Print 
Like adopting a pet or purchasing a car, you might think that dropping the cash for pricey software means that you’re the sole owner of that one user license. But as we recently discovered ourselves, there is absolutely no truth to that. The reality of the matter is that your collection of software is more like your collection of DVDs—you pay for the right to use it as long as it’s in your possession, but the content and the software itself still belongs to the publisher. A recent ruling by the Ninth Circuit appeals court in Seattle supports this notion. The ruling states that you don’t really own software you’ve purchased if the company who published it says so in their user license. The court stated in its official documents that:
“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 essence, this court ruling affects the sales of user material, and it sends the message to media manufacturers that all they have to do is attach a license to claim unlimited, forever ownership of a product beyond its post-sale distribution. A great example of this can be seen in the case of Vernor v. Autodesk. Timothy Vernor purchased several outdated copies of Autodesk, a pricey CAD program, from a company who was selling its unwanted software. He then listed four of the copies on eBay and Autodesk immediately sent a DMCA takedown notice. Vernor then disputed it, reinstated the auctions, and Autodesk protested once again. Eventually, the battle ended up in court.
Now, the Ninth Circuit has made Vernor’s problem the problem of anyone else who has ever sold media. Gamers who were once accustomed to selling their old purchases to Game Stop now have to watch their backs, lest they end up in court for selling a $4 used game. And people who make a little extra cash offering their old software at real world flea markets and garage sales are most likely legally forbidden from doing so. The Venor ruling makes it easier for software manufacturers to collect seriously big bucks in court if you re-sell licensed software by allowing monetary penalties far greater than any money you could make re-selling.
Sherwin Siy, the Deputy Legal Director at Public Knowledge, a Washington, D.C.-based public interest group, says that where there might have been a vacuum of legal precedent before or, at least, disputed territory, “We now have the Ninth Circuit saying that, as far as it's concerned, the license agreement determines whether there has ever been a ‘first sale,’ and that anyone who buys used copyrighted goods needs to somehow investigate the terms under which the first buyer acquired the copy. A lot of software licenses resemble Autodesk's, but this is the first case I can think of where they've been applied to create copyright liability for someone who never agreed to the license in the first place.”
Katherine Wenger of Bay Area law firm Morgan Miller Blair, which specializes in copyright protection, adds that the Ninth Court’s ruling emphasizes “how important it is for those individuals and businesses to understand who they are purchasing software from and whether the re-seller owns the software or merely has a license to the software.”
In particular, the Ninth Court’s opinion in Vernor vs. Autodesk dispels any previous belief that may have existed that as long as an individual or business has the original CD of software (particularly if he does not make another copy of it) that they can re-sell that CD to another individual without violating copyright laws.
If a consumer or business does not “own” software, then what demands can be made on the licensing company? Can you demand that a company provide you with a free new copy due to a scratched CD? Wegner says that the kinds of demands that a consumer can make would largely depend on the particular company’s licensing agreement and services the company chooses to provide. No surprise there, right? But she concedes that often, when a product is licensed, the consumer may be entitled to more support from the seller than that consumer would have if he or she were simply purchasing a product. “A consumer may be able to download a new copy of the software if the old copy becomes corrupted,” she says. “[They also] have the benefit of obtaining updates to the software without having to purchase an entirely new version of the product.”
Chances are that a lot of things you’ve purchased in the last year, including e-books, aren’t entirely your property. Recently, in the case of F.B.T. Productions LLC v. Aftermath Records, the Ninth Circuit ruled that songs permanently downloaded from Apple’s iTunes store were not actually purchased either, but licensed. “The finding that music that has been permanently downloaded onto a computer may be a ‘license’ and not a ‘sale’ is not an insignificant one,” reminds Wegner. And when coupled with the Vernor ruling, it shows just how how much traction this ruling is gaining.
Thomas Carey, a partner and head of the Business Practice Group at Sunstein Kann Murphy & Timbers, a Boston-based law firm specializing in intellectual property law, points out that it is equally unlikely that the Supreme Court would hear this case on appeal because there is apparently no split of authority among the U.S. Court of Appeals. In the amicus brief filed by the American Library Association, the Electronic Frontier Foundation did not cite a single appellate case involving the resale of a software product to support their proposition that the first sale doctrine applies to the re-sales of software. Presumably, licensing not only increases direct sales, it is also touted as an anti-piracy measure when backed by court rulings like Vernor. That said, companies are aware that they can push consumers too far.
Carey predicts that copyright owners of digital entertainment products will work within their means to prevent unauthorized copying or sales of their content. It looks like it might be high time that consumers alter their expectations and purchase digital media with the idea that it’s not as tangible as they once thought.
DJR12
October 11, 2010 at 9:35am
I'm no lawyer either, but I'm not sure why the familiar world of publishing and books can't serve as a precedent for electronic meda. If I buy a book, I am free to do with it as I please (including reselling it, lending it to friends or library patrons, etc.), except that I cannot make copies of it beyond short quotations that fall under fair use. 1 book purchase = 1 book use. Obviously, electronic works are far easier to copy, but I don't see why that should change the law. I buy a copy of a piece of software. I no longer need it, remove it from my computer, and sell the physical media along with the license to use it to another user. Seems quite fair and workable to me. Enforcement is a whole other issue, but I don't see why difficulties in enforcement should defeat common sense. Oh, that's right. Because large corporations with deep pockets will make sure that it does.
Phoenician1
October 10, 2010 at 2:23pm
I'm no legal scholar, but I cannot see how John Q. Citizen benefits from this ruling. (Yes, I read the section describing how some purchasers could maybe possibly be in a better position because of the ruling.) But to this casual software purchaser, excuse me, 'licensee', it seems that the ruling only benefits the software creator(s).
Is the age of private ownership now behind us? What vendor would not want to have permanent control over their product, and more importantly its uses, in perpetuity? As I said, I have no legal background in this area, but couldn't this concept be applied to more traditional kinds of sales, for items that aren't considered 'intellectual property'? Does the complexity of the physical object matter? The first thought that came to me is of the emerging new class of cars that are electric or hybrid-electric. I already don't own my Playstation and my Xbox. Could this concept be applied to cars? Perhaps the better question is, what products couldn't this ruling be applied to?
At that point, the question would then become, what would the terms of the EULA be limited to? It seems that the personal behaviors of the licensee would be a topic of interest/control, since the behavior of selling is now to be limited. What other behaviors might become subject to control? What about using the PS or the XB to play a pirated disc, or to visit a site that violates gambling laws, or to view a pornographic movie? What about driving the vehicle in an intoxicated condition, or using it to violate the law in manners such as speeding, or driving the wrong way down a one-way street? Could breaking the law cause you to lose ownership of your car as a matter of contract law rather than criminal law? If so, say goodbye to having your day in court in many areas.
The ability of vendors to reach into the lives of their customers and exert control over their behaviors strikes me as something this ruling could conceivably put at considerable risk.
