Federal Court Says First-Sale Doctrine Covers Software, Too

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.

Comments

Not really adding anything important but...

[Uncle Focker]

Score one for the little guy!

Re:Not really adding anything important but...

[Anonymous Coward]

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"?

Re:Not really adding anything important but...

[TheRealMindChild]

Their concern isn't actually piracy in this regard. They don't want some CAD operator to sell a two-version-old-Autocad for $5 to someone who needs a CAD package. Instead they want that person who needs it to spend multitudes of money on a brand-spanking-new copy.

Re:Not really adding anything important but...

[mikael]

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.

Re:Not really adding anything important but...

[thtrgremlin]

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?

Re:Not really adding anything important but...

[Anonymous Coward]

I work as a designer for a small firm. I was formerly a draftsman before i got my BS in ME. I can tell you with 100% confidence that AutoCAD 14 is of no use to anyone. Ever.

Architects will have a fully-updated copy of Architectural Desktop, while most machine shops will already have a 3d solid modeling package that supports coordinate systems that CNC cabs, etc. can interface with.

The guy who bought the software off of ebay was probably a kid in high school taking a "technology" class. It'd make sense that the same kid who got a deal on an old version of crappy software might end up as an engineer some day and be responsible for sourcing a CAD package for his employer.. Good think Autodesk nipped that in the bud before they saw another batch of site licenses.

Honestly, I don't understand why companies chose to pick such terrible battles. Any shop that operates with pirated CAD packages will already have the latest version fully cracked--in their native language to boot. (I'm looking at you, China.)

Workaround

[Anonymous Coward]

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

[egburr]

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

[thtrgremlin]

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

[egburr]

See, I really disagree with this, as it basically implies that "any contract you ever sign is bullshit."

Where did I say that? There is no contract. At most, there is a EULA which is non-negotiable and is not even presented until after the purchase is completed. A contract is a documented agreement between two parties for an exchange of money, goods, services, etc. The EULA is not even presented until after that exchange has been copleted. How can it be a contract?

If you install a piece of software, you click through an agreement. You are party to a contract(-ish thing, to get technical).

No, I click the let-me-use-what-I-have-already-paid-for button that is labeled "agree".

If one of the clauses is that you cannot resale the software, and you have agreed to that clause, then why do you all of a sudden feel entitled to sue because you should be able to resell the software (when you agreed that you wouldn't per the contract)?

You didn't read my post, did you? Why are you responding to it? Did you miss the paragraph about the EULA explicitly stating "You may permanently transfer all of your rights and obligations..."? Isn't one of my rights the ability to use the key that is part of the package?

Don't give me bullshit about how you didn't see the license until you bought the software, because you can still return the software if it's not been installed yet. It's the law.

The bullshit part is the part about returning it. Most stores will not accept returns of opened software. Mail-order stores will not pay shipping for the return or refund the original shipping cost even if they were to accept the return. It's not the law; it's a provision of the EULA which the vendors were not a party to.

I just got done with a software licenses class at my law school (wrote my paper on open source licenses, actually), and while I may not like the terms of these clickware license agreements, in my opinion they are valid and we should follow them or stop buying the software / return it and let the companies we don't like how they do business.

That's your opinion, good. My opinion is that they are only as valid as we allow them to be. They are unconscionable, primarily because they are not presented until after the sale is complete and attempt to impose conditions and restrictions that were not agreed upon at the time of the sale. Making it unusable by not accepting the EULA after I have purchased it and installed it has wasted my time and money. Those conditions and restrictions should be presented in full at the time of the sale.

Thoughts? I'd love it if there were some argument to make me switch sides on this issue, as I really want to be on the other side, but I don't think the better arguments are on the other side. I think they're on the side of "obey the terms of the contract."

In general, I'm on the side of "obey the law". I don't know where exactly the law stands on this yet. A EULA is not law. A EULA is a post-sale unilaterally imposed non-negotiable statement of restrictions and conditions with the appearance of a contract that must be agreed to in order to use what was already purchased. Contract law may be relevant to this, but first we have to determine if a EULA really is a full-fledged contract. My opinion is that it is not.

Re:Workaround

[egburr]

The requirements you're implying should be imposed on contract and licensing law with these statements are staggering. You're basically demanding that all agreements be completely performed in person simultaneously or else they are unconscionable.

No, I'm suggesting that the terms of the contract should be agreed upon before the sale is completed, by which I mean money changing hands and me leaving the store with the item I purchased. Anything after that point is unreasonable.

Hell, the current regime still permits post-purchase refusal and refund, but what you're suggesting would make it worse for the average consumer.

Yes it does, but they make it difficult to get the refund, they make it time consuming, and you usually don't get a complete refund, even if you don't count the time wasted. It may make it worse for the average consumer in the short term. In the long term, outrage over that would likely cause the publishers to reduce the contracts to the minimum possible and present more reasonable terms that both parties agree with. As it is now, most people click the let-me-use-what-I-purchased button whether they agree with (or even read) the EULA or not.

Finally, the time of the sale is not the end of the license formation process, and it does not have to be. Again, how do you think people in faraway lands have done business for decades? By mailing contracts back and forth, and including partial performance as part of the deal. You buying the software is partial performance of the agreement. Later, when you click "agree," that's the rest of the performance. The agreement is not finalized until you've fully performed. It's basic, black-letter contract law.

There's a significant disconnect then. I consider the agreement complete when I say "I'll give you this money for that item" and the cashier says "done". The piece of paper hidden inside the box is not part of the agreement; that is something that comes after and says "you can't use this thing you've already paid for until you agree to our amendments to your purchase."

This has never been a valid argument for why a contract or license is crap. Consider this: you read a contract before signing it. You decide you don't like it. Do you now get to say all contracts are unconscionable because they waste your time since you have to read them?

The waste of time is the change of the terms of the agreement after the sale is complete. I have completed the purchase. I have returned home. I have installed the software. Only then is the EULA presented. If it had been presented at the time of purchase, so I could consider it then, if I should decide the EULA was not acceptable I could walk away right then. Now I have to uninstall it (in some cases), return it to the store, convince customer service that the EULA says I have the right to a refund and that they have somehow agreed to that EULA. For example, I spent considerable time reading through all the contracts when I bought my house. The contracts were signed before payment was made. The same is true for my car. I did not consider that time wasted. In both cases, after the sale is complete, nobody came running up denying me entry to my house/car until I signed an extra contract that had not been presented and agreed to before the sale completed.

Autodesk = a true evil empire

[Anonymous Coward]

Those of you who have not had to deal with their software and their heavy handed approach to licensing and upgrades are lucky.

Re:Autodesk = a true evil empire

[TheRealMindChild]

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:What about the ebay account?

[phpmysqldev]

This article goes into more detail about that. Apparently his eBay account was restored (and good thing, I would be livid if I had a 10k+ feedback powerseller account taken from me)

Likewise in Finland since a number of years

[vinsci]

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?

[nonsensical]

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.

Re:Product Activation?

[Chris Burke]

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.

Nontransferable Licenses in question

[icebike]

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

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

[lantastik]

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.

there is NO SIGNIFICANCE to this ruling

[Anonymous Coward]

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.

So true

[Weaselmancer]

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

[EnOne]

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

[Osurak]

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

Vernor 'bound' by a license?

[Jason Levine]

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:First-Sale cuts both ways

[icebike]

That act is specifically prohibited by the Copyright act. (At your discretion of course).

See http://en.wikipedia.org/wiki/First-sale_doctrine

Anyone knows how these laws work in Canada?

[urbanriot]

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?

Re:Anyone knows how these laws work in Canada?

[geekoid]

"My client wanted to avoid a legal battle, so they settled and paid this fine. "
And that's why the get away with this crap. People willing to be shit upon for convenience.

Google's Attorney's Blog

[jmichaelg]

This blog entry by William Patry adds quite a bit of background.

Patry is Senior Copyright Counsel for Google.

Re:First-Sale cuts both ways

[pegr]

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!

Troll??

[thtrgremlin]

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)

Re:First-Sale cuts both ways

[tungstencoil]

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.

AM Radio

[thtrgremlin]

I knew that would be a bit of an inside joke.

AM radio was a big and powerful medium long before tv, but there were some serious drawbacks (like that annoying perpetual humming in the background). Edwin Armstrong, scientist, was commissioned to improve on AM radio on the promise that big media would license it. Mind you they held all the patents for all the technology and the power to control the future technology in many ways money can.

What was totally unexpected was Edwin went on to develop FM radio, something beating all the problems of AM, and totally outside the scope of big media control. Just as Edison tried to do to Tesla with AC power, Edwin was discredited and sued into oblivion, and during all the distractions of a European war, big media managed to buy protection from congress to ensure FM would have to stay within a narrow band of frequencies and transmission power, despite the fact FM was and is superior in every way. Note:limiting transmission power was necessary to ban it from being usable by the government or telecoms which would have required the kind of power that was only legal for AM, for trans-American and transatlantic broadcast. Edwin, eventually old and ruined, seeing what he knew was great destroyed, went on to blow his brains out.

And today we have a strong and thriving AM radio industry, a towering zombie icon to political corruption and an eternal symbol for the power of money!

So as I said, their dead like AM radio :)