An interesting case comes out of the West earlier this month under Copyright law’s “first sale” doctrine, involving computer software under a license agreement.
Copyright’s “first sale” doctrine
The “first sale” doctrine involves this concept: If you buy a copyrighted work (say, a painting, or a book, or – as in this case – software – you have an unqualified right to transfer your copy of that work to anybody as you please. That doesn’t mean you can make additional copies and sell those too, but generally it does mean that you are free to resell something that you purchase. (As will be discussed below, the operative term is “purchased”.)
The doctrine was first recognized by the Supreme Court in a 1908 case, and later codified by Congress into the Copyright Act in the 1976 amendments to the Act.
One commentator has illustrated the purpose of the doctrine with this absurdity:
If you purchase a Ford car, you may not drive it near a Chevy dealer, or trade it for a Chevy, because it was Ford’s car.
Whether or not that might make business sense, clearly this is not a correct statement of reality. Which gives us the first sale doctrine.
The recent software dispute involving first sale was Vernor v. Autodesk, Inc., decided September 10, 2010.
The case involved a software vendor (Autodesk) and an end-user (Vernor) who sought to resell (on eBay) the 4 copies of Autodesk’s software that he had previously purchased. Of course, the operable term is “purchased”, because technically, Vernor licensed rather than purchased the Autodesk software. That distinction decided the case.
The ruling was on an appeal from a lower court which held that, notwithstanding the fact of a “license” rather than “sale”, the first sale doctrine still applied because the end-user was permitted to retain the physical copies of the software in perpetuity. In other words, the court disregarded the distinction between a license and a sale of software, except where the physical copy was required to be returned similar to a rental or lease.
The appeals court reversed, basing its ruling largely on the clear terms and affirmative acceptance of a standard software license agreement. And as Jeffrey Neuberger wrote this week about the case,
In brief summary, the court held that “a software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use restrictions.
Some commentators (see, particularly, Wired’s analysis of the case) worry that the ruling guts the first sale doctrine, in that other copyright owners could simply insert license terms into their products to the same effect. So, for example, a book publisher could insert a license into the dust cover.
That concern may or may not be justified, although it is already true that e-book and e-music downloads are appended with their own versions of click-wraps similar to typical software license terms.
In any event, it may be premature to read anything into this other than an affirmation of the standard practice in the software industry of licenses (even licenses in perpetuity) rather than sale.
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