US Circuit Court of Appeal verdict making first-sale doctrine practically useless?

[Elfwreck]

Hm. How long before someone gets the bright idea to sue CompUSA and OfficeMax for claiming to sell software and not telling you that they're only selling a license-to-use?

When you buy a car, you own it. When you lease a car, even if you pay the whole fee up front, you're told that you don't own it. Seems there's grounds for a *terrific* class action suit against the software sellers, the retailers, or both, for trying to hide the terms of sale.

[Kali Yuga]

Originally Posted by Elfwreck

Seems there's grounds for a *terrific* class action suit against the software sellers, the retailers, or both, for trying to hide the terms of sale.

Nope. Click-through agreements have been upheld since 1996.

The real issue in this case is whether you have the legal right to transfer the license, an action which has nothing to do with transferring a physical object from one person to another.

[Kali Yuga]

FYI, the 9th Circuit ruling is available on line here: http://www.jdsupra.com/post/document...5-5200c77bb00f


I'd have to say that in this particular case, I have a hard time seeing how Vernor has a leg to stand on.

The company that originally purchased the software (CTA) upgraded their copies of AutoCAD R14. Rather than destroy the CDs, they resold the physical discs. I.e. CTA is essentially still "using the software" they originally purchased from Autodesk, since those copies were subsequently upgraded.

CTA did not lose access to the content by reselling the physical objects (the installation CD's), as would be the case with a paper book or an instruction manual.

The "first sale" doctrine was generated in 1908, and IMO makes perfect sense when applied to physical goods. If I purchase a paper book, and I resell it, I essentially lose access to the content in question; the transaction is clean and complete. The physicality of the object produces a mechanism by which unauthorized duplication is (generally) restricted.

With digital content, that is clearly not the case, since I often have the ability to create duplicates at will. Thus you can easily have a situation where the content is available to the original purchaser, as well as any and all subsequent purchasers. The resale process potentially produces an unlimited number of unauthorized duplicates.

From what I can tell, there are precedents that a licensor can put incredibly strong restrictions on licensed content. I'd have to agree with the court that if you want that changed, it's really a job for Congress, not the courts.

[Shaggy]

Originally Posted by Kali Yuga

The company that originally purchased the software (CTA) upgraded their copies of AutoCAD R14. Rather than destroy the CDs, they resold the physical discs. I.e. CTA is essentially still "using the software" they originally purchased from Autodesk, since those copies were subsequently upgraded.

So this case really has nothing to do with first sale doctrine. It's just plain old copyright infringement.

[Shaggy]

Originally Posted by queentess

Regardless of DRM, it's still not legal (in the U.S.) to resell or give away ebooks.

Where did you get that from?

[Kali Yuga]

Originally Posted by Shaggy

So this case really has nothing to do with first sale doctrine. It's just plain old copyright infringement.

Well, sort of.

Vernor wants the court to say that the initial transaction between Autodesk and CTA was a sale, not a license; and as such the software is subject to first-sale, that CTA did in fact transfer their copy to him. Hence it's not about duplication or infringement, the key is whether CTA bought or licensed the software in the first place.

The lower court believed that some precedents were in conflict on these issues, but the 9th Circuit says they are not, and that Autodesk has the legal right to treat it as a license -- with nearly unlimited control over its subsequent use. (In fact, the court states that the act of imposing controls on use essentially makes the transaction a license rather than a sale.)

The case only discusses software. However, the court states that merely by asserting control, Autodesk essentially has control, so I'd assume this would apply to content as much as it would software.

On a side note, AFAIK everything related to the first sale doctrine was essentially created by the courts, not as a result of legislation. Hence the opinion points out that Congress could change this structure if it wanted.

[HamsterRage]

Originally Posted by Shaggy

So this case really has nothing to do with first sale doctrine. It's just plain old copyright infringement.

That's happens with these things. A particular case is way more complicated than reported, or there's special circumstances that make it less than a precedent setting case.

[Sonist]

Originally Posted by Kali Yuga

Well, sort of.

Vernor wants the court to say that the initial transaction between Autodesk and CTA was a sale, not a license....

I didn't read the opinion, but I'd think that the upgrade creates a new contract between the CTA and Autodesk, whereby CTA receives the benefit of a discount on the purchase price of later version of the software, while promising to not use (derive any further benefit from) the old copies of the software in exchange.

BTW, last I looked, click-through rulings are still random, depending on the circuit, so claiming that they are the law of the land since 1996 is not correct.

[Kali Yuga]

Originally Posted by Sonist

I didn't read the opinion, but I'd think that the upgrade creates a new contract between the CTA and Autodesk, whereby CTA receives the benefit of a discount on the purchase price of later version of the software, while promising to not use (derive any further benefit from) the old copies of the software in exchange.

If you are so inclined, read the ruling. Otherwise you're kind of stuck with my interpretation of it.

That said, on one hand you are correct that CTA used the licenses to get the upgrade pricing. However, you're still dealing with Autodesk stipulating how their product is used after purchase.

Let's say you want to "upgrade" your car. In that case, you go to your dealer, you surrender a physical object, and the dealer gives you a discount on a new car. Vernor is saying this is what happened with CTA, and Autodesk was lax in its collection of the physical objects (the installation media); as such, when CTA sold him the media, he thus acquired the legal right to resell the software.

Autodesk, in contrast, is saying that the legal right to use their AutoCAD product has nothing to do with the physical objects, is not a purchase, and as such Autodesk can control what you do with the software and media after purchase.

AFAIK Autodesk does make you sign contracts, but the ruling does not mention anything about contracts or contract law -- it only discusses whether this was a purchase or license.


Or, to think of it another way: Vernor is suggesting that EULAs aren't worth the pixels used to display them on your screen, and Autodesk believes they are binding. The appeals court is stating that if you agree to it, it's binding; and if you don't agree to it, you can return it and get your money back.

Originally Posted by sonist

BTW, last I looked, click-through rulings are still random, depending on the circuit, so claiming that they are the law of the land since 1996 is not correct.

They are infrequent but generally upheld. As such, until or unless Congress gets involved, they are almost certainly going to survive a class-action lawsuit by consumers who don't read EULAs.

[Shaggy]

Originally Posted by HamsterRage

That's happens with these things. A particular case is way more complicated than reported, or there's special circumstances that make it less than a precedent setting case.

In my experience, most of the time you see journalists reporting on a court case, they get most of the details wrong. They tend to be more interested in capturing headlines than reporting the actual facts.

[Shaggy]

Originally Posted by Kali Yuga

Let's say you want to "upgrade" your car. In that case, you go to your dealer, you surrender a physical object, and the dealer gives you a discount on a new car. Vernor is saying this is what happened with CTA, and Autodesk was lax in its collection of the physical objects (the installation media); as such, when CTA sold him the media, he thus acquired the legal right to resell the software.

Generally speaking, the contract for a software upgrade stipulates that you have rights to the original. To me, the crux of this case seems to be that CTA could not resell the original software while still using the upgrade. That is, essentially, copyright infringement. It's basically the same thing as selling something while keeping a copy of it for yourself.

It doesn't seem to be so much about whether it qualifies as a sale/license, but rather that your rights to the upgrade and the original are tied together. You can't sell one and keep the other, regardless of how the first sale doctrine applies to software.

If CTA had sold both the original and the upgrade rights to Vernor, then we would start getting into the area that most people are talking about. IE, whether or not it was a sale vs license, and how that impacts first sale rights.

[Shaggy]

Also note that this court didn't make a ruling one way or the other. All they really did was throw out the summary judgment in Vernor's pre-emptive suit and sent it back to the lower court for further proceedings.

[Kali Yuga]

Originally Posted by Shaggy

To me, the crux of this case seems to be that CTA could not resell the original software while still using the upgrade....

On one hand I concur, in that CTA is in many ways still "using" the original software.

Again, though, it looks like the court isn't concerned with that. To them, the question is whether this is a license or a sale. If it's a sale, CTA had the right to do whatever they wanted with the software, and if Autodesk didn't want them to resell it, they'd have to return the installation media (i.e. the "purchased objects") to Autodesk -- a process that, apparently, Autodesk used prior to R14 but abandoned.

I.e. the conditions of the upgrade are part of the SLA, which is only binding on the end-user if the software is actually a license rather than a purchase.

Yes, the court did vacate the earlier ruling. But that's basically a victory for Autodesk, since this case was an attempt by Vernor for the court to pre-emptively declare that Autodesk can't sue him. The precise wording of the conclusion:

Originally Posted by 9th Circuit Court of Appeals

We hold that because CTA is a licensee, not an owner, the “sale” of its Release 14 copies to Vernor did not convey ownership. Vernor is accordingly not entitled to invoke the first sale doctrine or the essential step defense, on behalf of his customers.

So this doesn't affect first-sale for physical goods, but if upheld it finds that a software vendor has the rights to control the use of the product after the purchase. Or, similar to how the EFF puts it, first-sale rights are less important than a license agreement, which can contain whatever terms are set by the vendor and agreed to by the end-user.

[Shaggy]

Originally Posted by Kali Yuga

Yes, the court did vacate the earlier ruling. But that's basically a victory for Autodesk, since this case was an attempt by Vernor for the court to pre-emptively declare that Autodesk can't sue him.

I don't think Autodesk can claim victory yet. This was a setback for Vernor, certainly, but this court didn't make a ruling. All they did was basically send it back for trial, instead of letting the lower court make a declaratory judgment.

Also keep in mind that one of the main reasons the court found that CTA was a licensee is that previously Autodesk had sued CTA for "unauthorized" use of their software (separate from the current case), and as part of the settlement to that previous case Autodesk agreed to redistributed copies to CTA, and CTA specifically agreed as part of the settlement that they were a licensee, not an owner.

One of the main tests that is used for determining license vs sale is that the customer is made aware up front that it is only a licensee. Because of the terms of that previous settlement, CTA clearly knew that they fell under licensing terms. That is possibly a significant part of the reason that this court found that CTA was a licensee, not an owner.

As someone else pointed out, those special circumstances may mean that this case doesn't really apply as a more general precedent for consumers/retailers.

[Lady Fitzgerald]

Originally Posted by Shaggy

...As someone else pointed out, those special circumstances may mean that this case doesn't really apply as a more general precedent for consumers/retailers.

That doesn't mean the retailers won't try to twist it their favor.