Court Says First Sale Doctrine Doesn't Apply To Licensed Software

An anonymous reader wrote to tell us a federal appeals court ruled today that the first sale doctrine is "unavailable to those who are only licensed to use their copies of copyrighted works." This reverses a 2008 decision from the Autodesk case, in which a man was selling used copies of AutoCAD that were not currently installed on any computers. Autodesk objected to the sales because their license agreement did not permit the transfer of ownership. Today's ruling (PDF) upholds Autodesk's claims: "We hold today 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. Applying our holding to Autodesk’s [software license agreement], we conclude that CTA was a licensee rather than an owner of copies of Release 14 and thus was not entitled to invoke the first sale doctrine or the essential step defense. "

Comments

Bad consequences

[Anonymous Coward]

This is going to mean bad things for all the rest of us.

Re:Bad consequences

[ChrisKnight]

Just wait until publishers of physical books and magazines add a 'license agreement' to the first page.

This ruling has the potential to strip the right of first sale from all future books, magazines, CDs, DVDs, etc.

Re:Bad consequences

[Maxo-Texas]

No. We need them to add it ASAP and push the issue hard.

This is one of those "on the internet" type things where the judges are missing reality because they are not seeing it in a familiar context.

Push the license for books, CD's, cars, clothing, everything you can.

Re:Bad consequences

[Anonymous Coward]

Just wait until publishers of physical books and magazines add a 'license agreement' to the first page.

They used to do exactly that, and that is exactly what the First Sale doctrine was created in response to.

This case is even more egregious than the summary suggests because the plaintiff Timothy Vernor never agreed to any license terms with Autodesk. He never opened the packages, never saw an agreement, never clicked through an agreement, and certainly never signed an agreement. Vernor owned these copies until this court said he didn't, and Autodesk's only recourse should have been a civil action against CTA for breaking its contract terms.

Re:Bad consequences

[Zencyde]

While I do hate this strategy, showing the obvious fallacies of a system by pushing it to its limits is one of the more effective ways. Reductum ad absurdum is not simply a logical argument but an overall strategy that can be applied to demonstrate scalable effectiveness of a system. I know we shouldn't expect a system to scale perfect but in this case the system seems to not scale very well at all.

Also, I'd like for it to now be legally disallowed to use the term "buy software" in a commercial context as it no longer applies and would falsely advertise what it is that we "purchase".

Re:Bad consequences

[syousef]

Reductum ad absurdum is not simply a logical argument but an overall strategy

It's hard to reduce to absurdity that which is already absurd. Copyright and patent law has been absurd for decades.

Re:Bad consequences

[Maxo-Texas]

Not unless the license allows you to install it on multiple devices. Typically they do not or only allow a limited number of copies.
If you lose your licensed copy- instead of replacing it, you are usually screwed.

This could be a value add for the companies but instead they use it as a hammer. It could be, "once you license this song, you can download it to any new computers or other devices for life. And the storage fee will only run you $20 a month for an unlimited number of movies and songs." Put a reasonable download limit of once per quarter on it to avoid obvious abuse.

But what they really want is to RENT it to you. You pay for the content every time you use it/play it. Microsoft has said openly they want you to "subscribe" to office.

Re:Bad consequences

[Jane Q. Public]

What all this ignores is that publishers' attempts to put restrictions on books was what CAUSED the creation of the "first sale doctrine" in the first place.

I don't know what it is with some of these court decisions lately, but it's almost like in the last few years the judges have turned into a bunch of morons who ignore precedent and have never picked up a history book. This is a BAD ruling. And it's so obviously bad, given history and legal precedent, that I really have a hard time understanding how they could have decided that way.

It also appears to ignore the issue of "shrink wrap" licensing, which violates the very basic principles of contract law, and which has never been found to be binding by any major court to date.

Re:Bad consequences

[MachDelta]

Too late.

Own a copy of Starcraft 2? The EULA explicitly states you are not allowed to sell it.

Yes, even Blizzard has gone rotten. The apocalypse is nigh.

Re:Bad consequences

[Grishnakh]

Don't worry, they can't apply restrictions retroactively. You'll always be able to sell everything you have now, the question is about things you buy in the future. Just keep an eye on Slashdot and you'll see if anyone tries this BS with books, CDs, DVDs, etc. When that happens, simply don't buy those goods.

Finally, even if you do buy goods licensed that way, you can still sell them, just not in the USA. Look for some type of Craislist-type site in Europe or elsewhere, and sell your stuff there. As long as Customs doesn't open it to inspect it, you should be OK.

However, when it does come to that point, you'll probably want to consider simply packing up and moving out of the USA, because that'll be a sign that things are about to turn really ugly here.

Re:Bad consequences

[Haeleth]

Yes, even Blizzard has gone rotten.

Were you asleep in 2002? Because that's when Blizzard abusing EULAs was news.

Re:Bad consequences

[GameMaster]

The problem is that once you have it applying to things like books, it will be much easier for the software/music lobbyists to pitch a bill that limits the practice to just digital stuff as a "compromise". We call it politics for a reason. Rarely does any one party in a contentious issue get everything they want from new legislation and the only way for the whole system to work is for the people writing and voting on the bills to agree to concessions. The further you let them push it before clamping down in it, the further in their favor the final law is likely to be.

Re:Bad consequences

[HungryHobo]

I'll miss libraries when they're gone. :(

Publishers are gradually changing to e-books anyway and they've never liked libraries, now they just have to make one of the terms of the license that you can't loan books.

Re:Bad consequences

[TheoMurpse]

What all this ignores is that publishers' attempts to put restrictions on books was what CAUSED the creation of the "first sale doctrine" in the first place.

I don't know what it is with some of these court decisions lately, but it's almost like in the last few years the judges have turned into a bunch of morons who ignore precedent and have never picked up a history book.

To be fair, you're wrong that this case is exactly like Bobbs-Merill Co. v. Straus, 210 U.S. 339 (1908), the case that created the first-sale doctrine.

In that case, Bobbs-Merill sold books to wholesalers their copyrighted book including a "shrinkwrap" license saying retailers shall not sell the book below a certain price. Wholesalers sold the books to retailers. Retailers sold the books below the certain price to consumers. The Court held that the license was not binding upon the retailers because there was no privity of contract between the retailers and Bobbs-Merill. This is true: there was only privity of contract between Bobbs-Merill and the wholesalers. And as the license only purported to bind retailers, the wholesalers did not violate the terms of the license either.

However, the case at hand is distinguishable. Here, CTA initially installed the Autodesk software. However, as part of the installation process, CTA agreed not to resale the software. As the sale was from Autodesk to CTA initially, there was privity of contract. Thus, the license is enforceable against CTA.

CTA later resold the software in violation of this agreement. This revokes CTA's license, which means the copies Vernor sold on eBay were unlicensed, infringing copies from the moment he purchased them. When he sold them, he also infringed. This is textbook copyright law. Read the first few sections of 17 USC to verify. I'm honestly too lazy to pull up a citation for something extremely uncontroversial in an otherwise engaging discussion on /.

This case would only be analogous to Bobbs-Merill if the license in that case had forbidden the wholesalers from doing something, and the wholesalers had violated the license. Had the wholesalers violated the license, any copies sold to the defendants subsequent to the violation would have been infringing, and the first-sale doctrine would not have applied.

If you have any questions, please respond. At first glance, the Autodesk case appears to be a rehash of the Bobbs-Merill case. However, Bobbs-Merill turned on privity of contract, while the Autodesk case turns on sales of unlicensed software. Privity is merely tangential to the Autodesk case.

Seeing as how it is very difficult to explain things and make legal arguments on /. in this tiny <TEXTAREA>, I've undoubtedly not been clear enough in my explanation. Hopefully I have, but if I have not, I hope someone points it out so I have the chance to clarify.

It also appears to ignore the issue of "shrink wrap" licensing, which violates the very basic principles of contract law, and which has never been found to be binding by any major court to date.

Well, it ignores the shrinkwrap issue because it's wholly irrelevant to the case.

To explicate by way of analogy: If you buy an infringing CD (illegal copy made by Son May in Asia, for example) and sell it to someone else, you have committed copyright infringement even if you did not know the CD was infringing. Similarly, Vernor (the Autodesk defendant) bought an already infringing copy and resold it. He therefore did commit copyright infringement, regardless of his knowledge of infringement.

We can argue the merits of mens rea-less infringement on moral/ethical grounds, but the law is clear on that issue right now: you don't have to know you're infringing to infringe.

Re:Bad consequences

[WNight]

Yes. It's a common tactic to ask for the moon and then fall back to your previously hideously unreasonable position and play the conciliator, willing to compromise so much.

The only reason to expect anything different at all is because patents are an artificial restriction and a country with them is going to get left behind by unrestricted competitors. Now that we're broke it's getting harder to force the world into ruinous treaties. At some point we'll be left with patented cats and the rest of the world will just cut us and our insane laws off until we starve.

Re:Bad consequences

[Wordplay]

It surely is relevant to the issue of shrinkwrap licensing. In the absence of a valid EULA to strip license, Vernor bought a non-infringing copy. I think it's plain software sold from publisher to end-user with no valid extra contract provisions attached is both implicitly licensed (warranty of merchantability, if nothing else) and that the media is resellable (first sale). ]

For this judgment to be valid, the EULA has to be upheld. AFAIK, that's a new horizon for the 9th District.

Re:Bad consequences

[c]

> Had the wholesalers violated the license, any copies sold to
> the defendants subsequent to the violation would have been infringing,
> and the first-sale doctrine would not have applied.

I have a bit of trouble with this one... You're talking about copies being sold when, in fact, neither the wholesalers nor the retailers were selling anything other than the physical things delivered unaltered by the publisher (who, for sake of argument, we'll assume was providing authorized copies). I fail to see where copyright could have been infringed. If you s/wholesalers/printers/, sure, I'd buy the argument, since the printer would be the ones making copies under license, but it's a completely different scenario when you talk about those who just act as conduits for physical goods.

Re:Bad consequences

[hairyfeet]

You know, as much as I hate to agree with FLOSSies on...well pretty much anything, I have to say RMS is looking spot on with his right to read story. The most basic fundamental rights we have enjoyed for centuries are being taken away by a bunch of weasel lawyers and corrupt officials. Sadly there ain't a damned thing we can do about it either, unless someone here has a couple of billion lying around to buy some politicians with?

Re:Bad consequences

[Runaway1956]

The problem is - what was truly absurd 50 years ago was made legal 40 years ago - and what was absurd 40 years ago was made legal 30 years ago. They keep pushing the envelope, and the kids coming up are brainwashed into accepting the newest absurdity. The "rights holders" outlive the voters and the customers, so today's customers have little idea where things started out, and little idea of what is absurd!

Re:Bad consequences

[Moridin42]

Probably.. however.. I would laugh my ass off, if it opened the software house to lawsuits for crashing your computer, destroying your data, and whatnot despite the release from liability in the license.

After all, if I own the software and am licensing its use, its my property interfering with and damaging other property of mine. But now, I don't own the software. The development house does. And its property is damaging my property.

Re:Bad consequences

[Sabriel]

So would this be a demonstration of GIGO in the legal arena? Logical steps (court process) arriving at a socially undesirable conclusion (prevention of resource transfer) because the initial parameters were garbage (allowing licenses to forbid resale for no reason other than to profiteer by artificially limiting resource availability)?

Re:Bad consequences

[Belial6]

Also, I'd like for it to now be legally disallowed to use the term "buy software" in a commercial context as it no longer applies and would falsely advertise what it is that we "purchase".

Seriously. If a person watches a commercial that says a product is for "sale". They go into the store and see a "sale" sign for the product. They then take the product to the cash register and offer to "buy" the product. The cashier runs the transaction, takes their money, and hands them a "sales receipt". How is this not a SALE of the product?

Re:Bad consequences

[Chowderbags]

So the concession is that the copyright holders get to shaft us in a new way, and we get nothing? A compromise would be "licensed software doesn't have the first sale doctrine, but the license cannot be modified 'at will', preventing a licensed user from using their software entitles them to a full refund, licenses must be readable by people who didn't spend their youth getting a law degree, licenses should be fully available before purchase, if a EULA isn't agreed to a user can return it for a full refund to where they bought it, etc, etc". Hell, I'd settle for a copyright length that puts things produces when my grandparents were kids into public domain. This whole notion of "we should compromise" only works when dealing with reasonable actors. Corporations are not reasonable.

Re:Bad consequences

[DocHoncho]

why should you feel like a criminal? Buy the software, do what you like, and if it pisses off a bunch of shitty lawyers too bad. Just because a bunch of greedy shit heads want to make everything illegal doesn't mean you should feel bad for doing something you would have done anyway. It's not like you're murdering puppies or anything... are you?

Re:Bad consequences

[Migraineman]

Don't worry, they can't apply restrictions retroactively.

So, uh, the retroactive copyright extensions didn't happen?

Re:Bad consequences

[RAMMS EIN]

``You know, as much as I hate to agree with FLOSSies on...well pretty much anything, I have to say RMS is looking spot on with his right to read story.''

Indeed. The beauty is that you don't have to like someone to agree with them, and you don't have to agree with them for them to have a point.

It's scary that, although The Right to Read seemed like a whacky conspiracy theory when I first read it, things have rapidly changed to make it a reality since.

Re:Bad consequences

[Myopic]

You know, as much as I hate to agree with FLOSSies on...well pretty much anything, I have to say RMS is looking spot on with his right to read story. The most basic fundamental rights we have enjoyed for centuries are being taken away by a bunch of weasel lawyers and corrupt officials. Sadly there ain't a damned thing we can do about it either, unless someone here has a couple of billion lying around to buy some politicians with?

Really? Doing marches, protesting and that stuff won't work?

You do realize the one thing the government is afraid of is it's people taking to the streets to voice their unapproval?

It's true: governments will respond to gigantic throngs of penniless people angrily protesting nearby. But to recognize that is not to deny the even more abundant truth that governments will respond to miniscule numbers of rich assholes quietly greasing palms. The ratio of rich fucks versus poor saps that it takes to move government is, what, something like 1-to-100,000-. I absolutely believe that 3,000 of the richest and best connected people in the USA could outweigh every single last one of the rest of us on a policy issue such as copyright reform. So, what I'm saying is, good luck getting your protest participation to the 99.999% level, and if you can't, then I'd rely on big money to get the way you want.

Re:Bad consequences

[marvinglenn]

Also, I'd like for it to now be legally disallowed to use the term "buy software" in a commercial context as it no longer applies and would falsely advertise what it is that we "purchase".

An absolutely brilliant point. And following up on that point, I went to their website to see how they phrased it, and indeed they are using the language "reasons to buy" and "review and buy" on their product pages.

Re:Bad consequences

[kvezach]

We can ignore them altogether. Pirate, build heavily encrypted peer-to-peer networks, migrate from the "official" internet to the "dark" internet, until all that's left on the official internet is corporate advertising. Short of a police state, they can't force us to use the official internet, and the more they tighten their grip, the more people find it worthwhile to slip through the fingers into the unofficial internet.

Re:Bad consequences

[hairyfeet]

Won't work, and here is why: I believe your right to privacy will soon be gone. You watch and see my words come true, the next thing you'll be seeing is Nancy Grace talking about how TrueCrypt is protecting "dirty child pornographers!" and they will equate encryption with CP. Then they don't have to outlaw it, they know simply having it in your possession will have any court convict you.The only "encryption" that will be allowed will be corporate approved, like SSL and the built in MSFT encryption which can be bypassed by law enforcement.

Add to that the most likely utter failure of getting any real net neutrality passed, along with any bills that DO pass having a nasty "illegal traffic" clause that will let them crush any P2P or similar "non approved" application of the bandwidth YOU pay for, and slowly but surely the once free Internet will end up just another cable shopping channel.

Never forget to know your enemy. Your enemy is a multinational cartel, which means they have NO alliance to this or any other country or their beliefs, would have NO problem perverting laws and removing rights in trade for higher profits, and finally has billions of dollars to use against you with everything from SLAPP style lawsuits to outright bribery of elected officials. Sadly like DVD ripping software anything that dares to allow anyone even the POSSIBILITY of costing corporate profits will end up under a DMCA style ban, if not actually made a criminal offense.

Yay!

[Pojut]

Wait...what? Seriously?

Many industries have been trying for literally decades to prevent used or second-hand sales...but parts of the software industry are the ones to actually do it? Huzzah. That's so awesome. Thanks for fucking us over once again. Guess what people will do when they can't buy a used copy and don't have money for a new copy?

Yaargh.

Re:Yay!

[Culture20]

Many industries have been trying for literally decades to prevent used or second-hand sales..

Expect an End User License Agreement with your next car or house. Car manufacturers and home builders would love that.

Re:Yay!

[russotto]

What you buy is a license, and the contract you sign is the EULA you click through when you install the software.

Piss on that, and piss on the Ninth Circuit (in whose jurisdiction I do not reside). What I buy is a copy of a piece of software. The thing in the box is merely an impermissible attempt to restrict my rights post sale.

And the First Sale Doctrine is just that, a doctrine - not a federally protected right.

It's in the copyright code, 17 USC 109.

Re:Yay!

[Duradin]

Do you run AutoCAD solely from the DVD or do you install a copy on your machine?

Re:Yay!

[Sloppy]

The problem is, you are not actually buying something. You are acquiring a license to use.

Let's look at two scenarios. In one case, a person is buying a loaf of bread. In another case, a person is buying software. I'm not going to tell you which is which.

Scenario 1: person walks into store, takes [censored] off the shelf, carries it to cash register, pays $n dollars cash, does not sign or click anything, cashier places [censored] into a bag, and customer walks out of the store, carrying the bag.

Scenario 2: person walks into store, takes [censored] off the shelf, carries it to cash register, pays $n dollars cash, does not sign or click anything, cashier places [censored] into a bag, and customer walks out of the store, carrying the bag.

In which of these scenarios did a person acquire a license to use something, and in which did they become the new owner of a physical object?

Re:Yay!

[Vegemeister]

Nope, it *is* as scuzzy as it seems, by virtue of the fact that it's a home owners' association doing it.

Re:Yay!

[ScrewMaster]

I bought the physical media. I don't need a copyright license to do that. And now owning a "copy" (defined in 17 USC 101 to be the physical media), I have the right per 17 USC 117 to install and run the software on that copy.

Yes, you have that right. However, the vendor of that software is not (as I understand it) bound to give you that right, and laws such as the DMCA make it very difficult to legally install anything if the vendor has chosen to use copy protection. Basically you have rights that you cannot legally exercise and that a vendor can take away from you on a whim ... so for the government to continue calling them "rights" is, to me, just insulting.

From a practical perspective, I have no problem with a corporation wanting to license their software to me, under whatever restrictions they care to place upon it. If I don't like them, I won't rent that software. However, this crap about charging the full retail price for a product under the false pretense of selling it is ridiculous. You want to charge me a nominal monthly fee for the use of your software, fine. I buy the item outright, and you give me the box with the shiny plastic disc in it ... just get out of my face. I won't make illegal copies, but telling me what I can do with it after I've bought it will just get me to seek out alternatives. As this behavior becomes prevalent, when sites like E-Bay start taking down thousands upon thousands of auctions because the software was "sold" with a "non-transferable license" ... well. It just opens up business opportunities for companies willing to treat their customers will more respect. Look, just because something is perfectly legal doesn't mean there's a good business case for doing it, and squeezing one's customers too hard usually has consequences.

Seriously, this is going to present a better and better case for open source products, wherever viable alternatives to commercial shrink-wrapped software exist. That's not always the case, I know (don't want to start a GIMP/Photoshop flamefest here), but if I'm a big company that has traditionally resold old copies of major closed-source apps, I'd think twice before I buy the next version, maybe I'll look at what's out there before sending in that P.O. that, in the past, would have been a no-brainer. At the very least, corporations are going to be scrutinizing those license agreements a bit more closely in the future.

In any event, Congress needs to be replaced far more often than it is. Those fuckers are the ones that sold us out (and there's no other term for it.)

Re:Yay!

[Fieryphoenix]

If the source code were written out in a book for the purchaser to enter into their computer by hand (or even just the bits of a compiled version), you're saying it would be illegal to resell that book? There is no fundamental difference between that and a DVD-ROM delivery.

Re:Yay!

[j-beda]

And whichever one is the software cannot be used because the EULA hasn't been agreed to.

So what happens if I use it *without* agreeing to the EULA? Say I load up the installer in a debugger, click "I disagree" and make the software continue installing anyway. What if I make the EULA display something different (you know, just like a *real* contract, where you can strike sections out or amend it before you sign) and agree to that?

I believe that would be like whiting out sections of the contract after it was signed and carefully inserting your own text in the handwriting of the other party. IE, no way would that pass legal muster.

Couldn't you amend the contract as desired, sign it, and send it to the publisher with a note saying, "if you disagree, let me know"? Isn't that pretty much what the click-through-license does? Then if they disagree and let you know about it, you could resell the box.

Oh, crap

[ak_hepcat]

This is a ruling that is going to spur a lot of changes to software vendors.

*everybody* will end up being "a licensee" of the software, and you will no longer own anything.

And yes, this will extend to FOSS as well... licensing through copyright is still licensing....

Do these judges even understand the enormity of their decisions?

Re:Oh, crap

[Dyinobal]

No they don't or they do and are getting paid nicely for it. Either way we are boned.

Re:Oh, crap

[93 Escort Wagon]

This is a ruling that is going to spur a lot of changes to software vendors.

*everybody* will end up being "a licensee" of the software, and you will no longer own anything.

And how, exactly, is this a change? What software do you currently have that's not licensed to you rather than sold?

I'm not saying it's right - I'm just saying I don't expect changes as a result of this ruling because this is pretty much what every software company does already.

Re:Oh, crap

[Anonymous Coward]

Do these judges even understand the enormity of their decisions?

No they don't or they do and are getting paid nicely for it

There is a third option: They do, but they also recognize that they are bound to make their rulings based on what the law is, not on what it "should" be.

9th Circuit

[Andorin]

This was a decision by the 9th Circuit Court of Appeal, specifically. With any luck whatsoever, this unacceptable ruling will be overturned by the Supreme Court. The 9th Circuit is apparently the most overturned court in the country, so hopefully this won't stand for long.

Re:9th Circuit

[Hatta]

The 9th circuit court makes more rulings than any other circuit, so it also has more rulings overturned than any other court. In terms of percentages, they are not more overruled than any other court.

As for the chances of the Supreme Court overturning this... Has this Supreme Court overturned *any* rulings favorable to corporations?

Re:9th Circuit

[phantomfive]

Yes, but the vast majority of decisions by the 9th circuit court are not overturned, so that doesn't mean anything. Obviously the law isn't clear in this matter (otherwise it wouldn't have gotten this far), so it is anybody's guess what the Supreme Court will do.

It kind of makes sense, you should be able to license software to somebody, just like you should be able to rent a car to someone. The problem is (in my opinion) it should require more than a EULA stuffed in a box, or that you click on, to bind you to such a contract. If you sell something by selling it like an object, people are going to have a reasonable expectation that they bought it.

Re:9th Circuit

[NeutronCowboy]

Complete crap statistics. If it were true, it would mean that the USOC took at least 50 appeals for decisions from the 9th circuit, and overturned at least 47 of them in one year. Considering that they only granted review for 80 cases in the last term, that's basically an impossibility. And it actually is. According to this, the 9th circuit was overturned 71% of the time, which is actually less often than the other two next busiest courts of appeal.

Did you make up these statistics on your own, or did you just regurgitate what you heard?

Whatever happened to copyright?

[Darkness404]

Whatever happened to copyright as it was originally made that copyright was a compromise between consumers and producers. In exchange for giving up the right to use materials how we wished we gained a few key rights among them were limited copyrights, fair use and the first sale doctrine.

Now, while producers now have more power, consumers have less. We no longer have limited copyright, fair use is being systematically eliminated and now the first sale doctrine is being challenged.

A free market works on balance on both sides of the scale, producers and consumers both have rights. A producer has some rights to screw customers but customers have rights to balance that out by being able to screw producers in numerous ways. But that balance is being broken with copyright.

Re:Whatever happened to copyright?

[NeutronCowboy]

This is not about copyright. This is about contracts, which can apply to any good or service. The only question is what kind of contracts can be enforced through EULAs. Turns out, quite a wide range.

You know what will fix this problem in a hurry? People reading the EULA, rejecting it, and petitioning the publisher for a refund. If Activision would have to field to field about a million refund requests for SC2, I bet you that EULAs would get fixed in a jiffy. But since everyone just clicks Accept, nothing will change.

So let me get this straight...

[Anonymous Coward]

You buy something (and you *are* buying it, because the "agreement" isn't presented before the sale.)

You try to install it, and disagree with the EULA, so press "I disagree", and the software doesn't get installed.

You then sell it to try to recoup some of your lost money.

But you can't, because the *agreement*, which you did not agree to says you can't.

The USA is officially the most fucked country on earth.

Re:So let me get this straight...

[NeutronCowboy]

Not quite. Essentially, when you handed over the money, the transaction wasn't complete, because you didn't accept the contract yet. Without that, whatever you paid for is still not yours.

The joy of contract law.

Re:So let me get this straight...

[Grond]

You buy something (and you *are* buying it, because the "agreement" isn't presented before the sale.)
You try to install it, and disagree with the EULA, so press "I disagree", and the software doesn't get installed.
You then sell it to try to recoup some of your lost money.
But you can't, because the *agreement*, which you did not agree to says you can't.

Those weren't the facts of the case at all, nor is it the rule the court laid out. Read the opinion. The undisputed facts were that Autodesk busted a company (CTA) for unauthorized use of AutoCAD. It then licensed 10 copies of AutoCAD R14 to CTA. CTA accepted the terms of the license. Later, CTA upgraded to AutoCAD 2000, paying the upgrade price. It accepted the AutoCAD 2000 upgrade license, which required destruction of the copies of R14. Rather than destroy them, CTA sold the copies to Vernor along with the activation codes in violation of both the R14 and AutoCAD 2000 licenses. Vernor then tried to sell the copies on eBay.

So, the rule is that if you accept the terms of a license and that license (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, then the first sale doctrine does not apply and you must abide by the terms of the license that you accepted.

I don't think there's anything terrible about this ruling at all. Software companies imposing restrictions on customers through licensing agreements helps them perform price discrimination, which often benefits customers. For example, a company might sell a student version on the cheap with a license that says it can't be transferred or at least not transferred to a non-student. If a student could sell the student version to a non-student, then the company could no longer price discriminate, and it would have to charge students a higher price.

Re:So let me get this straight...

[Grond]

Not quite. Essentially, when you handed over the money, the transaction wasn't complete, because you didn't accept the contract yet. Without that, whatever you paid for is still not yours.

The joy of contract law.

This is inaccurate. A typical purchase of boxed software has two parts. First, you buy the box. That transaction is between you and the retailer, and it is complete when you pay for the box. The box will typically include a notice that installing the software requires accepting the terms of a license. This ruling does not affect that transaction. You are free to transfer the box to someone else because you are not yet bound by the license.

Second, you install the software, which includes accepting the terms of the license. This ruling says that, at least under certain circumstances, once the license has been accepted, the user is a licensee, not an owner of a copy, and must abide by the terms of the license.

Note that just because you can transfer the box to someone after step 1 does not mean that the transferee will be able to accept the license. For example, if you buy the student version of a program and sell the box to a non-student, that non-student will be legally precluded from accepting the terms of the license agreement, assuming the license specifies that it is only to be used by students.

Re:So let me get this straight...

[toriver]

The Church of Redmond, WA does.

This should really go to the Supreme Court...

[nebaz]

It would be good once and for all to find out whether or not EULAs (especially ones that do not appear until after the software is open) are enforceable. I would prefer all contracts require written signatures, as well as modifications of such, so that companies can not arbitrarily change clauses willy-nilly even if the contract has wording to allow such. (Think cell phone contracts, I never signed anything). First sale should be first sale, period. On the other hand, I am afraid as to what the Supreme Court would rule in such a decision.

I will enjoy watching piracy numbers escalate.

[Spazntwich]

Makes you wonder if the software vendors have any grasp on the idea that the license having some value as a second-hand sale item is what allows them to charge such exorbitant rates in the first place.

EULA-mania

[Citizen of Earth]

Starting tomorrow, every movie release will come with an EULA.

Re:EULA-mania

[AnonymousClown]

On eBay tomorrow you will find:

Used "Iron Man" DVD case for sale: $6.00 - DVD thrown in for free!

Re:Not Quite

[Andorin]

> What to learn from this? Don't agree to this sort of licence.
In the case of consumer software, people often don't have much choice. The EULA is presented to them after the purchase and after they've already opened the package to install the software. Naturally, vendors and resellers won't accept opened software packages or refund them, so that customer can either accept the EULA or be the proud owner of a new shiny frisbee.

At least we aren't stealing any more

[mtmra70]

If we are just a licensee, then that means they can't sue for intelectual property theft. It went from 'breaking and entering' charges to 'trespassing'.

Re:Not Quite

[DarkKnightRadick]

What if you bought the software, and since you weren't presented with the license before sale, try to sell it after not agreeing to the license and not installing it on your computers?

Re:Used video games

[geekoid]

OTOH piracy will gain a boost.

Why just software vendors?

[roystgnr]

If a copyright holder can retroactively take back some of the rights they sold you by springing a one-sided un-agreed-to contract on you after the fact, what's to stop music, video, or book vendors from putting a EULA in their own works? Ironically, that's exactly what Bobbs-Merrill did in the original "first-sale doctrine" court case, and that was actually less unethical since at their books didn't hide the unilateral rules under a layer of shrinkwrap. Too bad for them that judges were smarter back then...

I can't see how EULAs can be enforceable...

[Radical Moderate]

Name any other contract that one party can't even look at before money changes hands. Obligatory Car Analogy: You hop into your new SUX-2000, turn the key, and are notified that before the engine will start you have to agree to to have your car serviced exclusively by SUX dealerships. And they never mentioned this during the purchase process. How could that possibly be legally binding?

Re:Time to Burn Down the Supreme Court

[Ironhandx]

I wish this wasn't modded flamebait. You folks should realize that revolution doesn't necessarily mean flag burning and civil war. It does mean that you have to gather enough popular support to oust the current government though.

Revolution CAN be peaceful. It will always cause upheaval, but if the system is broken enough, it needs to be thrown out and rebuilt.

Not that I'm saying its necessarily time for Americans to do so, or that this is the sort of issue that should cause a revolution, but there are more than just this fellow that seem to feel that one is necessary, on both sides of the political spectrum.

Again glad I live in Canada

[HannethCom]

In Canada software has always been viewed as a license. So are movies and music.

The law does not allow companies to place restriction on the lending, or selling of a license. Please note I said companies, governments for obvious reasons do not allow this for things such as driver's licenses.

This law is the basis for why downloading a file from a P2P network, or other source is not illegal. The license is for using the material, so you have not committed a crime until you use the material without a license.

For example, if I have All My Loving on a Beatles record and I download the MP3 and listen to it, that is perfectly legal. If I downloaded and listened to Poker Face which I don't have a license to, that would be illegal.

Anyone Read It?

[Legal Penguin]

Okay, I hesitate to weigh in here, because this isn't going to be a popular question, but did anyone read the opinion? This is, factually, a rotten case for first sale. CTA bought the software and agreed to the EULA which specifically required that they destroy Release 14 in order to get upgrade pricing on Release 15. They paid $495 per license for R 15 instead of the normal $3,750 they would have paid specifically BECAUSE they were required to destroy R 14. Instead they decided to say screw it and they sold their old R 14 copies on the secondary market with the activation codes handwritten on the package. Vernor bought the copies, knowing about the EULA, and then resold them and claimed protection from the first sale doctrine.

Now I'm as gung ho as the next guy about appropriate limitations on copyright (maybe not the next guy here on /., but the average next guy); and in particular I think first sale, like fair use, is an incredibly important protection that's been getting the shaft in the courts lately. But in this particular context -- the upgrade context where the company that poured its dollars into writing better and stronger code is trying to cut its customers a break -- it's going to be a pretty hard sell. Vernor screwed himself here, and unfortunately I suspect he took a lot of other people with him.

Re:Anyone Read It?

[Moof123]

I guess in my opinion CTA is the one in the wrong. CTA broke a contract, not Vernor. I could agree with CTA getting sued for the ~3k/seat for their ill gotten copies (plus punitive, etc). As I see it, the sold software was not illegal for Vernor to buy and resell, but was illegal for CTA to sell.

I'm curious to know if the same rules should apply as to passing on endorsed checks as software, where no matter the interim steps a legally signed check is still valid by whoever cashes it in (i.e. interim illegal activities don't make the check null and void).

Clearly I am not a lawyer...

Re:Will the publisher...

[Legal Penguin]

Yes. As the Court notes explicitly on the fourth page of the decision.

In my best Morbo voice

[Sycraft-fu]

CONTRACTS DO NOT WORK THAT WAY!

Contracts aren't something you can trick someone in to, they aren't something you can say "By nodding your head in that way you agree to all this stuff." In general, a contract must have few things that an EULA fails at:

1) A contract must be an exchange. Contracts can't be one sided, they have to be an exchange. That's why if you do something like a quit claim deed (meaning you helped someone buy property and are now letting them have it) it'll say something like "For the sum of ten dollars and other valuable consideration I quit all claim," and so on. Even when the intent is to give something over, there MUST be an exchange for it to be a contract. An EULA just acts to tell you what you can't do.

2) A contract has to be prior to the exchange or sale. This is why you sign all the paperwork related to a home purchase before it is yours. That contract is only binding if you sign it before things happen. They can't sell you something and then say "Oh by the way, here's the contract." Sorry, too late. Same deal with prenuptial agreements. They are "pre" the nuptial for that exact reason. You can't tack on terms after something is done, has to happen before hand.

3) A contract must be open to negotiation. You don't have to accept what the other side proposes, of course, but you have to be open and available for it. You can't hand over a contract and then vanish. When my university signs a contract with MS or someone for a Software Assurance pack, there is negotiation. They send us the contract, our lawyers change it and send it back, they change it and send it back and so on. That has to be there, that opportunity. A contract cannot be a one sided demand, both sides have to discuss and mutually agree.

None of this is new or special, this is how contracts work, this is why things are done as they are. For some reason though some people, including the 9th circuit, seem to be ignoring that for software and saying "Sure it is perfectly ok to put a bunch of requirements on shit ex post facto, never mind that we'd never allow that for other situations."

I do not get this logic (or rather lack of logic).

Or even other goods

[Sycraft-fu]

Suppose you buy an expensive piece of industrial equipment. Once you get it home, you open the box and an EULA falls out. It says you didn't buy the device, you licensed the ability to use it. It says you may not sell the device, or return it for a refund, it is yours now once and for all time. Further, you agree that you can't sue for any injury that happens, even if such an injury is a result of a defect in manufacturing.

How would that be any different? How would that be at all legal, based on existing contract law?

This could be the end of culture.

[Haeleth]

Libraries are now required to predict, in advance, which video games and other licensed media will be culturally significant in the future.

If they fail to buy a copy of a product while it is on store shelves, there is now no legal way for them to preserve it for posterity, since the people who did buy it are not allowed to transfer ownership.

Ah well, back to reading the works of authors like Shakespeare who were somehow inspired to expend massive effort on creating amazing intellectual works despite the lack of any effective copyright protection whatsoever. (Still waiting for you to explain that, copyright lobby ...)

But you can't get a refund

[Sycraft-fu]

Try taking software back to a store. Say you didn't like the license and want a refund. They'll tell you "No refunds on opened software, exchanges only." Of course you can fight that but it takes time and money.