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Federal Court Says First-Sale Doctrine Covers Software, Too 509

Posted by timothy
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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Federal Court Says First-Sale Doctrine Covers Software, Too

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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: (Score:3, Informative)

        by Gat0r30y (957941)
        I suppose they could, but many folks are going to want to work in AutoCad without an internet connection. It would make a little more sense to stick a license on every box of software - and on install associate it with a user account. Even that though probably isn't optimal - considering many companies just have a license server for such programs.
      • 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.

        • by Dachannien (617929) on Thursday May 22, 2008 @02:55PM (#23510320)
          Reusing the key would require that the previous owner relinquish the key from their account. It's apparent that the previous user, um, neglected to do that before he sold you his copy of WoW on eBay.

          On a side note, I have this bridge I'd like to sell on the cheap. Interested?
        • 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!
      • by davidsyes (765062) on Thursday May 22, 2008 @05:01PM (#23511962) Homepage Journal
        They already have the PLU, which is just ONE way to create an extreme hassle to would-be second-owners, and a deterrent to first-purchaser resales.

        Basically, the PLU, or portable license utility, is installed with every protected Autodesk product. Well, at least with AutoCAD. After you register and authorize your licensed copy (electronically or over the phone, etc), the PLU ties that license to that machine. If you install and try to run another instance of the software on another machine, or even reinstall on your own after a total disk wipe, you'll have to re-register or at least get re-authorization.

        http://discussion.autodesk.com/thread.jspa?threadID=608297 [autodesk.com]

        http://discussion.autodesk.com/thread.jspa?threadID=478591 [autodesk.com]

        http://www.autodesk.co.uk/adsk/servlet/item?siteID=452932&id=6005296&preview=1 [autodesk.co.uk]

        http://www.cvis.com/MP/Using_the_Portable_License_Utility.htm [cvis.com]

        http://www.tovna.com/main/softlock.htm [tovna.com]

        http://www.cadforum.cz/cadforum_en/qaID.asp?tip=2396 [cadforum.cz]

        When you want to legally for a day or a week or whatever transfer the user activity from one machine to another, you activate the PLU, specify the target machine to which the license is to be sent. When done, do the same on the current machine to get the license back to your original machine. If you botch it, you've got to call Autodesk. Botch it TOO many times, they'll forever deny re-authorization for that particular license.

        If confused, contact Autodesk, or go visit the AUGI and other sites.

        I don't particularly have a problem with the PLU. But, if the PLU is used to deprive resale by legitimate license holders who want to dispose of the product and maybe use a competing product, then "locking in" the user is heinous. I use AutoCAD for WORK. But, for my hobby, I use TurboCAD and Punch! ViaCAD and marine products meant for ship design. AutoCAD 2009 and even 08 have some nifty features, but about all I don't like about TC & VC is their pseudo-command-line is limited to single strokes, not multiple characters. That makes me think AutoCAD has some "patent" lock or threat against other CAD companies attacking AD on the command line. If that is TRUE, then that'll be yet another reason for me to continue using the smaller guy for my non-work activities.
    • by Anonymous Coward
      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.
      • 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]
      • Re: (Score:3, Informative)

        by Uncle Focker (1277658)
        That rental company has no right to do that under the First-sale doctrine. If they are truly doing so you need to take action to stop them. It's funny that you tried to argue against the First-sale doctrine protections by providing an example of something that isn't protected by said doctrine. A rental company must have a contract with the copyright owner in order to rent out their copyrighted works.
        • by cfulmer (3166) on Thursday May 22, 2008 @03:18PM (#23510634) Homepage 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 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 stubear (130454) on Thursday May 22, 2008 @03:01PM (#23510404)
        Actually First Sale only allows one to resell their physical copy, nothing else. If they want to rent it then they have to enter into an agreement with you to do so. Copyright law protects you here. Ever wonder why rental late fees were so high? Rental stores pay (or they used to anyway; not sure how it works now) more for each copy explicitly for the right to rent the video and replacing them was expensive. The copyright holder gets more for these discs, though nothing compared to what the video stores could ultimately make for a new release, and video stores get to rent the videos. I'd suggest contacting a lawyer and proceed from there. You should be entitled to more per copy if they want to rent the video.
    • 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?"
      • Re: (Score:3, Informative)

        by Mister Whirly (964219)
        I know this isn't the point you are trying to make, but call MS and explain to them what you are doing. They will issue you another key with relatively few hassles. I have done this a few times in the past and have had nothing but helpful MS employees who have issued a new license key with minimal questions involved.
        And no, I am by no means a MS fanboy, just relating my real-life experiences with MS keys and hardware changes.
        • by ConceptJunkie (24823) * on Thursday May 22, 2008 @03:37PM (#23510860) Homepage Journal
          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 @02:24PM (#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.
      • Re: (Score:3, Interesting)

        by sumdumass (711423)
        Interesting. I just moved a copy of Autocad from a windows 2000 machine to an XP laptop that was replacing it. I had to call and validate the license key for an activation code because the old one wouldn't work in the new OS. They gave me one no problem. They asked if I removed it from the old computer yet and I told them I couldn't do that until the new computer was totally functional.

        That was for a county (government) office though. The licensing might be different elsewhere or they could have changed the
  • 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.
  • Antiquated Thinking (Score:3, Interesting)

    by ouvyt (1294074) on Thursday May 22, 2008 @02:27PM (#23509848)
    AutoCad aggressively attempts to make itself irrelevant. Why generate such bad press over a single copy... This follows the same backwards mentality of the book publishing industry, which thinks the less books in the hands of people the better.
    • 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.
    • Precedent (Score:3, Informative)

      by Weaselmancer (533834)

      Why generate such bad press over a single copy...

      Because they were hoping to set a precedent, that's why.

      Same reason the RIAA backs out anytime one of their victims looks like he can put up a decent fight. Precedent is powerful.

      The difference here being that Autodesk got their asses handed to them because they decided to see their illogical claim all the way through to a ruling. I'm sure they were hoping for a ruling in their favor so that future claims would be a rubber-stamp process.

      Unfortunately for them, they lost. Surprise! Now the rubber

  • Psystar (Score:4, Interesting)

    by oahazmatt (868057) on Thursday May 22, 2008 @02:28PM (#23509860) Journal
    A bit off-topic, but I'm wondering if Apple was actually waiting on this ruling before going after PsyStar for OS X.
  • by vinsci (537958) on Thursday May 22, 2008 @02:29PM (#23509876) Journal
    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.
    • by sumdumass (711423) on Thursday May 22, 2008 @04:07PM (#23511262) Journal
      You know, you just brought up a pretty interesting observation. How would this Non Transferable license effect sarbanes oxley compliance? If there is no liquid value in a non transferable license, then as soon as a company purchases it, it ceases to be an asset of value. You couldn't list it as value towards bankruptcy either, I wouldn't think. But claiming $20,000 in computer software as an asset when if it ever needed to become liquid to satisfy debt or something, it would be worthless in essence might seem like a violation of some sorts.

      Then again, if you file bankruptcy and dissolve the company, the company/person acting for the company who agreed to the license disappears. Would the Non Transferable license still be bound at that point? This case in question is a situation where someone purchased software at an auction (could very well be a bankruptcy sale) and didn't agree to any licenses before attempting to resell it on Ebay. If the software is confiscated from the company that agreed to it, is anyone but the company bound by the non transferable license anymore?
  • 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) Homepage 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 gnasher719 (869701) on Thursday May 22, 2008 @04:38PM (#23511652)

      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.
      You should have read what the judge wrote. In this case, there are no facts in dispute. However, in a motion for summary judgement the judge can only rule for the moving party (in this case Autodesk who asked for the summary judgement) and the case is closed and won by the moving party, or the judge can deny the motion for summary judgement and the case goes on. The judge cannot possibly, at this point, rule against Autodesk. However, in this case, the judge can use exactly the same arguments to finally decide the case against Autodesk when it is time to do so.
  • by Jason Levine (196982) on Thursday May 22, 2008 @02:41PM (#23510066)
    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.
    • Re: (Score:3, Interesting)

      I wonder if this also applies to subscription services like DSL. I'm currently in the middle of resolving a dispute over a DSL early cancellation fee. Before I purchased the service, I asked for a copy of the license agreement. SBC said they didn't provide written copies of the agreement (At present, you can get them on the web, but you couldn't, or at least the salesman didn't tell me that I could at the time).

      The salesman assured me that if I were to move before the 1 year contract was up and SBC could
    • Re: (Score:3, Interesting)

      by db32 (862117)
      You clearly haven't thought this out very well. What makes you think you could buy software from Best Buy anymore? Best Buy would have had to purchase said software to put on their shelf in the first place and thus be bound by this type of agreement. In this case I would have actually hoped AutoDesk would have won this nonsense. I could have made MILLIONS! I walk into court with a ruling in favor of this kind of draconian nonsense and a phone call to the BSA asking for my reward for reporting piracy on
  • 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 Anita Coney (648748) on Thursday May 22, 2008 @02:44PM (#23510134) Homepage
    But what the court actually determined is that software licensing agreements (as currently written) do not apply to third parties. And that those third parties have the right to resell software under the first sale doctrine.

    Even so, it's still an amazing ruling.
  • 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) Journal
    This blog entry by William Patry [blogspot.com] adds quite a bit of background.

    Patry is Senior Copyright Counsel for Google.
  • by MikeRT (947531) on Thursday May 22, 2008 @02:53PM (#23510274) Homepage
    No doubt, part of the problem it has with piracy comes from the way that software isn't held to the same expectations as physical property, adjusted for the ability to copy it. If I buy a copy of Autocad, I should be able to sell my one copy of it. I can do that with anything else in my home. Why should software be exempted from this social and legal convention of property use?

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