US court rules against software resale

A software company has won the right to stop a man from re-selling second hand copies of software because the programs are licensed to users and not owned by them.

A US appeal court ruled in favour of software company Autodesk follows a long running dispute with Timothy Vernon who sells products on Ebay. The US Court of Appeals for the Ninth Circuit said software producers who clearly impose restrictions on buyers and make it clear that buyers are only licensing material rather than owning it outright do have the right to restrict second hand sales of the material.

The ruling has angered the Electronic Frontier Foundation, which described the decision as
“deeply disappointing”, and “very bad news for consumers.”

Telling the story on its site, it said:  “By undermining the crucial balance between copyright owners and users that supports used bookstores, libraries, and DVD rentals, it hurts both our ability to save a few dollars and our ability to retain, archive and access older, out-of-print materials. Libraries and second-hand sellers are often the only hope for these materials and the “long tail” community of researchers, historians and hobbyists that value them.

“But the potential effects of this decision don’t stop there: it risks creating a situation in which violating contracts and end-user license agreements (EULAs) could result in a copyright infringement lawsuit (with the heavy club of statutory damages, attorneys fees and low standards for injunctions) rather than just a simple breach of contract claim.”

The legal matters first began when Timothy Vernor bought second hand versions of Autodesk’s architectural drawing software from a company. He made them available for sale on eBay, but Autodesk wasn’t happy and filed claims that this infringed its copyright.

Autodesk claimed that the copies Vernor had obtained should have been destroyed and this eventually led to Vernor’s eBay account being suspended. This prompted him to go to the courts and ask a judge to declare his activity lawful. He prevailed before the district court in 2009, prompting Autodesk to appeal.

Although the EFF filed an amicus brief supporting Mr. Vernor, arguing that copyright owners should not be able to trump the first sale doctrine by using a few “magic words” in a “license agreement,” this didn’t cut the mustard.

Vernor had also argued that the software was bought and owned by Autodesk’s customers, and that the first sale doctrine meant that it was theirs to dispose of however they saw fit.

The court sided with Autodesk, holding that: “A software user is a licensee rather than an owner of a copy where the copyright owner, in the documents included with the software packaging, (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.

“[Original owner] CTA was a licensee rather than an owner of copies of [the software] and thus was not entitled to invoke the first sale doctrine or the essential step defense,” said the ruling.

“Autodesk retained title to the software and imposed significant transfer restrictions: it stated that the license is nontransferable, the software could not be transferred or leased without Autodesk’s written consent, and the software could not be transferred outside the Western Hemisphere.