Court Says First Sale Doctrine Doesn't Apply To Licensed Software 758
An anonymous reader wrote to tell us a federal appeals court ruled today that the first sale doctrine is "unavailable to those who are only licensed to use their copies of copyrighted works." This reverses a 2008 decision from the Autodesk case, in which a man was selling used copies of AutoCAD that were not currently installed on any computers. Autodesk objected to the sales because their license agreement did not permit the transfer of ownership. Today's ruling (PDF) upholds Autodesk's claims: "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. Applying our holding to Autodesk’s [software license agreement], we conclude that CTA was a licensee rather than an owner of copies of Release 14 and thus was not entitled to invoke the first sale doctrine or the essential step defense. "
9th Circuit (Score:3, Informative)
This was a decision by the 9th Circuit Court of Appeal, specifically. With any luck whatsoever, this unacceptable ruling will be overturned by the Supreme Court. The 9th Circuit is apparently the most overturned court in the country, so hopefully this won't stand for long.
Re:Not Quite (Score:5, Informative)
> What to learn from this? Don't agree to this sort of licence.
In the case of consumer software, people often don't have much choice. The EULA is presented to them after the purchase and after they've already opened the package to install the software. Naturally, vendors and resellers won't accept opened software packages or refund them, so that customer can either accept the EULA or be the proud owner of a new shiny frisbee.
Re:9th Circuit (Score:5, Informative)
The 9th circuit court makes more rulings than any other circuit, so it also has more rulings overturned than any other court. In terms of percentages, they are not more overruled than any other court.
As for the chances of the Supreme Court overturning this... Has this Supreme Court overturned *any* rulings favorable to corporations?
Why just software vendors? (Score:4, Informative)
If a copyright holder can retroactively take back some of the rights they sold you by springing a one-sided un-agreed-to contract on you after the fact, what's to stop music, video, or book vendors from putting a EULA in their own works? Ironically, that's exactly what Bobbs-Merrill did in the original "first-sale doctrine" court case, and that was actually less unethical since at their books didn't hide the unilateral rules under a layer of shrinkwrap. Too bad for them that judges were smarter back then...
Re:9th Circuit (Score:2, Informative)
That 9th Circuit decisions are more apt to be overturned is a myth just like the myths that the 9th Circuit is more anti-business or more liberal than any other circuit.
Re:Bad consequences (Score:5, Informative)
They used to do exactly that, and that is exactly what the First Sale doctrine was created in response to.
This case is even more egregious than the summary suggests because the plaintiff Timothy Vernor never agreed to any license terms with Autodesk. He never opened the packages, never saw an agreement, never clicked through an agreement, and certainly never signed an agreement. Vernor owned these copies until this court said he didn't, and Autodesk's only recourse should have been a civil action against CTA for breaking its contract terms.
Re:So let me get this straight... (Score:5, Informative)
Those weren't the facts of the case at all, nor is it the rule the court laid out. Read the opinion. The undisputed facts were that Autodesk busted a company (CTA) for unauthorized use of AutoCAD. It then licensed 10 copies of AutoCAD R14 to CTA. CTA accepted the terms of the license. Later, CTA upgraded to AutoCAD 2000, paying the upgrade price. It accepted the AutoCAD 2000 upgrade license, which required destruction of the copies of R14. Rather than destroy them, CTA sold the copies to Vernor along with the activation codes in violation of both the R14 and AutoCAD 2000 licenses. Vernor then tried to sell the copies on eBay.
So, the rule is that if you accept the terms of a license and that license (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, then the first sale doctrine does not apply and you must abide by the terms of the license that you accepted.
I don't think there's anything terrible about this ruling at all. Software companies imposing restrictions on customers through licensing agreements helps them perform price discrimination, which often benefits customers. For example, a company might sell a student version on the cheap with a license that says it can't be transferred or at least not transferred to a non-student. If a student could sell the student version to a non-student, then the company could no longer price discriminate, and it would have to charge students a higher price.
Anyone Read It? (Score:5, Informative)
Okay, I hesitate to weigh in here, because this isn't going to be a popular question, but did anyone read the opinion? This is, factually, a rotten case for first sale. CTA bought the software and agreed to the EULA which specifically required that they destroy Release 14 in order to get upgrade pricing on Release 15. They paid $495 per license for R 15 instead of the normal $3,750 they would have paid specifically BECAUSE they were required to destroy R 14. Instead they decided to say screw it and they sold their old R 14 copies on the secondary market with the activation codes handwritten on the package. Vernor bought the copies, knowing about the EULA, and then resold them and claimed protection from the first sale doctrine.
Now I'm as gung ho as the next guy about appropriate limitations on copyright (maybe not the next guy here on /., but the average next guy); and in particular I think first sale, like fair use, is an incredibly important protection that's been getting the shaft in the courts lately. But in this particular context -- the upgrade context where the company that poured its dollars into writing better and stronger code is trying to cut its customers a break -- it's going to be a pretty hard sell. Vernor screwed himself here, and unfortunately I suspect he took a lot of other people with him.
Re:Bad consequences (Score:5, Informative)
I don't know what it is with some of these court decisions lately, but it's almost like in the last few years the judges have turned into a bunch of morons who ignore precedent and have never picked up a history book. This is a BAD ruling. And it's so obviously bad, given history and legal precedent, that I really have a hard time understanding how they could have decided that way.
It also appears to ignore the issue of "shrink wrap" licensing, which violates the very basic principles of contract law, and which has never been found to be binding by any major court to date.
Re:Bad consequences (Score:5, Informative)
Too late.
Own a copy of Starcraft 2? The EULA explicitly states you are not allowed to sell it.
Yes, even Blizzard has gone rotten. The apocalypse is nigh.
Re:Will the publisher... (Score:4, Informative)
Yes. As the Court notes explicitly on the fourth page of the decision.
Re:9th Circuit (Score:5, Informative)
Complete crap statistics. If it were true, it would mean that the USOC took at least 50 appeals for decisions from the 9th circuit, and overturned at least 47 of them in one year. Considering that they only granted review for 80 cases in the last term, that's basically an impossibility. And it actually is. According to this [scotusblog.com], the 9th circuit was overturned 71% of the time, which is actually less often than the other two next busiest courts of appeal.
Did you make up these statistics on your own, or did you just regurgitate what you heard?
Speaking of how wrong you are: (Score:3, Informative)
the fashion industry is not bigger then software.
Even if it was, and that is somehow an actually relevant argument instead of a logical fallacy, The pharmaceutical industry makes far more, and they have Patents, copyrights, and trademarks.
most profitable companies:
http://money.cnn.com/magazines/fortune/fortune500/performers/companies/profits/index.html [cnn.com]
I don't see any fashion companies.
And here are industries:
http://money.cnn.com/magazines/fortune/fortune500/performers/industries/return_on_revenues/index.html [cnn.com]
hmm. not there either.
Interesting.
Re:Bad consequences (Score:4, Informative)
Were you asleep in 2002? Because that's when Blizzard abusing EULAs was news.
Re:So let me get this straight... (Score:5, Informative)
The Church of Redmond, WA [microsoft.com] does.
Re:Bad consequences (Score:3, Informative)
Customs can open it all you want. I'm giving you the item and charging you shipping and "handling".
Re:Bad consequences (Score:5, Informative)
To be fair, you're wrong that this case is exactly like Bobbs-Merill Co. v. Straus, 210 U.S. 339 (1908) [findlaw.com], the case that created the first-sale doctrine.
In that case, Bobbs-Merill sold books to wholesalers their copyrighted book including a "shrinkwrap" license saying retailers shall not sell the book below a certain price. Wholesalers sold the books to retailers. Retailers sold the books below the certain price to consumers. The Court held that the license was not binding upon the retailers because there was no privity of contract between the retailers and Bobbs-Merill. This is true: there was only privity of contract between Bobbs-Merill and the wholesalers. And as the license only purported to bind retailers, the wholesalers did not violate the terms of the license either.
However, the case at hand is distinguishable. Here, CTA initially installed the Autodesk software. However, as part of the installation process, CTA agreed not to resale the software. As the sale was from Autodesk to CTA initially, there was privity of contract. Thus, the license is enforceable against CTA.
CTA later resold the software in violation of this agreement. This revokes CTA's license, which means the copies Vernor sold on eBay were unlicensed, infringing copies from the moment he purchased them. When he sold them, he also infringed. This is textbook copyright law. Read the first few sections of 17 USC to verify. I'm honestly too lazy to pull up a citation for something extremely uncontroversial in an otherwise engaging discussion on /.
This case would only be analogous to Bobbs-Merill if the license in that case had forbidden the wholesalers from doing something, and the wholesalers had violated the license. Had the wholesalers violated the license, any copies sold to the defendants subsequent to the violation would have been infringing, and the first-sale doctrine would not have applied.
If you have any questions, please respond. At first glance, the Autodesk case appears to be a rehash of the Bobbs-Merill case. However, Bobbs-Merill turned on privity of contract, while the Autodesk case turns on sales of unlicensed software. Privity is merely tangential to the Autodesk case.
Seeing as how it is very difficult to explain things and make legal arguments on /. in this tiny <TEXTAREA>, I've undoubtedly not been clear enough in my explanation. Hopefully I have, but if I have not, I hope someone points it out so I have the chance to clarify.
Well, it ignores the shrinkwrap issue because it's wholly irrelevant to the case.
To explicate by way of analogy: If you buy an infringing CD (illegal copy made by Son May in Asia, for example) and sell it to someone else, you have committed copyright infringement even if you did not know the CD was infringing. Similarly, Vernor (the Autodesk defendant) bought an already infringing copy and resold it. He therefore did commit copyright infringement, regardless of his knowledge of infringement.
We can argue the merits of mens rea-less infringement on moral/ethical grounds, but the law is clear on that issue right now: you don't have to know you're infringing to infringe.
Re:So let me get this straight... (Score:3, Informative)
price discrimination [...] often benefits customers.
No, price discrimination allows the seller to capture the buyers economic surplus thus benefiting the seller at the cost of the buyer though the total social efficiency remains the same.
Even if price discrimination were a good thing, licenses are not necessarily needed. Many other goods are price discriminated without licenses prohibiting resale.
Re:Look at things from a FOSS perspective ... (Score:3, Informative)
>> Except in this case. This ruling by judges is in direct opposition to protecting the little guy. They have ruled that an EULA is enforceable on someone that never even agreed to the EULA.
>
> That's an opinion not a fact.
Bullshit.
The person being "punished" here is a 3rd party reseller. He has never consented to be subject to any EULA from Autodesk.
THAT is a FACT.
A EULA is being enforced on someone that never even so much as opened the box in question.
This just highlights the absurdity of this EULA nonsense. People that have never done anything to be a party to these "contracts" are being bound by them.
Re:Bad consequences (Score:3, Informative)
Probably some kind of theft of services or license violation subject to fines.
Right now downloading is not the issue- giving it to others is.
Re:9th Circuit (Score:3, Informative)
to be fair they cherry pick cases because they feel there is Constitutional ground to be covered, not for matters of right and wrong. They pick cases where the lower courts essentially "set them up" to make a constitutional decision... so a good deal would be overturned. Also our court system is ENTIRELY adversarial. The court can only rule on cases that CONTINUE to be prosecuted. Prosecutors can keep a case out of court by pleading them out to a lower charge rather than risk loosing and most of the time public defenders are wiling to go for it.
This was the trick Bush used for Gitmo. He kept making a small change to the case, letting a few people go, moving them around just before the case got in the Supreme Courts jurisdiction... then the defendants had to start a NEW case all the way from finding a new grounds and 3-4 courts to hear them.
Re:Yay! (Score:3, Informative)
Not just absurd - it's patently false, too. When you own a copy of a software program, 17 USC 117 [bitlaw.com] grants you the explicit right to make copies (or adaptations) as necessary to run it.
I suppose YMMV in jurisdictions like the 9th Circuit where courts are playing along with the lie that you don't really "own" the disc that you paid for, but elsewhere in the US, you're fine.
Re:Yay! (Score:3, Informative)
Re:Bad consequences (Score:3, Informative)
Politicians aren't that expensive. We just need a few tens of millions in the right places.
Re:Again glad I live in Canada (Score:3, Informative)
If I downloaded and listened to Poker Face which I don't have a license to, that would be illegal.
Actually, even that is not illegal. That falls under "Private Copying", which is legal, thanks to the blank media levy.
Re:Bad consequences (Score:1, Informative)
Blizzard has been rotten since, oh, at least since the bnetd fiasco. Probably even before that.
I have not given them single dime since that, and do my best to advocate to others that they use their stuff without paying.
Besides, starcraft is not even a very good game compared to the original. So why would anybody buy it is beyond me.
Re:Bad consequences (Score:2, Informative)
To address your question specifically: Because this would be a contract between the publisher and the wholesaler/vendor attempting to bind a third party (the purchaser), which is not permitted in contract law in general.
I'm not an expert in this area, but I think in general in a book, since it's static, a EULA printed in the cover would be construed as between the publisher and wholesaler/vendor. It would not be a "reoffering" between the publisher and reader.
But in general, I'm not sure if there's anything stopping book publishers from doing something similar except that the moneyed interests involved are balanced differently, which puts pressure on publishers not to do something like that.
Re:Bad consequences (Score:3, Informative)
" And software, software is different because even when you are distributing it on a disk, it's the installed product that counts."
But that's exactly what all this is about. Here there were nothing installed (old copies of Autocad 14 not installed anywhere) and the first sale doctrine was being applied to the physical product (a cardbox with a CD). Look that the rule was not that the buyer had not the right to install and use the software but that the seller can't sell the box.
There was not customization of the agreement to apply to the first buyer as to make him any different from any second buyer but still the original vendor says he has a special advantage about the selling... and the judge complies to that!
The sad thing? Not even that (Score:3, Informative)
Politicians can be bought for a few thousand. They are REALLY cheap. Tens of millions would buy you congress. Just check how much a politician does for a donation of 10 grand.
That is the difference between moral vacuum and honest crooks. Crooks do it for big bugs only. A mafia hitman will charge a lot of money because to the mafia a life has value. A random lunatic with zero morals will do it for a tenner, because life has no value.
The days of honest crooks wanting big bucks is gone. Now they just want enough to help fund their election campaign because they know that it is the easiest way. And they tell themselves they are not corrupt, because it doesn't go directly into their pocket. Just that the paid for election campaign gets them elected and all the salaries and compensations and later commission's that come with the job.
The decay of democracy doesn't make for an intresting movie. It is not the evil of the black, but of the gray.
Re:Bad consequences (Score:3, Informative)
"you don't have to know you're infringing to infringe."
Not necessarily. At least in the US, there is a concept of "good faith". The innocent purchaser doctrine, covered in Uniform Commercial Code, sections 1-201(9) and 2-403, allows for a good faith defense if the transaction took place in an ordinary course of business (e.g., non-suspicious) for a non-merchant buyer (consumer). Merchant rules slightly differ with reasonable commercial standards of fair dealing in the trade.
Re:Not Quite (Score:3, Informative)
In the case of consumer software, people often don't have much choice. The EULA is presented to them after the purchase and after they've already opened the package to install the software. Naturally, vendors and resellers won't accept opened software packages or refund them, so that customer can either accept the EULA or be the proud owner of a new shiny frisbee.
Please look at this more carefully. So you handed over money for a box with a DVD, you stick the DVD into your computer to install the software, and the EULA shows. Here are your choices:
1. Agree to the EULA, install and use the software. You have no first sale right anymore if the EULA says so.
2. Don't agree to the EULA, install and use the software. You had no right to install the software and therefore committed copyright infringement.
3. Don't agree to the EULA, return the software to the store. They won't like it at all, but they have to return your money.
4. Don't agree to the EULA, don't install it, sell it to someone else. Perfectly legal.
Note that in the case discussed the software was installed, sold to Vernor quite clearly in breach of the license, and the question was whether Autodesk could stop Vernor, or if they could only successfully sue the party who sold the software to Vernor. It was always quite clear that Autodesk could sue _someone_ successfully.