The Western District of Washington has affirmed that a Seattle resident, Timothy Vernor, did not infringe the copyright of Autodesk, Inc. when he re-sold AutoCAD software that he had obtained from an Autodesk customer. This is an important software copyright infringement decision that affects the ability of software vendors to prevent the re-sale of their copyrighted software under the First Sale Doctrine.
Vernor initially sold the AutoCAD software on eBay. Autodesk sent takedown requests to eBay under the Digital Millennium Copyright Act (DMCA) that precluded him from selling the software on several occasions, and in 2007 eBay suspended Vernor from selling anything on the service for a month. Vernor was attempting to sell copies of AutoCAD that he had purchased in the sale of an architectural firm. These copies, as stated on the jewel case of the CDs, were subject to AutoCAD’s license agreement. Vernor brought a declaratory judgment action to prove that his sale of the software did not violate the Copyright Act.
The First Sale Doctrine allows the owner of a copy of a work to “sell or otherwise dispose of” that copy. In effect, the doctrine extinguishes the exclusive right of the copyright holder to distribute the physical embodiment of its work after it has been sold to a consumer. Autodesk argued that the First Sale Doctrine did not apply to Vernor’s sale of the AutoCAD programs because Autodesk had only licensed the use of the software and had never transferred ownership of the software to its licensees.
The court examined two different 9th Circuit theories to determine whether the agreement was a transfer of ownership or a mere license: the Wise view and MAI view. The Wise view stated that merely designating a transaction as a license is not enough, and the Wise court examined several ambiguous factors, such as whether the purchaser paid a single flat-fee payment for the software, to determine whether the transaction was a license or a sale. Under the Wise view, courts can still find that a transaction is a transfer of ownership even where the copyright holder expressly reserved title in the agreement. The court ultimately found that the AutoCAD license agreement, under the Wise reasoning, was a transfer of ownership because Autodesk licensees pay a single price for the software and because the license agreement did not have a provision for Autodesk to regain possession of the software.
The MAI view stems from a footnote in which the MAI court, which was considering whether a computer technician’s copying of software during repair was infringement, broadly asserted that the software at issue was licensed and not sold. Subsequent decisions citing MAI have stated that it stands for the proposition that a license that clearly states that it is a license is, in fact, merely a license and not a sale. Autodesk argued this fact extensively and even hired noted University of Houston Dean Raymond T. Nimmer as an expert witness to attest to the validity of the license agreement.
Despite Autodesk’s attempts, the court was not swayed. The court cited a proposition from Mr. Nimmer’s own book, The Law of Computer Technology, for the argument that “[m]erely labeling a transaction as a lease or license does not control.” Further, the court noted that prior 9th Circuit courts had called Mr. Nimmer’s view of licensing was “overly simplistic.” In the end, the court stated, citing Patry on Copyright and Nimmer on Copyright,
The views of commentators like Mr. Nimmer are helpful to courts and software lawyers in illuminating different perspectives on legal issues, and no doubt come from people who have devoted more study to those issues than the court. Nonetheless, the court is neither permitted nor inclined to defer to Mr. Nimmer’s view of licensing law and practices, any more than it could defer to the supportive views of other commentators.
Ultimately, the court found that MAI and Wise were irreconcilable. “Owner,” as used in both §109 and §117, has the same meaning in both sections. Autodesk attempted to assert the rarely used equitable defense of copyright misuse, which acts much like an unclean hands defense, but the court rejected it. The court found that the transaction was a sale because the restrictions imposed in the agreement were common to the software industry and because the software was purchased with a single payment.
This is a huge loss for Autodesk, so it is likely that they will appeal. It will be interesting to see how the 9th Circuit Court of Appeals will decide the software copyright infringement case, and it is likely that this is not the last time the issue of the First Sale Doctrine’s applicability to software ownership will be litigated. With the advent of second-hand MP3 stores, such as Bopaboo, the applicability of the First Sale Doctrine will continue to be an issue for software lawyers involved in modern copyright litigation. You can read the opinion here, courtesy of the EFF.