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. 

One thought on “Reselling Software Legal — For the Moment

  1. Since AutoDesk lost the court case it seems logical that there is some responsibility to uphold the validity of the “used” license.

    So, that leaves the question: if the court says that it is legal to re-sell an original copy of AutoCAD, what responsibility does AutoDesk have to allow the buyer of the used software to register their legally purchased copy? Upon installation AutoCAD software goes into demo mode then expires after 30 days if it is unregistered. So where does that leave the buyer of the used software when his 30 days is up? All versions of AutoCAD since 2006 require the online registration/blessing of AutoDesk.

    But based on the court’s decision, AutoCAD software is to be treated as a sale and not as a license, and therefore it is legal to sell a used copy (provided that it was properly uninstalled by the original user). Shouldn’ t AutoDesk, in following with the court order, be required to grant these registrations to allow these people who legally purchased a used copy to use their software past the 30 day demo mode?

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