Autodesk owns your software if you (think you) own a copy of AutoCAD, that is. In a reversal of fortune for enterprising eBay seller Timothy Vernor, the U.S. Court of Appeals for the Ninth Circuit vacated summary judgment of noninfringement, holding that Autodesk’s customers were licensees — not owners — and thus were not entitled to resell their copies under the first sale doctrine. Vernor v. Autodesk, Inc., No. 09-35969 (9th Cir. Sept. 10, 2010) (PDF) Previously discussed here, Vernor, the purchaser of four authentic, used copies of AutoCAD, attempted to sell these copies on eBay. Autodesk objected, claiming that the terms of the software licensee to the original owner prohibit resale of the software, and eventually Vernor filed for declaratory judgment, seeking a declaration that his sales were lawful under the first sale doctrine, 17 U.S.C. Sec. 109. On summary judgment, the U.S. District Court for the Western District of Washington held that the first sale doctrine applied, and that subsequent sales did not contitute copyright violations. Vernor v. Autodesk, Inc., No. C07-1189RAJ (W.D. Wash September 30, 2009) (PDF).
In vacating the lower court’s decision, the Ninth Circuit set forth a three-part test for determining whether a software user is a licensee and not an owner, paraphrased as follows:
1. Does the copyright owner specify that the user is granted a license?
2. Does the copyright owner "significantly restrict" the user’s ability to transfer the software?
3. Does the copyright owner impose "notable use restrictions"?
Applying this test to the facts, the Ninth Circuit determined that Autodesk’s customers were licensees, and not owners. Accordingly, the sale of the software to Vernor by the original licensee — which was prohibited by the AutoCAD license — was not valid. Thus, Vernor and Vernor’s customers were not owners of their copies of AutoCAD. The court remanded the matter for further proceedings.
This decision suggests significant changes for the current copyright regime, both for copyright owners and their customers. Will software publishers, emboldened by the validation of the AutoCAD license, attempt to exert greater control over physical copies of software, which could spell trouble for the large used software industry? Will "shrink-wrap" licenses spill over into other industries that use physical copies of copyrighted works (e.g., booksellers)? Or will the first sale question soon be a moot point, given our increasing reliance on digital delivery of copyrighted works, where licenses are the norm and copies are "tied" to individual accounts or computers? The court, acknowledging the various policy concerns, explained that "Congress is free, of course, to modify the first sale doctrine…if it deems these [policy considerations] to require a different approach." In the meantime, with the Augusto and MDY opinions pending, the Ninth Circuit has yet to have the last word on the first sale doctrine — however, we now have a bit of guidance suggesting how those cases will be decided.
One thing for certain is that many customers — especially those who are less familiar with the nuances of a licensor/licensee relationship, but are very familiar with the you-buy-it-and-you-own-it rules of traditional purchasing — simply won’t know what they’re buying when it comes to software, and that old maxim that so commonly pops up in daily life is especially relevant here: Read the fine print. If you don’t, you might end up like Vernor — on the wrong end of a copyright suit.