Reselling Software Legal — For the Moment

A little over a week ago, Judge Richard Jones of the Western District of Washington (Seattle) denied motions by software developer Autodesk for dismissal or summary judgment in its favor in a lawsuit brought by Timothy Vernor, who sells and re-sells things on eBay — including packages of AutoCAD, Autodesk’s flagship product.

Autodesk repeatedly sent DMCA takedown notices to eBay to stop Vernor’s sales.  Vernor filed a declaratory judgment action seeking to confirm the lawfulness of his sales.  Autodesk asked the judge to toss Vernor’s claims, on the ground that any authentic AutoCAD packages in Vernor’s possession were merely licensed by Autodesk, not sold.  Vernor, therefore, could not rely on the first sale doctrine in the Copyright Act, under Section 109.  Section 109 exempts “owners” of lawful copies from liability for infringing the distribution right when those “owners” distribute (e.g., re-sell) those copies.  Judge Jones, parsing Ninth Circuit authority that is less than clear, disagreed with Autodesk.  The original acquiror of the AutoCAD packages was not a “licensee,” rather than an owner.  The original transactions were sales, with contractual restrictions.  Vernor, in short, is in the clear.  The full opinion is here.

At EFF, last year Fred von Lohmann posted this analysis of why first sale matters, and EFF and others are litigating the Augusto case over the right to re-sell so-called “promotional” copies of CDs.

The short version of these cases is:  What do you own — if anything — when you pay for a digital something?  When you pay for a digital something encoded on a physical something?  What if those somethings are encoded with labels that say, in effect, “Even though you paid for this, you don’t own it”? If those labels are legally significant, then Section 109 and the first sale doctrine kick in only in those situations where the “seller” (or “licensor”) does not use one.  Take a look at this collection of labels, and consider whether they are or should be sufficient to limit the application of Section 109.  Is it a license merely because a record company (or software company) claims that it is?  Can record companies use copyright law and licensing labels to limit consumer sales of things that they own?

Most of the time, consumers don’t “assent” to these notices in a way that creates a contract.  Judge Jones suggests that even if there is a contract, the seller’s remedy is a suit for breach of contract — and damages — rather than a suit for copyright infringement, an injunction, and the ability to rely on DMCA takedown notices.  Over at Bill Patry’s blog, where he posted a reaction to Vernor that I think is basically right, Vernor commenters defend licensing on two standard, related grounds:  “digital is different,” and “the software industry needs to license to support business models based on price discrimination.”  I agree only in part with the first, and many folks wonder what becomes of copyright law as a whole if the business model justification is all there is.

We may find out whether that justification has limits.  Vernor is far from the last word on the meaning and implications of the first sale doctrine in the 21st century.