Court Once Again Confirms Right Of First Sale For Software: You Own It, Not License It

from the good-news dept

Fri, Oct 2nd 2009 7:01am — Mike Masnick

Excellent news. In the ongoing case involving Autodesk and a guy, Timothy Vernor, who was trying to sell legally acquired used versions of AutoCAD on eBay, the district court judge has ruled that Autodesk has no right to restrict the sales of its used software. This wasn't a huge surprise, as the court indicated as much last year, when it refused to grant Autodesk's motion to dismiss the case. But this is an important ruling for a variety of reasons. Beyond just reiterating the well-established right of first sale on software, it also helps clarify that when you by a piece of software, you own it, rather than just license it. As the judge noted:

"The transfer of AutoCAD copies via the license is a transfer of ownership."

The judge also mocked Autodesk's claim that allowing such sales to go forward promoted piracy:

"Vernor's sale of AutoCAD packages promote piracy no more so than Autodesk's sales of the same packages."

Autodesk, of course, will likely appeal the ruling, so this isn't done yet. But, so far, this is definitely good news.

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Filed Under: copyright, license, ownership, software, timothy vernor
Companies: autodesk

27 Comments

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Dark Helmet (profile), 2 Oct 2009 @ 7:23am

I assume
that AutoCAD doesn't have agreements for necessary updates and so forth. Isn't that how companies like Symantec and Barracuda get away with "required" licenses for the software: by roping support, definition updates, firmware updates, etc. under the License Agreement?

I would wonder if/how a ruling like this affects a consume/business user's ability to transfer ownership of licenses like those.
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Dave M, 2 Oct 2009 @ 7:27am

s/w licensing
Most PBX don't allow softare transfers unless you pay a relicensing fee. Not sure how they get away with that.
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Ima Fish (profile), 2 Oct 2009 @ 7:33am

Wow, great news and a fantastic ruling. The judge really seems to get it, selling a used copy could not promote piracy anymore than selling a new copy would.
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Anonymous Coward, 2 Oct 2009 @ 7:56am

I assume the software in question is on a CD or DVD. I am interested in how this would play out if it were software that was downloaded?
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- MBraedley (profile), 2 Oct 2009 @ 8:26am
  
  Re:
  Well let's take Steam as an example, and in fact extend this discussion to Valve's offering of physical versions (ie CDs) of its computer games. As soon as you purchase a game over Steam (not as a gift), it's tied to your Steam account. The only way you have to sell that game to someone else is by selling your entire account (which I believe is against Valve's EULA and TOS, but that hasn't stopped me before with another company's game). In a similar manner, purchasing the game on disc will require you to tie it to a Steam account, but that doesn't happen until you install it, meaning you are free to resell it until that time. Once you install it, the CD key for that disc is associated with your Steam account. You can still sell the disc, but without the account that the CD key is associated with, it's of little value to anyone else except as a backup or a means to quickly reinstall the game.
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  - CommonSense (profile), 2 Oct 2009 @ 9:36am
    
    Re: Re:
    If you get the CD's from someone else, you need to photocopy/fax the cd cover, with the key on it, to Steam, and they'll release the lock or whatever and let you re-associate the key with a new account. Similar to if you lost your password and created a new steam account and wanted your discs to work again... Long process, but works.
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    - MBraedley (profile), 6 Oct 2009 @ 6:24am
      
      Re: Re: Re:
      I did not know this. Not that it really matters to me, because I buy all my Valve games over Steam anyways.
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Eric, 2 Oct 2009 @ 8:01am

Don't own software, but the licence
I think what the judge is saying is that there is a right of first sale on the licence.

AutoDesk cannot prevent the owner of the licence to transfer it to someone else.

Is that what you mean by "owning the software"?
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- scote, 2 Oct 2009 @ 8:07am
  
  Don't get too hung up on the word "licence"
  Yes, the judge says first purchase applies to the license--but that is no different from a book, where you get an implied license with the physical copy.
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- Joseph Young, 2 Oct 2009 @ 9:52am
  
  Re: Don't own software, but the licence
  That’s the way it’s treated in the UK. The licence is a ‘first-class’ legal object. It’s like leasehold realty. With that, you don’t own the land or building, but you have the right to occupy it, possibly for a very long time. You have legal title and you can pass on that title. It’s the same with the original copyright, when it’s transferred from business to business.
  
  A blanket ban can’t be put on the transfer. There can only be limited restrictions set out in statute or established in common law. With software, you’re expected to pass on the physical medium and anything else that came with it that you still possess, like box, printed manual, etc. It’s one of the reasons the software industry wants to move away from perpetual licences.
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John Doe, 2 Oct 2009 @ 8:08am

Never though I would say this...
That is one smart judge. Love the second quote.
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Anonymous Coward, 2 Oct 2009 @ 8:52am

Great, its about time. Now lets apply it to all software. Just because a company has to keep putting out updates, it should not mean they retain ownership of poorly written code after the initial sale. Write it correctly the first time and then sell the final product (just like any other product). Especially if the software is system critical. Security updates (not upgrades) should be part of the purchase price and be a factor in setting that price. If that price is too high, then you need to rethink the companies structure. Would you keep buying the same make automobile if you had to take it back to the factory every week to get it fixed??? Where I live we have something called a lemon law. If you want to claim IP, would you pay $300 for a painting just to have the painter tell you how, where, or if, you can display it??? Even tell you that you cant resell it?? Oops I think I just inadvertently mentioned current copy-write law.
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Michial Thompson, 2 Oct 2009 @ 9:17am

It's called Software as a Service
Autodesk sells the software in CD format, and pretty much off the shelf.

The way you sell software and prevent the resale is under the Software as a Service business model. My contracts all state that the Software is Licensed, AND requires an ongoing Service, Support and Hosting fee. It also states that without the Service and Support they must stop using the software.

In my specific case even if they sold my CD's the software would be useless because the data is hosted on my servers. Its a package deal, no service/support contract no database to access.
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hax, 2 Oct 2009 @ 9:18am

So if I own it and they put in some server checking DRM which makes it unusuable to me after a certain time they are robbers....right?
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Anonymous Coward, 2 Oct 2009 @ 9:43am

Michial. here is where I have a problem. The way you describe your business, the software is RENTED. Just like a house, apartment, car, or tool. SALE implies transfer of ownership. Sales receipt vs rental contract. Call it what it is. Mind you, I dont have a problem with people renting if thats what they want to do, I just prefer to own it if I have to spend my money on it.
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- Dark Helmet (profile), 2 Oct 2009 @ 9:54am
  
  Re:
  You're right, but it's becoming fairly common practice in the IT world, particularly for small/medium sized businesses. Hardware is going to this realm, as well, with HaaS agreements replacing sales receipts.
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  - Sneeje, 2 Oct 2009 @ 10:16am
    
    Re: Re:
    Otherwise known as cloud computing...
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    - Dark Helmet (profile), 2 Oct 2009 @ 10:25am
      
      Re: Re: Re:
      "Otherwise known as cloud computing..."
      
      Actually, not at all. With what my company is doing at least, we've got standardized PCs at various levels that we install on the customer network, along w/any SPLA licensing for software they want, and then we couple it with our managed service and just charge a monthly fee. We don't break even on the hardware for months, but the terms are for three years.
      
      For the customer, they don't have to worry about depreciating assets, hardware/software refreshes costing huge capital sums, or the upfront costs of a rollout.
      
      It's niche, and only makes sense for the SMB market, but it's getting bigger.
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Anonymous Coward, 2 Oct 2009 @ 10:43am

Joseph, "you don’t own the land or building, but you have the right to occupy it, possibly for a very long time.". Change the word "right" to "permission" and thats exactly what I am talking about.The phrase "right to occupy" is inappropriate here. the rights are retained by the owner and permission is given for use of HIS rights. Implying that the "permission" can be revoked by the owner. Paying a fee, be it monthly, yearly, or once per lifetime for conditional or restricted use, or "permission" to use, with no possibility of unfettered use or possession (ownership), is renting
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Eponymous Coward, AKA Doug (profile), 2 Oct 2009 @ 10:48am

Hackintosh next?
I'd love to see this carried to Apple's doorstep, in that they try to restrict any installs of their OS to Apple products, citing the EULA that users must 'accept' before installing (I hate using the emphasis/sarcastic quotes, but Apple brings it out of me). I've been waiting for their "you don't own OSX, you own a license to use OSX" line to meet a serious challenge, and this feels close enough to the mark to me.
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Anonymous Coward, 2 Oct 2009 @ 1:04pm

What I want to know is does this ruling mean that, after the intitial sale:
Do you, without restriction, own the software with all rights and privileges as owner?

or

Are you, not being the owner, only able to transfer (and collect a fee for) the conditional/restrictive permissions within the license (EULA/rental agreement) to another and not have to pay the owner for another licensing fee (rent).
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senshikaze (profile), 2 Oct 2009 @ 2:05pm

Vista EULA Section 8
Does this nullify section 8 of the Vista EULA?
8. SCOPE OF LICENSE.
The software is licensed, not sold. This agreement only gives you some rights to use the software. Microsoft reserves all other rights. Unless applicable law gives you more rights despite this limitation, you may use the software only as expressly permitted in this agreement. In doing so, you must comply with any technical limitations in the software that only allow you to use it in certain ways. For more information, see http://www.microsoft.com/licensing/userights. You may not

· work around any technical limitations in the software;

· reverse engineer, decompile or disassemble the software, except and only to the extent that applicable law expressly permits, despite this limitation;

· use components of the software to run applications not running on the software;

· make more copies of the software than specified in this agreement or allowed by applicable law, despite this limitation;

· publish the software for others to copy;

· rent, lease or lend the software;
or

· use the software for commercial software hosting services.
Link
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- Ryan, 2 Oct 2009 @ 3:02pm
  
  Re: Vista EULA Section 8
  Wow, because heaven forbid we fix a problem with Vista...
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okwhen (profile), 2 Oct 2009 @ 7:04pm

First Sale Doctrine
It seems that no one has read the first sale doctrine. Here is a link to the Electronic Frontier Foundation EFF and the information you seek. The information listed below was taken from that link just to give you a taste. First Sale, Why It Matters, Why We're Fighting for It by Fred von Lohmann The "first sale" doctrine expresses one of the most important limitations on the reach of copyright law. The idea, set out in Section 109 of the Copyright Act, is simple: once you've acquired a lawfully-made CD or book or DVD, you can lend, sell, or give it away without having to get permission from the copyright owner. In simpler terms, "you bought it, you own it" (and because first sale also applies to gifts, "they gave it to you, you own it" is also true).
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okwhen (profile), 2 Oct 2009 @ 7:07pm

First Sale Doctrine
It seems that no one has read the first sale doctrine. Here is a link to the Electronic Frontier Foundation EFF and the information you seek. The information listed below was taken from that link just to give you a taste. First Sale, Why It Matters, Why We're Fighting for It by Fred von Lohmann The "first sale" doctrine expresses one of the most important limitations on the reach of copyright law. The idea, set out in Section 109 of the Copyright Act, is simple: once you've acquired a lawfully-made CD or book or DVD, you can lend, sell, or give it away without having to get permission from the copyright owner. In simpler terms, "you bought it, you own it" (and because first sale also applies to gifts, "they gave it to you, you own it" is also true).
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Doctor Strange, 2 Oct 2009 @ 8:21pm

The headline and the text in the article conflate a couple of concepts that are important to distinguish. Namely, this statement:

"it also helps clarify that when you by a piece of software, you own it, rather than just license it."

Is ambiguous at best. The judge makes the effort to clarify:

"The court makes this observation because the parties and their witnesses too often suggest that their dispute is about whether Autodesk 'sold' rather than 'licensed' its software. That dispute is not determinative, because the use of software copies can be licensed while the copies themselves are sold."

So you can't say that "software is sold, not licensed" because that's not strictly true. A particular copy of software is sold, but the use of the software is licensed. So when you say "a piece of software" if you mean the physical copy of it, that's one thing, but the use of the software on that physical copy is separate.

The more complicated question is: can you sell a copy of software to someone with a license so restrictive that it practically prevents first-sale from being meaningful: i.e., can I sell you an AutoCAD CD, where the software is licensed in such a way that you have no way to use it except to put it on a shelf and admire it?

The judge basically seems to rule that the Wise precedent indicates that it depends on how the copy got transferred in the first place. If it looks like a licensing arrangement, then it can get treated as a licensing arrangement. However, if it looks too much like a sale, then it may get treated as a sale, regardless of what the license says. So if AutoCAD had, instead of providing copies for a one-time payment of $3500 each (which looks like a sale), provided the CD and then charged $199 a month to use the software on it (which looks more like a license), they may have been able to restrict other users. The judge calls a license without an accompanying sale a "mere license" to distinguish it.

The court finds that later cases, called the MAI Trio conflict with Wise directly. However, the rule is that the oldest precedent stands regardless of what the judge thinks is the best policy, and since Wise is older, it wins. The judge notes that cases in other districts also seem contradictory, and that this will likely be concerning to people interested in this issue.
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- Crosbie Fitch (profile), 4 Oct 2009 @ 7:40am
  
  Re:
  It's all actually pretty straightforward.
  1) Material property can be sold or lent.
  2) A copyright holder can provide transferable or non-transferable licenses to people permitting them to make copies in certain conditions.
  
  That's all there is to it.
  
  You buy a material copy, you can use it to prop up a table, burn it, or sell it. Copyright doesn't impact any of that.
  
  All copyright does is prohibit anyone apart from the copyright holder (or their licensees) from making copies.
  
  Copyright does not grant the copyright holder with any power, e.g. to prohibit anything "You may not use this copy as a paperweight". Copyright prohibits copying. The copyright holder simply gets to permit copying. A license is about giving permission - not taking anything away from a recipient or binding the poor mug to surrender their first born.
  
  When I buy an AutoCAD CD I buy a piece of plastic representing an authorised copy. I NEVER need to sign any contract to use this copy that is now my property, nor can some spectral force reach out and bind me to terms of its choosing. The only thing I can't do (legally) is make copies of it. A license may be provided, that permits certain copies on certain conditions, but I can always ignore that license, especially if I never want to make any copies. Even if I do make copies, I can still ignore the license and possibly infringe copyright as a consequence. Simply making a copy doesn't trigger the spectre to leap out of the license claiming that the copy signifies my agreement where none was given. I know what I agree to or don't agree to.
  
  Copyright may be incredibly complex, but that's no reason to start getting superstitious about it.
  
  It still sounds like the judge has drunk some of the koolaid. Right of first sale was never about selling the license to a book you purchased (given books rarely came with licenses), but about selling the book: paper, ink and words. The same applies to software: acetate, pits, and machine code.
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