Software Transferability? (or the lack of it)

BarefootClown asks: "We've all seen the stories about Microsoft forcing eBay to remove auctions hawking their software. Microsoft is certainly the most visible target, but there are others. Most every EULA includes a clause forbidding the transfer of ownership of software (there are exceptions, of course, and kudos to them). My question is, have these clauses been upheld in court?" What is so special about software (and their licenses), that allows it to avoid the protections consumers enjoy from more tangible products?

"I seem to recall hearing stories of courts overturning these schemes; does anybody have any specifics? Cases/judicial opinions, perhaps? I've checked FindLaw, Google, and others, but haven't found anything (haven't found anything upholding them, either...). Have these clauses ever even been to court, or do the companies just depend on FUD to bludgeon the end user into compliance? Anybody with experience, I'd love to hear it. Lawyers, your opinions? (Lawyers, would you be willing to fight one out in court, if given the chance?)"

As many of you may know, the concept of "owning" software is fallacy. You own nothing. What you do posess when you purchase your new piece of commercial software, is a corporate-skewed set of limited-use rights, which are getting more and more limited each day. For those interested, the latest print issue of Wired (October, 2001) has a big "article" on this (see p.170). It attempts to illustrate thru humorous example, what software has been seriously doing for decades.

No one would own (or lease) a car if the contract said, "You must not sell this car, in the event this car is no longer used, send it to the nearest junkyard.", so why is this true for software?

Comments

In Germany you are allowed to do this.

[tjansen]

A German court has ruled that you can even sell your OEM versions, and Microsoft can't do anything against it (even though they tried). But in the US this is probably different, thanks to the DMCA...

doctrine of first sale

[_|()|\|]

You want to research the doctrine of first sale. A turn-of-the-century court case involving, essentially, EULAs in books established that a consumer has the right to transfer, in whole, a book, notwithstanding any statement to contrary by the vendor or manufacturer.

I believe this was subsequently written into law for records, but this may have been turned on its ear by passage of UCITA, which gave EULAs teeth.

Re:doctrine of first sale

[bigdavex]

Yes, it's been codified. The question, as others have pointed out, is whether of not the person owns the copy or just a liscense.
This, I believe, is the applicable US law.

U.S. Code, title 17, chapter, section 109:

US Code as of: 01/23/00

Sec. 109. Limitations on exclusive rights: Effect of transfer of particular copy or phonorecord

(a) Notwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord. Notwithstanding the preceding sentence, copies or phonorecords of works subject to restored copyright under section 104A that are manufactured before the date of restoration of copyright or, with respect to reliance parties, before publication or service of notice under section 104A(e), may be sold or otherwise disposed of without the authorization of the owner of the restored copyright for purposes of direct or indirect commercial advantage only during the 12-month period beginning on -
(1) the date of the publication in the Federal Register of the
notice of intent filed with the Copyright Office under section
104A(d)(2)(A), or
(2) the date of the receipt of actual notice served under
section 104A(d)(2)(B), whichever occurs first.
(b)
(1)
(A) Notwithstanding the provisions of subsection (a), unless authorized by the owners of copyright in the sound recording or the owner of copyright in a computer program (including any tape, disk, or other medium embodying such program), and in the case of a sound recording in the musical works embodied therein, neither the owner of a particular phonorecord nor any person in possession of a particular copy of a computer program (including any tape, disk, or other medium embodying such program), may, for the purposes of direct or indirect commercial advantage, dispose of, or authorize the disposal of, the possession of that phonorecord or computer program (including any tape, disk, or other medium embodying such program) by rental, lease, or lending, or by any other act or practice in the nature of rental, lease, or lending. Nothing in the preceding sentence shall apply to the rental, lease, or lending of a phonorecord for nonprofit purposes by a nonprofit library or nonprofit educational institution. The transfer of possession of a lawfully made copy of a computer program by a nonprofit educational institution to another nonprofit educational institution or to faculty, staff, and students does not constitute rental, lease, or lending for direct or indirect commercial purposes under this subsection.
(B) This subsection does not apply to -
(i) a computer program which is embodied in a machine or
product and which cannot be copied during the ordinary operation
or use of the machine or product; or
(ii) a computer program embodied in or used in conjunction with
a limited purpose computer that is designed for playing video
games and may be designed for other purposes.
(C) Nothing in this subsection affects any provision of chapter 9 of this title.
(2)
(A) Nothing in this subsection shall apply to the lending of a computer program for nonprofit purposes by a nonprofit library, if each copy of a computer program which is lent by such library has affixed to the packaging containing the program a warning of copyright in accordance with requirements that the Register of Copyrights shall prescribe by regulation.
(B) Not later than three years after the date of the enactment of the Computer Software Rental Amendments Act of 1990, and at such times thereafter as the Register of Copyrights considers appropriate, the Register of Copyrights, after consultation with representatives of copyright owners and librarians, shall submit to the Congress a report stating whether this paragraph has achieved its intended purpose of maintaining the integrity of the copyright system while providing nonprofit libraries the capability to fulfill their function. Such report shall advise the Congress as to any information or recommendations that the Register of Copyrights considers necessary to carry out the purposes of this subsection.
(3) Nothing in this subsection shall affect any provision of the antitrust laws. For purposes of the preceding sentence, ''antitrust laws'' has the meaning given that term in the first section of the Clayton Act and includes section 5 of the Federal Trade Commission Act to the extent that section relates to unfair methods of competition.
(4) Any person who distributes a phonorecord or a copy of a computer program (including any tape, disk, or other medium embodying such program) in violation of paragraph (1) is an infringer of copyright under section 501 of this title and is subject to the remedies set forth in sections 502, 503, 504, 505, and 509. Such violation shall not be a criminal offense under section 506 or cause such person to be subject to the criminal penalties set forth in section 2319 of title 18.
(c) Notwithstanding the provisions of section 106(5), the owner of a particular copy lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to display that copy publicly, either directly or by the projection of no more than one image at a time, to viewers present at the place where the copy is located.
(d) The privileges prescribed by subsections (a) and (c) do not, unless authorized by the copyright owner, extend to any person who has acquired possession of the copy or phonorecord from the copyright owner, by rental, lease, loan, or otherwise, without acquiring ownership of it.
(e) Notwithstanding the provisions of sections 106(4) and 106(5), in the case of an electronic audiovisual game intended for use in coin-operated equipment, the owner of a particular copy of such a game lawfully made under this title, is entitled, without the authority of the copyright owner of the game, to publicly perform or display that game in coin-operated equipment, except that this subsection shall not apply to any work of authorship embodied in the audiovisual game if the copyright owner of the electronic audiovisual game is not also the copyright owner of the work of authorship.

You have to copy software to use it.

[Dr. Zowie]

The legal basis for restrictive EULAs is that you have to make a copy of the software (in your computer's RAM) in order to use it. Copying is prohibited without explicit permission, and so, therefore, is use. Therefore the companies can ask you to sign whatever argument they want before allowing you to use the software. If the license is non-transferable then, sure, you can sell the source CD for the software -- but the poor schnook who buys it from you doesn't have a license to copy it, so he can't use it.

Yep, I know it sounds stupid (and means, for example, that online documentation has more restrictions than the exact same information printed on paper). But there are federal legal precedents for that interpretaiton. Check out, for example, MAI vs. Peak Computer, from 1993.

IANAL.

Re:because...

[blakestah]

Software is like prostitution. You got the product. You sell the product. You still got the product. The consumer doesn't get money back just because he's done with the product, it's a totally different concept than just buying tangible things.

Copyright protection allows full transfer and/or resale of copyrighted material and all copies made for personal backup. Software does not get an exemption .

In Germany, this has been further extended. You can even resell your Microsoft Windows OEM license as a full blown license, provided you transfer all copyrighted associated material.

In the US, the issue becomes more complex for EULA protected software. One issue is that the company claims the consumer agrees to a contract he never has a chance to read before purchase. The contract allows the consumer to be refunded for the software, but not from the software owner, Microsoft. No. You have to get the refund from the resaler. In practice this does not happen so you are forced into accepting a license whose terms you cannot read before purchase.

There is some reason to think that EULAs of this form will ultimately be stricken as illegal, and software only protected by copyright. In fact, some people think this is already the case (read http://cr.yp.to/).

So, to sumarize, software is not like tangible things. In some views, it is just like copyright, and is completely re-sellable. Even after use.

Re:because...

[beejhuff]

This is a horrible analogy. First of all, the First Sale doctrine DOES APPLY to recordings of Musical works - meaning when I buy a CD (admittedly it's a copy of a piece of art) I have the right to sell that CD to anyone whom I chose.

Hence used CD shops all around the world.

What's different about software is that you agree to the EULA before you open or install the software.

The real question is whether or not that EULA is even a valid agreement, since it attempts to nullify certain rights the courts have traditionally upheld, such as First Sale doctrine.

In a similar note, I remember reading about IBM getting into Anti-Trust trouble back in the 70's because they would NEVER sell their software or hardware. You HAD to lease it from them, meaning they never transferred ownership of anything to you.

Of course, from a corporate standpoint this makes perfect sense. Economically, a firm will always maximize profits if it only leases (either rights of use or whatever) it's products and services. My question is why no one ever thought to bring this up in the Microsoft case.

IBM was forced by the courts to sell products and software if they were also going to lease them. Of course, they continue to do both, but it's interesting that this was the focus of one of the most successful anti-trust cases in our nation's history, and yet somehow the DOJ missed it in the Microsoft Case.

Anyone have any ideas on how this doctrine has held up in the courts and how it might affect the future of Software as Services???

BJ Hoffpauir
Sr. Systems Architect
Time Trend, Inc.

www.timetrend.com

PS - I read about the IBM issue in "Proudly Serving My Corporate Masters" - a great book!!!
http://www.proudlyserving.com/