by Greg Beck
Most people outside the software industry probably assume that when they pay money in exchange for a package of software, they have just purchased that software. In Vernor v. Autodesk, the Ninth Circuit today cast that assumption into doubt. The court held that Timothy Vernor, who purchased authentic, second-hand copies of software at garage and office sales to sell on eBay, did not own that software and thus had no right to resell it.
Public Citizen represented Vernor in his case against software-publisher Autodesk, which claimed that reselling the software on eBay was copyright infringement. The district court agreed with Vernor and rejected Autodesk’s copyright argument, holding that Vernor had a right to resell the software under copyright’s first-sale doctrine. The first-sale doctrine 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. The doctrine dates from a 1908 Supreme Court decision in which the Court held that a book publisher could not restrict the price at which its books were sold on the secondary market, and Congress subsequently added the doctrine to the Copyright Act as one of the law’s crucial consumer-protection provisions. Here, the district court held that Vernor was the “owner” of the software, and thus entitled to the doctrine’s protection, because Autodesk had distributed the software in exchange for a one-time payment and had no expectation that the software would ever be returned. In other words, because the transaction looked like a sale, it was a sale.
The Ninth Circuit disagreed, relying on the “license agreement” that Autodesk packages with its software. The license stated that Autodesk retained title in the software, restricted redistribution, and imposed some other terms that are pretty typical in the software industry, such as a prohibition on reverse engineering. The Ninth Circuit held that these terms were restrictive enough that anyone in possession of the software could not be considered its actual owner. Although Vernor never installed the software or agreed to its terms, the court held that license effectively bound him anyway because Autodesk, as the software’s legal owner, could dictate the terms on which it was used.
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.