Autodesk vs. the First Sale Doctrine

by on May 23, 2008 · 12 comments

Over at Ars, I discuss the implications of this week’s Autodesk decision:

In a 21-page decision, Judge Jones sided with Vernor. Citing the 1977 case of United States v. Wise, which involved the sale of used films obtained under dubious circumstances, Jones found that the Ninth Circuit’s precedents suggested that the circumstances surrounding the sale of AutoCAD software constituted a sale, not merely a license. Therefore, the First Sale Doctrine applied, and Vernor was not bound by any of the terms in Autodesk’s license agreement.

But the judge acknowledged that three more recent Ninth Circuit decisions involving software seemed to cut in the opposite direction without explicitly overturning Wise. Jones found that Wise was controlling precedent, and ruled in Vernor’s favor. If the case gets appealed to the Ninth Circuit, the conflict among these precedents is likely to occupy the court’s attention. The trio of more recent cases hints that the Ninth Circuit is sympathetic to characterizing software sales as licenses for legal purposes. However, none of those cases involved circumstances exactly like Vernor’s, and the court never dealt squarely with the question of what factors determine whether software is sold or licensed.

If Jones’s ruling is upheld on appeal, it will have important consequences for the software industry, where the legal fiction that software is merely licensed is widely employed. In addition to discouraging the market for used software, software firms have also attempted to use the “licensed, not sold” theory to enforce restrictions on reverse engineering that would otherwise be fair use under copyright law. If software is sold, rather than licensed, then no license is required to install and use the software, and the terms of shrink-wrap licenses may not be legally binding.

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