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Federal Court Says First-Sale Doctrine Covers Software, Too

Posted by timothy on Thu May 22, 2008 02:19 PM
from the it-better dept.
New10k writes "The US District Court in Seattle has rejected Autodesk's myriad arguments regarding its software licenses and found in favor of eBay seller Timothy S. Vernor. The ruling started by ruling that Vernor was within his rights to resell copies of AutoCAD Release 14 he got in an auction. Once the court settled the legitimacy of reselling, it used that ruling as a lens to dismiss all of Autodesk's various claims. More than once the court described Autodesk's arguments as 'specious' and 'conflicted.'" Autodesk managed to have Vernor's eBay account pulled, after he listed for sale copies of AutoCad 14. He sued Autodesk in response.
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  • by Uncle Focker (1277658) on Thursday May 22 2008, @02:20PM (#23509754)
    Score one for the little guy!
    • Workaround (Score:5, Interesting)

      by Anonymous Coward on Thursday May 22 2008, @02:23PM (#23509786)
      Can autodesk skirt this by making its software connect to an autodesk server and validate the presence of a (non transferrable) user account?

      Because that is exactly what World of Warcraft (and all MMO's, for that matter) does.

      Autodesk would then give the software away for free, but sell the user accounts for whatever they want.
      • Re:Workaround (Score:5, Insightful)

        by FooAtWFU (699187) on Thursday May 22 2008, @02:27PM (#23509856) Homepage
        The difference is that World of Warcraft has something interesting on its servers. With Autodesk, all the really interesting stuff is on the desktop. As such, it's much less trouble to hack Autodesk to play for free than to hack MMORPGs (not that this has stopped a few random free "shards" showing up in various spots from time to time, game to game).
      • Re:Workaround (Score:5, Informative)

        by egburr (141740) on Thursday May 22 2008, @02:45PM (#23510140) Homepage
        I would hope it is the other way around, that companies (such as Blizzard for WoW) would no longer be allowed to prohibit the re-use of the keys that come with the software. Since the key is what allows the software to be used, the software is useless without the key. Since the key is part of the software package, it should be usable by the rightful owner, whether that is the original owner or the second owner or the third owner, and so on.

        Skirting this by saying the key allows you to create an account and that the account is non-transferable is bogus as long as the key can only be used to create only one account.

        I did buy a "like new" copy of WoW on ebay a couple years ago. I was a bit put out when the key was rejected due to having already been used. After reading the EULA thoroughly (not that I agree to a unilateral after-purchase change of conditions), I argued with Blizzard about my non-working key. After talking with a lawyer friend, and him sending them a letter, they sent me a new key.

        One of they key points in their EULA was the paragraph:
        You may permanently transfer all of your rights and obligations under the License Agreement to another by physically transferring the original media (e.g., the CD-ROM or DVD you purchased), all original packaging, and all Manuals or other documentation distributed with the Game; provided, however, that you permanently delete all copies and installations of the Game in your possession or control

        The key is part of the "other documentation" and must be transferred to the new owner. Preventing someone from using it just because they are not the original owner of it is contrary to the first-sale doctrine.

        Furthermore, there is nothing in the EULA indicating any possibility that the key cannot be used by its rightful owner. The only place that is mentioned is the Terms of Use which are displayed when you go to use the key. Prohibiting subsequent owners from using the key completely destroys the intended use of the software, so should not be allowed as long as first-sale doctrine principals apply.

        • Re:Workaround (Score:5, Interesting)

          by thtrgremlin (1158085) on Thursday May 22 2008, @04:02PM (#23511208) Homepage Journal
          I really hate companies that operate on the basis of "we will stomp the rights of every customer that doesn't sue us" policy. Lots of places seem to be like this. Some often just break the law till you point it out to them, then they change it... for you, and will keep screwing the person right next to you. I actually got into an argument with a McDonald's manager that refused to give a 6 year old kid a free cup of water (he bought a lot of food for himself and his friends at the same time). The manager said that the only water they had was the bottled water, and it was $1.50. I informed the manager that I knew they were lying and knew the law, and I would be more than happy to call the Health Department if they didn't get the kid his cup of water... in so many words. In California, at least, restaurant, for a variety of reasons, must provide water with no charges or restrictions, other than there is no regulation on cup size, customer or not. Kid got his water, and he thanked me.

          Shame on them picking on a little kid for not knowing his rights. Now I think they just try to convince adults that anything but bottled water is poisoned or that only poor people drink water.
          Idiots!
        • Re:Workaround (Score:5, Informative)

          by Experiment 626 (698257) on Thursday May 22 2008, @03:20PM (#23510660)

          Wow software is free, and always has been. YES, you pay for the pretty book and the pretty package, but you can always just borrow your friends for the install instead. Where you pay is for the account on their servers.

          You can install WoW from your friend's disks, but when you go to create an account, it makes you enter your own CD key (plus the key for any expansion you want to activate). They could remove this requirement and it would indeed work as you describe, but for now Blizzard expects to get money for both the software and the account fees.

    • by sm62704 (957197) on Thursday May 22 2008, @02:48PM (#23510202) Journal
      Not hardly. My PC recently died (I mentioned it in the other thread today) and I dragged an even older one from the basement. Now, I'd like to put my hard drives, wireless mouse and keyboard, video card with its S-Video so I can plug the TV as a monitor, etc in it.

      XP is going to say that it's a different computer and refuse to run more than 30 days. It has a EULA that slashdotters say is a legal document (although I never signed anything) to back it up.

      I fail to see how this court ruling benefits the user. As Agent Smith said to Neo, "what good is a phone call if you're unable to speak?"
        • I have to agree. I'm no MS fan either, but in the case of getting XP activated on new hardware (i.e., transferring it to a new machine), I've never had any trouble. When a phone call was needed, it only took a couple minutes and was easy and straightforward, no hold times or anything.

          As much as people whinged and complained about how awful activation was when MS first introduced it, I've never had a problem or hassle because of it.

          I will go out of my way to find reasons to criticize MS, but in this can, I cannot.
      • by Anonymous Coward on Thursday May 22 2008, @02:25PM (#23509814)
        without uninstalling...

        So, did Vernor? Or are you just throwing some bullshit out there like "We should just kill everyone because they might commit a crime"?
      • by Uncle Focker (1277658) on Thursday May 22 2008, @02:32PM (#23509924)
        And the same could be said when reselling books, movies, cds, etc. But it's been ruled we have a right to resell such things and it's about time the same thing was clarified for software. It's a shame if the company goes under, but they don't have a right to undermine the rights of the users.
        • So true (Score:5, Insightful)

          by Weaselmancer (533834) on Thursday May 22 2008, @02:40PM (#23510056)

          I mean, look at how libraries have put all those authors and publishers out of business.

          You can get the books for free there! It totally destroyed the book selling market.

          • Re:So true (Score:5, Insightful)

            by Uncle Focker (1277658) on Thursday May 22 2008, @02:42PM (#23510094)
            And clearly Netflix, Blockbuster and Hollywood Video, etc have ravaged DVD sales!
          • Re:So true (Score:5, Insightful)

            by EnOne (786812) on Thursday May 22 2008, @03:18PM (#23510638)
            Can you imagine the difficulty of trying to create a library if they already didn't exist. Publishers, Authors, Printers, MPAA, RIAA... they would all try to sue you into oblivion for essentially 'giving away' what they rightfully own.
            • Re:So true (Score:5, Funny)

              by Osurak (1013927) on Thursday May 22 2008, @03:35PM (#23510830)

              Can you imagine the difficulty of trying to create a library if they already didn't exist. Publishers, Authors, Printers, MPAA, RIAA... they would all try to sue you into oblivion for essentially 'giving away' what they rightfully own.
              Yeah, seriously, thank $deity for prior art
          • Troll?? (Score:5, Insightful)

            by thtrgremlin (1158085) on Thursday May 22 2008, @03:45PM (#23510972) Homepage Journal
            I think a very valid argument is being made, and people have been saying this for awhile. People share and lend books to friends all the time. Yes, it is difficult to get a break in the book market, but the real advantage in movies and music (fir the producers) is barriers to market. As Lawerence Lessig argues (in part) in his book Free Culture, movie companies don't care about piracy, what they worry about is a reduction in the barriers to market. P2P enables anyone with a $200 camera and a $1500 computer to be a movie producer and seen by anyone almost instantly with no restrictions to geographic region. This terrifies the big movie companies. It has been easy for them to make lots of bad movies because there are not a lot of alternatives when it previously required millions of dollars and the studios permission to get in on the game.

            As for CD's? It is as dead as AM radio (AM Radio has a dirty history, read Free Culture)
      • Isn't that the same (fallacious) argument for gun control where they justify taking guns away from law abiding citizens because criminals use guns too? Or blocking all p2p traffic because sometimes people use p2p to transmit copyrighted material outside the copyright holders intended desires?

        And people actually make fun of Singapore for their anti-gun laws?

        Companies and consumers are going to find ways to break the law, that doesn't mean their rights to do legal business should be changed in unnecessary ways. How do you justify that?
      • by Lijemo (740145) on Thursday May 22 2008, @03:48PM (#23511022)

        how about if the little guy writes software, and everyone who buys it goes straight to ebay and resells it, without uninstalling...

        then the little guy is out of business...

        Um, where are you getting the "without uninstalling"? That has nothing to do with this case or TFA.

        This court case says that if I buy a copy of Windows Office and decide I don't like it, that I can uninstall it and sell it to someone else. Previously, software companies had been trying to claim that even after uninstalling the software and destroying every backup copy, you still couldn't sell the original CDs.

        • by mikael (484) on Thursday May 22 2008, @02:58PM (#23510364)
          You give the software away for free, but you charge a free for a license key (eg. Microsoft) that unlocks various features of the software. For potential customers, you provide edit and load functionality. For students, you allow all the edit, load and save features, but any printed files have a watermark copyright. For professional users, you provide all features.
        • by sumdumass (711423) on Thursday May 22 2008, @03:48PM (#23511004) Journal
          This isn't a matter of keeping a copy. US copyright law already states that if your going to sell your copy of computer software, you have to sell all copies of it.

          The laws covering computer programs [cornell.edu] Section 117 a 1 and 2 say that you can make a copy of the program as an essential step in using it (a fancy wording for installing it) and that you have to destroy or transfer the copy with the program is you sell it.

          (a) Making of Additional Copy or Adaptation by Owner of Copy.-- Notwithstanding the provisions of section 106, it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided:
          (1) that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner, or
          (2) that such new copy or adaptation is for archival purposes only and that all archival copies are destroyed in the event that continued possession of the computer program should cease to be rightful.

          So in the case of the little guy, or any guy, keeping a copy of the software without the copyright holders permission is still a violation of copyright. With this ruling, no one can install a copy of software then sell the product on ebay without removing it from their computer first. The little guy needs to do nothing because he is still in as much control of his work as the copyright law originally allowed.
      • by icebike (68054) on Thursday May 22 2008, @02:41PM (#23510078)
        That act is specifically prohibited by the Copyright act. (At your discretion of course).

        See http://en.wikipedia.org/wiki/First-sale_doctrine [wikipedia.org]
      • by Naughty Bob (1004174) * on Thursday May 22 2008, @02:54PM (#23510286)

        I created a 4 hour video on building boats. I sell probably 30 a year. An online video rental site bought a legal copy and now rents my video out at $15 per week.

        So why should people buy my video at $80 if they can get it for next to nothing on the web and most likely just burn their own copy? That's First-Sale Doctrine and it can also suck for the little guy.
        Contact the video rental site. Send them an 'updated', Hi-Def version of your tutorial. Include on this a number of unobtrusive ads for your product, and maybe throw in a few free support calls (then start charging...).

        (I know nothing about boat building, but...) If building boats takes more than 5 weeks, or is slightly difficult, you'll have successfully adapted your business model to (cue scary-deep voice over) 'A Business Model For The Digital Age'.

        Kerching!
        • by Uncle Focker (1277658) on Thursday May 22 2008, @02:54PM (#23510306)
          This post clearly shows that someone doesn't understand either the First-sale doctrine or the reason why libraries can lend out books and movies for free. I suggest no one listen to the nonsense he put out. The rental company has no right under the First-sale doctrine to rent the person's video if they had no permission to do so. Since this rental company is also clearly not a library they are not covered under the same protections afforded to such institutions. The AC, if their claim is real, should use his status as the copyright owner to stop this violation of his rights.
            • by JonWan (456212) on Thursday May 22 2008, @03:47PM (#23510996)
              The first video store I ever visited did this. You purchased the Tape for the retail price (about$80) and returned it for a refund. They deducted $5 for each day you had the tape. If you needed a VCR they would rent one to you for $10 per day plus a $300 deposit.
        • by cfulmer (3166) on Thursday May 22 2008, @03:18PM (#23510634) Journal
          Pardon?

                This is exactly the sort of thing you can do under the first sale doctrine. First sale exhausts the distribution right. (except for software and music. See Section 109(b)(1) of the copyright act.) And, renting is distribution.
          • by jcr (53032) <jcr@mac. c o m> on Thursday May 22 2008, @03:07PM (#23510480) Journal
            Do you think your local video store has a contract with all the movie studios?

            Actually, they do. They buy their copies of the movies through a distributor who acts as the studios' agent.

            -jcr
            • by pegr (46683) * on Thursday May 22 2008, @03:20PM (#23510658) Homepage Journal
              Actually, they do. They buy their copies of the movies through a distributor who acts as the studios' agent.

               
              There is only one circumstance within which video rental stores have a contract (indirectly) with studios, and that's for PPT, or Pay Per Transaction. That is a voluntary agreement where the studios get a cut of every rental.

              Otherwise, any legally owned copy of a copyrighted video work may be rented without any permission from the studios. My qualifications? I was an independent video store owner for 15 years, a long-standing member of the VSDA, and have worked with all the major distributors. I'm afraid you are completely and utterly wrong.

              Apart from that, my slashdot UID is lower, my kids smarter, my wife prettier, and my crap smells like cinnamon rolls.

              Have a nice day!
          • by shawn(at)fsu (447153) on Thursday May 22 2008, @03:13PM (#23510570) Homepage
            I think they do. My sister used to work at a video rental store and I saw the catalog they used to order VHS tapes from. They were easily 4 to 5 times as expencive as buying it from walmart or what have you. This also led to fun times when someone would leave a video in their hot car in Florida and were shocked when told how much it was to replace the tape.
            • by tungstencoil (1016227) on Thursday May 22 2008, @03:49PM (#23511036)
              With all due respect, I will have to agree with Cinnamon-Roll guy (my family, too, was involved with independant video rental business in the late 80s through the 00s).

              Where I believe you are somewhat incorrect is that, in the catalog you saw, you saw prices higher on items not released for "general sell-thru". Recall back in pre-DVD days, many videos were available for rental only first (for a few months). This was because of the artificially high markup (around $100 a tape, circa 1998). Consumers simply wouldn't pay it. When the need for rental stores to buy 10 or 15 copies died down, it went to sell-thru. This was how the movie companies countered the rental market at the time. Interestingly, this was primarily brought about by the stores selling their used copied once the need to have a lot of copies of something died down. To the rental houses, the studios argued they had to make their money somehow, and it wasn't fair to sell a movie out for initial rental for just a few bucks and have it sold for nearly that much used.

              Exceptions were made (think Disney or something that was thought to be a major-selling video, like "Titanic") - and for those that the consumer paid $19.95 for, the video stores paid about $15.

              Agree: it did make for some fun explanations why that new release that baked in the hot (Michigan, in my case) sun in their car was $125 to replace, when they were used to spending $20 for a tape. It's all about the timing.

              The germane point here is that they weren't paying a special licensing fee or anything to the studios (though, in later years, Blockbuster and Hollywood entered into "revenue sharing" agreements that allowed them to get a jillion copies of a movie) - they were simply paying an inflated price set by what was essentially a monopoly for a particular title: the studio.
  • by Anonymous Coward on Thursday May 22 2008, @02:24PM (#23509804)

    Those of you who have not had to deal with their software and their heavy handed approach to licensing and upgrades are lucky.
    • by TheRealMindChild (743925) on Thursday May 22 2008, @02:40PM (#23510054) Homepage Journal
      I can surely attest to this. While in school for CS, I was a junior administrator in the MIS department, doing things like... well, everything that went wrong on the computer network. We dreaded when anything went wrong with Autocad. It was a bloody nightmare. Dongles would just stop working and their customer support would pretty much tell us that we were lying and trying to pirate the software. And it was like talking to a brick wall. No amount of sales receipts or serial numbers mattered. They didn't even care. Their solution every single time was to "Buy a new copy".

      On top of that, upgrading almost never worked. It got to the point where an upgrade to Autocad meant loading up a new system image, then installing it first before anything else.
  • by Nichotin (794369) on Thursday May 22 2008, @02:26PM (#23509838)
    What I could not figure out from the article was: What happens now to his ebay account? If it was pulled, I hope ebay restores it. Bugs me that ebay, google, youtube etc. always gets away for enforcing bogus claims. I did RTFA, but please enlighten me if I have missed something.
  • by vinsci (537958) on Thursday May 22 2008, @02:29PM (#23509876)
    A similar ruling is in effect in Finland since a number of years. The case was vs. Microsoft, decided by the supreme court that reselling MS Windows licenses is perfectly OK and Microsoft can't stop it. Don't have the reference handy, sorry.
  • Product Activation? (Score:5, Interesting)

    by nonsensical (1237544) on Thursday May 22 2008, @02:29PM (#23509886)
    It's about the courts re clarified this for software. When you buy a physical product, you should have the right to sell it.

    What happens now with all the authentication and tying copies of software to the hardware it's first installed on such as Windows XP/Vista?

    You have a right to sell your copy, but effectively you can't because it's been tied to your hardware.
    • by Chris Burke (6130) on Thursday May 22 2008, @02:44PM (#23510128) Homepage
      You have a right to sell your copy, but effectively you can't because it's been tied to your hardware.

      It seems to me that the courts have not typically ruled against "effective" rights violations*. There's no law that says Microsoft can't require your PC to phone home to verify it's using the same hardware as before. So while this decision could be repeated if Microsoft tried to stop you from reselling Vista and you went to court over it, it would probably not have any effect on that sold copy of Vista being useless because Microsoft wouldn't activate it.

      * See Eldridge v Ashcroft, "retroactive finite copyright extensions, repeated infinitely" doesn't violate principle of copyrights being finite.
  • by Hankapobe (1290722) on Thursday May 22 2008, @02:32PM (#23509926)
    FTFA: There is a piece of paper tucked inside that says it is a licensing agreement with the statement "by opening the sealed software packet(s), you agree to be bound by the terms and conditions of this license agreement."

    How many of you have found the actual license agreement is on the media stored in the packet? So in order to read the agreement, you have to open the packet.

  • by icebike (68054) on Thursday May 22 2008, @02:35PM (#23509966)
    The ruling is important because it calls into question the whole concept of a Non Transferable license. The court found that âoefirst saleâ doctrine of copyright law did apply. http://en.wikipedia.org/wiki/First-sale_doctrine [wikipedia.org]

    If this hold, it will largely eliminate the non-transferable license in software.

    And why shouldn't it? As long as the original owner retains no copy, selling an unused license simply keeps that copy under maintenance (maintenance charges frequently exceed sales revenue) and keeps the money flowing to the authors.

    Nontransferable licenses are usually attempted by companies that have some sort of a near monopoly lock, so that not only do they gain from a new sale, they also gain from maintenance charges. If there are multiple vendors of equivalent software you really can't get away with nontransferable clauses.

    As a software author, I'd gladly accept continued maintenance fees instead of new sales revenue. If my customers know that unused licenses have residual value when their projects are completed its good for me, and good for them. They buy extra licenses to handle the surge effort of development, and retain a few licenses for maintenance.
  • No lawyer (Score:5, Interesting)

    by lantastik (877247) on Thursday May 22 2008, @02:36PM (#23509984)
    Wow, that guy has some rocks. In the second link, you find out he sues them without a lawyer. That's not an easy thing to do in a US District Court.
  • by Anonymous Coward on Thursday May 22 2008, @02:37PM (#23510010)
    I just read this article. The author has no idea what a summary judgment motion is, nor the significance of having it denied. Summary judgment motions are just long shot motions brought early in a case to try to dismiss it if there are no facts in dispute. The significance of a *denial* of such a request simply means there are facts in dispute, or the law isn't so clear. IT IS A NON-EVENT. Nobody has won -- the case simply proceeds.
    • Pfft. (Score:5, Informative)

      by cfulmer (3166) on Thursday May 22 2008, @03:28PM (#23510764) Journal
      Certainly more than a non-event.

            The denial means that if Vernon's version of the facts are correct, he wins. The only question is whether his version of the facts are correct.

            The case still goes on, but the opinion is good precedent for future cases with similar facts.
  • by Jason Levine (196982) on Thursday May 22 2008, @02:41PM (#23510066) Homepage
    I'm glad to see this was slapped down. From my understanding (from reading the article) is that Vernor obtained boxed copies of AutoCAD (through some legal means) and then sold them on eBay. AutoDesk was claiming that Vernor was bound by their software license agreement. Even if you accept the validity of a click-through license (a big IF, I know), how would he have been bound by a license that he never clicked "I Agree" to? In AutoDesk's reasoning, did his mere purchasing of the boxed software bind him to the license? I can see how a judge would laugh this out of court. At least with a click-through license, you can present the license's text. In a "buy the box, bound to the license" agreement, where would the license be presented to you? As you were about to pay for the box, would the Best Buy checkout clerk hand you a 10 page agreement to sign? If they didn't, then the license can't be binding (you need to be able to read a contract before agreeing to it), if they did, a lot of people wouldn't feel comfortable signing a big, legal looking document every time they picked up a piece of software.
  • by Zontar_Thing_From_Ve (949321) on Thursday May 22 2008, @02:42PM (#23510100)
    Well, this is what happens when you go to court. You sometimes lose. Expect Autodesk to quickly settle this out of court with quite generous, but non-disclosed, terms to Mr. Vernor. I don't see how they can take the risk that an appeals court will uphold this, so I expect them to pay him a lot of money (maybe $100,000 or more) and have him agree to a non-disclosure of the settlement. The court case will be dropped and Autodesk will not admit to wrong doing and the ruling won't apply since they settled. This will keep the door open that Autodesk or some other company might be able to try a similar case in the future and get a ruling in their favor.
  • by urbanriot (924981) on Thursday May 22 2008, @02:44PM (#23510136)
    I have a client that was recently nailed by the BSA for having illegitimate copies of Autocad, because they purchased them online through various Ebay auctions (they only needed 2005 LT, not the latest and greatest, expensive version). The BSA deemed their less than 10 copies to be illegal, and nailed them with a hefty fine. My client wanted to avoid a legal battle, so they settled and paid this fine.

    That being said, does anyone know what the laws are in Canada regarding reselling retail, boxed Autocad, and if my client had a foot to stand on?
  • by jmichaelg (148257) on Thursday May 22 2008, @02:50PM (#23510232)
    This blog entry by William Patry [blogspot.com] adds quite a bit of background.

    Patry is Senior Copyright Counsel for Google.
    • by qoncept (599709) on Thursday May 22 2008, @02:34PM (#23509950) Homepage
      People don't use AutoCad because they like the company behind it, they use it because they've decided it's the best tool for the job. The people using it cost a whole lot more than software, so you give them what will make them the most productive.