Monday, September 13, 2010
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Ninth Circuit Draws Line Between Software Owners, Licensees
By STEVEN M. ELLIS, Staff Writer
The Ninth U.S. Circuit Court of Appeals on Friday threw out a federal district judge’s ruling that an eBay merchant could sell used copies of software regardless of any agreement binding those from whom he purchased the copies.
Limiting the first sale doctrine’s applicability to so-called “shrinkwrap” licensing agreements, a three-judge panel agreed with software producer Autodesk Inc. that the terms it required customers to accept before they could install its software made the customers licensees of the copies, not owners.
First Sale Doctrine
The first sale doctrine limits a copyright holder’s right to exclusive distribution by allowing owners of copies of copyrighted works to resell those copies, but it makes no such exception for a person who possesses such a copy without owning it, such as a licensee.
Writing for the court, Judge Consuelo M. Callahan explained 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.”
The judge did so recognizing “the significant policy considerations raised by the parties,” which included the Software & Information Industry Association and the Motion Picture Association of America lining up as amici curiae behind Autodesk, and eBay and the American Library Association doing so in support of plaintiff Timothy Vernor.
Declaratory Judgment
Vernor brought the action seeking a declaratory judgment establishing that his sale on eBay of copies of Autodesk’s AutoCAD Release 14 software, which Vernor purchased from one of the company’s direct customers, did not infringe Autodesk’s copyright.
AutoCAD is a computer-aided design software used by architects, engineers and manufacturers, and Autodesk distributed Release 14 under a limited license agreement in which it reserved title to the software copies and imposed significant use and transfer restrictions on customers.
U.S. District Judge Richard A. Jones of the Western District of Washington granted Vernor summary judgment, reasoning that a first sale occurs whenever the transferee is entitled to keep a copy, and that Autodesk had sold Release 14 by not requiring customers to return copies when they purchased an upgrade. Jones concluded that Vernor was therefore a successive owner, and entitled to resell copies he purchased under the first sale doctrine.
The judge also found that customers of Vernor who copied the software during installation were protected by the essential step defense. That defense provides that the owner of a copy of a copyrighted software program does not infringe the copyright by making a copy 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.”
But Callahan said neither defense was available to Vernor or to his customers because the company from which Vernor purchased his copies was itself not an owner given Autodesk’s explicit retention of title and the company’s use and transfer restrictions.
Noting that Jones did not consider Vernor’s claim that Autodesk misused its copyright—an equitable defense to copyright infringement which precludes the copyright holder’s enforcement of its copyright during the misuse period—because Vernor prevailed on his other claims, Callahan remanded for the district court to consider the defense in the first instance. Judges William C. Canby Jr. and Sandra S. Ikuta joined Callahan in her opinion.
The case is Vernor v. Autodesk, Inc., 09-35969.
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