You’re out cruising garage sales on a hot summer Sunday morning when you spot an unopened copy of AutoCAD sitting on a card table for $40 – 40 buckeroos for a program people spend $700 for new. Yeah, it’s a couple of versions back, but you figure you can get $340 for it on eBay, and not break a sweat. You buy it from the clearly clueless seller, and the next thing you know you’re watching bids come in at over $300. Except that Autodesk, proud owner of this high-end computer aided design program, objects. You don’t own that program, they say, we licensed it to the original seller, and she had no right to sell it, no right at all. You are infringing our copyright by reselling the software, so take it off eBay right now, Autodesk’s lawyers insist in a hand delivered, “sign-here-to-acknowledge-receipt-sir” letter. In the meantime, they’ve sent eBay a DMCA take-down notice and eBay has killed your sale.
You are upset. You purchased that software, just like you might purchase a book at a garage sale. You can resell a book, a music CD, a record, and the copyright owner of those works has no right to object, so how can Autodesk stop you from selling a product you purchased fair and square? A little research educates you on the copyright law “first sale” doctrine, which says that a copyright owner can’t stop a purchaser from reselling a work the purchaser owns – the “first sale” teminates the copyright holder’s control over the physical object in which the work is embodied. Without that, there wouldn’t be a legal second-hand book store anywhere in the U.S. of A.
So, you file suit, asking a federal court to “declare” that you are not an infringer, that you are entitled to buy and resell that software under “first sale.”
This, in essence is what Tim Verner did. He won in federal district court, but on September 10, 2010, the Ninth Circuit federal court of appeals reversed, holding that (i) the copies of Autodesk Verner bought had been licensed by Autodesk, not sold; (ii) that the software license agreement under which Autodesk had been licensed prohibited any transfer by the licensee; and (iii) accordingly, as Autodesk had indeed argued, Verner was a dad-blamed copyright infringer by trying to sell this stuff.
The decision is filled with legal arguments that, to anyone other than a copyright enthusiast, is more boring than watching paint dry. For example, we can skip the arguments over whether Verner was allowed to end-run Autodesk’s position under the “essential step” defense, and go right to what I consider the heart of the decision: when you buy something, how can you tell if it’s a license or a sale? If the publisher puts a sticker on the book you purchase at Barnes & Noble warning you to read the license on the inside back cover, and stating that once the book is purchased at the register you have agreed to that license, are you indeed a “licensee”?
Conveniently, the Ninth Circuit provides a test, as follows:
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.
In this instance, a package label attached by Autodesk, along with “significant” transfer and “notable” use restrictions, meant that the transaction was a license and not a sale.
If, after reading this, you think it is darned easy for a software publisher to meet this test, I agree. In fact, as I read the test, if the publisher is in doubt about how to ensure the legality of a no-transfer clause, it has an incentive to make its license more restrictive under part (3). Autodesk, and other publishers of expensive software that is sold under a shrink-wrap or click-wrap license that prohibits transfer, happy days.
In the book-seller example, what’s to stop a book seller from licensing books? In fact, Verner’s lawyer, Greg Beck, has raised just this concern. In an interview, Mr. Beck states:
AuctionBytes: how likely is it in your opinion that book publishers may decide to issue licenses for their books?
Greg Beck: In my opinion, it’s almost inevitable that it will happen. You’ll probably see it first in cases like textbook publishers where there is already a strong interest in limiting resale because they don’t like students selling textbooks to the next class that comes along. They’d much prefer if every student had to buy a new textbook.
So I can definitely see the textbook industry adopting a similar model based on this decision, and I don’t think that other kinds of publishers would be far behind.
As Beck observes, there’s nothing in the law that would encourage the courts to treat books differently than software.
And, if you’re thinking of purchasing a book on Amazon’s Kindle, you may want to check out the Amazon Kindle License: “Unless specifically indicated otherwise, you may not sell, rent, lease, distribute, broadcast, sublicense or otherwise assign any rights to the Digital Content or any portion of it to any third party.” Does that mean my Kindle, with the thousands of books I’ll have purchased (oops, licensed) before I depart for the great courthouse in the sky will have to be cremated with me? Or that my heirs will inherit an illegal Kindle? It will be interesting when Kindles start showing up in yard sales.
Additional commentary by Eric Goldman (“This case makes my head hurt”), Prof. Randy Picker at U. Chicago (“gnashing of teeth in some quarters”) and EFF (“major blow to user rights”).