a copy of copyrighted
material, retains title, limits the uses to which the material may be put, and
is compensated periodically based on the transferee’s exploitation of the
material, the transaction is a license. See, e.g., Wall Data Inc. v. Los Angeles
County Sheriff’s Dep’t, 447 F.3d 769, 785 (9th Cir. 2006); MAI Sys. Corp. v.
Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993); United States v. Wise, 550
F.2d 1180, 1190-91 (9th Cir. 1977); Hampton v. Paramount Pictures Corp., 279
F.2d 100, 103 (9th Cir. 1960).

It is easily gleaned from these sources of federal copyright law that a license
is an authorization by the copyright owner to enable another party to engage in
behavior that would otherwise be the exclusive right of the copyright owner, but
without transferring title in those rights. This permission can be granted for
the copyright itself, for the physical media containing the copyrighted work, or
for both the copyright and the physical media."

[ Reply to This | # ]

Upgrades...
Authored by: Anonymous on Tuesday, September 21 2010 @ 09:26 AM EDT
Nothing prevents Autodesk from implementing the DRM based
scheme that would make copies unfunctional after upgrade
activation. It would still be not a crime to sell
deactivated copies under first sale.*** A researcher may
well be interested to buy such a copy and attempt to break
the DRM scheme to tell Autodesk that the scheme is not
reliable. And it *would* be a crime to break the DRM scheme
(and sell copies with broken DRM) allowing use of
deactivated software after upgrade. That is precisely what
DMCA is about.

But instead of gently pointing out to Autodesk the right
solution to their problem, the imbeciles in the 9th Cir. has
created utterly idiotic anti first sale "legal test." The
people of the 9th Cir. shall impeach sillies in robes.

Sorry for the strong words (and feel free to XXXX it) but
Vernor opinion is really unbelievably stupid ruling in my
opinion.

***) http://www.goodnewsblog.com/2006/04/17/lotologist-has-
amassed-250000-used-lotto-tickets

"Lotologist has amassed 250,000 used lotto tickets

Published 17 Apr. 2006

You know the saying, “one man’s junk is another man’s
treasure.” It’s an axiom that Dennis Morse and nearly 900
other people around the U.S. apparently take to heart.

Morse is a collector. He collects a lot of things but is
most passionate about one thing in particular: used scratch-
off lottery tickets."

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  • Upgrades... - Authored by: PJ on Tuesday, September 21 2010 @ 05:35 PM EDT
  • Upgrades... - Authored by: PJ on Tuesday, September 21 2010 @ 05:36 PM EDT
Vernor v. AutoDesk - Vacated (first sale) and remanded (copyright misuse)
Authored by: Anonymous on Wednesday, September 22 2010 @ 02:33 PM EDT
"I can't XXXX your comments."

That sounds like a bug not a feature. Where can I submit a bug report?

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