Re: Utterly imbecile pinky communist Ninth Circuit 'judges' (Vernor scandalous ruling)

[Alexander Terekhov]

http://www.citizen.org/documents/Vernor_Autodesk_Petition_Rehearing.pdf

"No. 09-35969
__________________________________
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
__________________________________
TIMOTHY S. VERNOR,
Plaintiff-Appellee,
v.
AUTODESK, INC.,
Defendant-Appellant.
__________________________________
Appeal from the United States District Court
for the Western District of Washington
__________________________________
PETITION FOR REHEARING EN BANC
__________________________________
Gregory A. Beck
Deepak Gupta
PUBLIC CITIZEN LITIGATION GROUP
1600 20th St. NW
Washington, DC 20009
Phone: (202) 588-1000
Counsel for Plaintiff-Appellee
October 1, 2010
i
TABLE OF CONTENTS
TABLE OF AUTHORITIES 
....................................................................................
 ii
RULE 35(b)(1) 
STATEMENT..................................................................................1
INTRODUCTION AND BACKGROUND 
..............................................................1
ARGUMENT.............................................................................................................4
I. The Panel’s Distinction Between “Licenses” and “Sales”
Conflicts With Decisions of the Second and Federal Circuits
and Is Based on a Fundamental Misunderstanding of Copyright
Law. 
.......................................................................................................4
II. The Panel’s Reliance on Formalistic Licensing Language
Instead of Economic Realities to Determine the Nature of a
Transaction Conflicts With Decisions of the Supreme Court,
this Court, and the Second Circuit. 
.......................................................7
A. Whether the Copyright Owner Specifies that It Is
Granting a 
“License”...................................................................8
B. Whether the Copyright Owner Significantly Restricts the
User’s Ability to Transfer the Software....................................12
C. Whether the Copyright Owner Imposes Notable Use
Restrictions................................................................................13
III. This Case Involves a Question of Exceptional Importance
Because the Panel’s Rule Undermines Consumers’ Personal
Property Rights and Destroys the Balance Created by the First-
Sale Doctrine. 
......................................................................................15
CONCLUSION........................................................................................................18
CERTIFICATE OF SERVICE 
................................................................................19
ii
TABLE OF AUTHORITIES
Cases
Atonio v. Wards Cove Packing Co., 810 F.2d 1477 (9th Cir. 1987) (en
banc)..............................................................................................................
 11
Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908) 
.......................................... passim
Brilliance Audio, Inc. v. Haights Cross Commc’ns, Inc., 474 F.3d 365
(6th Cir. 2007) 
..............................................................................................
 15
Denbicare U.S.A. Inc. v. Toys R Us, Inc., 84 F.3d 1143 (9th Cir. 1996) 
............... 16
DSC Commc’ns Corp. v. Pulse Commc’ns, Inc., 170 F.3d 1354 (Fed.
Cir. 1999) 
................................................................................................
 1, 2, 6
In re DAK Indus., 66 F.3d 1091 (9th Cir. 
1995)............................................. 1, 2, 10
Krause v. Titleserv, Inc., 402 F.3d 119 (2d Cir. 2005) 
.................................... passim
MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir.
1993) 
.......................................................................................................
 3, 5, 6
Omega, S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2010),
cert. granted, 130 S. Ct. 2089 
....................................................................... 16
Parfums Givenchy v. Drug Emporium, 38 F.3d 477 (9th Cir. 1994) 
..................... 16
Quality King Distribs. v. L’anza Rsch. Int’l, 523 U.S. 135 (1998) 
.................... 9, 16
Sebastian Int’l v. Consumer Contacts, 847 F.2d 1093 (3d Cir. 1988) 
................... 15
United States v. Atherton, 561 F.2d 747 (9th Cir. 1977) 
........................................ 14
United States v. Wise, 550 F.2d 1180 (9th Cir. 1977) 
.............................. 1, 2, 11, 13
Wall Data, Inc. v. Los Angeles County Sheriff’s Dept., 447 F.3d 769
(9th Cir. 2006) 
............................................................................................
 3, 7
iii
Statutes and Rules
11 U.S.C. § 365(n) 
..................................................................................................
 10
17 U.S.C. § 
101.....................................................................................................
 4, 9
17 U.S.C. § 
106.....................................................................................................
 4, 5
17 U.S.C. § 
109................................................................................................
 passim
17 U.S.C. § 109(b) 
.....................................................................................................9
17 U.S.C. § 
202..........................................................................................................5
17 U.S.C. § 
504.......................................................................................................
 17
17 U.S.C. § 
506(a)(1)..............................................................................................
 17
Fed. R. App. P. 35(b)(1)(A) 
.......................................................................................1
Fed. R. App. P. 35(b)(1)(B) 
.......................................................................................1
H.R. Rep. No. 105-551 
(1998)...................................................................................6
Other Authorities
John A. Rothchild, The Incredible Shrinking First Sale Rule, 57
Rutgers L. Rev. 1 (2004) 
.................................................................... 4, 17, 18
Melville B. Nimmer & David Nimmer, 2 Nimmer on Copyright
§ 8.08(B)(1)(c) (2006) 
.....................................................................................6
Molly Shaffer Van Houweling, The New Servitudes, 96 Geo. L.J. 885
(2008)............................................................................................................
 14
R. Anthony Reese, The First Sale Doctrine in the Era of Digital
Networks, 44 B.C. L. Rev. 577 (2003) 
......................................................... 18
Restatement (First) of Prop. §10 cmt. c (1936) 
...................................................... 14
iv
Thomas F. Merrill & Henry E. Smith, Optimal Standardization in the
Law of Property, the Numerous Clauses Principle, 110 Yale
L.J. 1 
(2000)..................................................................................................
 17
1
RULE 35(b)(1) STATEMENT
Appellee Timothy S. Vernor seeks en banc reconsideration of the panel’s
decision in this case because it conflicts with decisions of the Supreme Court,
Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908), and this Court, In re DAK
Indus., 66 F.3d 1091 (9th Cir. 1995); United States v. Wise, 550 F.2d 1180 (9th
Cir. 1977), and “consideration by the full court is therefore necessary to 
secure and
maintain uniformity of the court’s decisions.” Fed. R. App. P. 35(b)(1)(A). In
addition, the decision involves “questions of exceptional importance,” Fed. R.
App. P. 35(b)(1)(B), because it conflicts with decisions of the Second and 
Federal
Circuits, Krause v. Titleserv, Inc., 402 F.3d 119 (2d Cir. 2005); DSC Commc’ns
Corp. v. Pulse Commc’ns, Inc., 170 F.3d 1354 (Fed. Cir. 1999), and because, by
redefining the nature of ownership of software and other copyrighted works, the
decision will adversely affect nearly every consumer who is subject to its 
authority.
INTRODUCTION AND BACKGROUND
More than a century ago, the Supreme Court in Bobbs-Merrill Co. v. Straus
rejected a book publisher’s attempt to impose restrictions on resale with a 
limited
“license.” 210 U.S. at 341, 350. Congress later codified this fundamental limit 
on
the scope of the copyright monopoly, known as the “first-sale doctrine,” by
providing that the “owner of a particular copy” of a copyrighted work is 
entitled to
resell that copy “without the authority of the copyright owner.” 17 U.S.C. § 
109. In
2
this case, the district court held that § 109 allowed Vernor to resell on eBay
authentic copies of Autodesk’s AutoCAD software that he bought second-hand at
garage and office sales. The panel, however, reversed, holding that the 
first-sale
doctrine is inapplicable to copies of Autodesk software—and that resale of those
copies therefore constitutes copyright infringement—because the software is
accompanied by a “license agreement” that purports to prohibit resale.
The panel’s opinion adopts an artificial distinction between “licenses” and
“sales” that flatly conflicts with decisions of the Second and Federal Circuits 
and
misconstrues the plain language of the Copyright Act, creating divergent and
incompatible standards of ownership in an area of law where national uniformity 
is
of paramount importance. See Krause, 402 F.3d 119; DSC Commc’ns, 170 F.3d
1354. Moreover, the panel’s test for determining whether a transaction is a sale
relies entirely on the copyright owner’s characterization of the transaction and
formalistic reservation of rights, while ignoring the economic realities of the
exchange—an approach that conflicts with decisions of the Supreme Court, this
Court, and the Second Circuit. See Bobbs-Merrill, 210 U.S. 339; Krause, 402 F.3d
119; DAK Indus., 66 F.3d 1091; Wise, 550 F.2d 1180.
The panel’s decision also involves an issue of exceptional importance
because it is the first by any court to hold that a consumer is not the owner 
of an
ordinary package of commercial software that is distributed with a “license
3
agreement.” By holding that a relatively typical software license is sufficient 
to
withhold ownership, the decision effectively abolishes the first-sale doctrine 
for the
software industry and has the immediate effect of depriving almost all consumers
of ownership of their software. The panel’s test also provides a cost-free 
formula
for the book, music, movie, and other copyright industries to follow software’s
example, thus rendering Bobbs-Merrill a dead letter.
Although the panel recognized these policy concerns, it did not reach them
because it considered itself bound by a line of authority originating from a 
onesentence
footnote in MAI Systems Corp. v. Peak Computer, Inc., an early software
copyright decision later overruled by statute. 991 F.2d 511, 518 n.5 (9th Cir. 
1993).
This Court in a later case recognized the extensive criticism MAI has engendered
and the Federal Circuit’s express rejection of its holding, but declined to 
revisit the
decision because the case could be decided on other grounds. Wall Data, Inc. v.
Los Angeles County Sheriff’s Dept., 447 F.3d 769, 785 n.9 (9th Cir. 2006). Here,
the panel held that MAI squarely controlled the result, and there is no reason 
for
this Court to defer reconsideration.
4
ARGUMENT
I. The Panel’s Distinction Between “Licenses” and “Sales” Conflicts With
Decisions of the Second and Federal Circuits and Is Based on a
Fundamental Misunderstanding of Copyright Law.
The panel’s central holding in this case is that the first-sale doctrine as
codified in § 109 does not apply when “a software user is a licensee rather 
than an
owner of a copy” of software. Op. 13879. The panel’s holding arises from a false
distinction between “licenses” and “sales”—a misunderstanding of copyright law
that directly conflicts with the plain language of the Copyright Act and 
decisions of
the Second and Federal Circuits.
Although many courts “have failed to grasp this utterly fundamental point,”
there is nothing incompatible between a “license” and a “sale.” John A. 
Rothchild,
The Incredible Shrinking First Sale Rule, 57 Rutgers L. Rev. 1, 4 (2004). To
“license” a copyrighted work under the Copyright Act is to grant a portion or 
all of
the copyright owner’s exclusive rights, such as the right to make copies of a 
work,
to distribute it, or to perform it publicly. 17 U.S.C. § 101 (“transfer of 
copyright
ownership”). Section 109, however, does not limit the availability of the 
first-sale
doctrine to the owner of a license in a copyrighted work, but to the “owner of a
particular copy” of that work. As opposed to a copyright, which is an 
incorporeal
concept, a “copy” is a “material object … in which a work is fixed.” Id. § 101
(emphasis added). Physical goods, in contrast to copyright rights, are not
5
distributed by “license.” Rather, the Copyright Act anticipates that copyright
owners will distribute particular copies of their works in the ways that 
physical
goods are typically distributed—“by sale or other transfer of ownership, or by
rental, lease, or lending.” Id. § 106.
Here, Autodesk’s licensing notice stated that it granted a “nonexclusive …
license” in the “products contained in the media,” not the physical media 
itself. 2-
ER-170 (emphasis added). That Autodesk granted a license in its software,
however, says nothing about whether it transferred the “material objects” that
constitute the “particular copies” at issue. See 17 U.S.C. § 202 (“Ownership of 
a
copyright … is distinct from ownership of any material object in which the work 
is
embodied.”). Indeed, as the district court recognized below, transfer of a
copyrighted work commonly involves both the sale of a particular copy and a
license to make certain uses of the copyrighted work. 1-ER-10; see Rothchild, 57
Rutgers L. Rev. at 28-29, 34-35.
The artificial distinction between “licenses” and “sales” on which the panel
relied originated with this Court’s decision in MAI, 991 F.2d at 518 n.5. 
There, this
Court concluded that a computer maintenance company committed copyright
infringement because its use of a computer during maintenance caused a temporary
copy of software to be automatically loaded into the computer’s memory. Id. at
517-19. MAI addressed the software-ownership issue in a one-sentence footnote,
6
without analysis or citation to authority, stating that, “[s]ince MAI licensed 
its
software, [its] customers do not qualify as ‘owners’ of the software.” Id. at 
518 n.5.
Congress later overruled the result in MAI by statute, specifically citing the
decision as the basis for creating a right for computer technicians to copy 
software
into memory. H.R. Rep. No. 105-551 pt. 1, at 27 (1998). Because Congress did not
specifically overrule MAI’s footnote on ownership, however, the panel regarded 
it
as binding authority. Op. 13879.
The MAI footnote has been widely criticized for failing to make the critical
distinction between ownership of a copyright and ownership of a copy. See, e.g.,
Melville B. Nimmer & David Nimmer, 2 Nimmer on Copyright § 8.08(B)(1)(c)
(2006) (describing the footnote’s logic as “inadequate”). For this reason, the
Federal Circuit in DSC Communications expressly declined to “adopt the Ninth
Circuit’s characterization [in the MAI footnote] of all licensees as 
non-owners,”
holding that “[p]lainly, a party who purchases copies of software from the
copyright owner can hold a license under a copyright while still being an owner 
of
a copy of the copyrighted software for purposes of section 117.” 170 F.3d at 
1360.
The Second Circuit also rejected the premise of MAI’s footnote in Krause, 402
F.3d 119. Like Autodesk, the copyright owner in Krause argued that the alleged
infringer “never owned the program copies … but rather possessed the copies as a
licensee.” Id. at 122. The court rejected that argument, noting that it 
“confuses
7
ownership of a copyright with ownership of a copy of the copyrighted material.”
Id. at 124.
This Court in Wall Data recognized the split in authority and the criticism
the MAI footnote has received, but avoided revisiting the decision by resolving 
the
case on another ground. 447 F.3d at 785 n.9. Here, however, the panel considered
itself bound by MAI’s footnote and applied it in deciding the case. Op. 13876. 
This
time, the Court should not decline to revisit MAI’s misapplication of copyright 
law.
II. The Panel’s Reliance on Formalistic Licensing Language Instead of
Economic Realities to Determine the Nature of a Transaction Conflicts
With Decisions of the Supreme Court, this Court, and the Second
Circuit.
The panel created a unique three-part test that, as a matter of federal
copyright law, gives copyright owners a purely formalistic and cost-free way to
bypass the first-sale doctrine and longstanding common-law restrictions on
restraints of trade. To accomplish that result, a copyright owner needs to 
include a
licensing notice with copies of its work that “(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.” Op. 13879. No matter how much a particular
transaction otherwise resembles a sale, a notice that satisfies these criteria 
ensures
that a putative purchaser “is a licensee rather than an owner” and is thus not
entitled to the benefits of the Copyright Act’s first-sale right. The three 
prongs of
8
the panel’s test conflict with decisions of the Supreme Court, this Court, and 
the
Second Circuit.
A. Whether the Copyright Owner Specifies that It Is Granting a
“License”
1. The panel’s reliance on formalistic claims of “licensing” to determine
ownership is flatly inconsistent with Bobbs-Merrill. The publisher in Bobbs-
Merrill purported to grant a “license” that limited subsequent distribution (“No
dealer is licensed to sell it at a less price, and a sale at a less price will 
be treated as
an infringement of the copyright.”), just as Autodesk purported to grant a 
limited
license here (“Autodesk … grants you a nonexclusive, nontransferable license to
use the enclosed program … .”). 210 U.S. at 341 (emphasis added); 2-ER-170
(emphasis added). The Supreme Court refused to give effect to the purported
license, concluding that a copyright owner cannot, with a printed notice, 
“qualify
the title of a future purchaser.” 210 U.S. at 351. Under the panel’s decision 
here,
however, the publisher in Bobbs-Merrill—by following the roadmap in the panel’s
opinion—could today draft a licensing notice that accomplishes the result the
Supreme Court prohibited a century ago.
The panel distinguished Bobbs-Merrill on two grounds. First, it stated that,
because the case was “[d]ecided in 1908, Bobbs-Merrill did not and could not
address the question of whether the right to use software is distinct from the
ownership of copies of software.” Op. 13884. But the Copyright Act does not
9
distinguish books and software in this way. On the contrary, it provides that a
“copy” includes fixation of a work not only by printing on paper, but “by any
method now known or later developed,” and regardless of whether the purchaser
can read the copyrighted material “directly or with the aid of a machine or 
device”
such as a computer. 17 U.S.C. § 101. Moreover, Congress has already spoken
directly to the first-sale doctrine’s applicability to software in § 109 by 
providing
that software cannot be rented, but has not imposed any similar limitation on
whether software can be sold or given away. Id. § 109(b).
Second, the panel relied on the Supreme Court’s statement in Bobbs-Merrill
that the case involved “no claim … of contract limitation, nor license agreement
controlling the subsequent sales of the book.” 210 U.S. at 350. The panel
apparently read the lack of a license agreement to mean that there was no 
license.
But there is no question that the publisher in Bobbs-Merrill was attempting to 
use a
license to impose a restriction on resale. Id. at 341 (“No dealer is licensed 
to sell it
at a less price … .”). When Bobbs-Merrill said there was “no contract or license
agreement,” it meant only that there was no relevant agreement—i.e., there was
“no privity of contract” between the copyright owner and the alleged infringer. 
Id.
at 350; see Quality King Distribs. v. L’anza Rsch. Int’l, 523 U.S. 135, 143 & 
n.10
(1998) (noting that the quoted language “emphasiz[es] the critical distinction
between statutory rights and contract rights”). That is precisely the situation 
in this
10
case—as in Bobbs-Merrill, Vernor was a third party who did not agree to the
copyright owner’s license agreement and thus could not be bound by the license
terms as a matter of contract law.
2. The panel’s reliance on the copyright owner’s characterization of a
transaction also contradicts this Court’s own precedent. In DAK Industries, this
Court held that the “economic realities” of an exchange, rather than the label
attached by the copyright owner, determine the nature of a software transfer. 66
F.3d at 1095 & n.2. Holding that Microsoft’s characterization of the 
transaction as
a “license” and payments as “royalties” did “not control [the] analysis,” the 
Court
concluded that the transaction was “best characterized as a sale.” Id.
The panel here distinguished DAK on the ground that it was a bankruptcy
case, but gave no reason why ownership of copyrighted works under federal law
should differ depending on whether a case involves bankruptcy. Op. 13884-85.
The panel’s distinction creates a split in circuit authority between bankruptcy 
and
other cases and would lead to strange results—the “owner” of software, for
example, could be forced to sell the software in bankruptcy, even though, under
copyright law, the software is “licensed” and resale would constitute copyright
infringement. The Bankruptcy Act avoids such problems by requiring courts to
apply “applicable nonbankruptcy law” with respect to intellectual property. 11
U.S.C. § 365(n).
11
In any event, this Court has also held in a non-bankruptcy setting that the
character of a transaction, rather than the label attached to it, determines 
copyright
ownership. In Wise, the Court determined whether particular agreements
constituted sales based not on whether they “expressly reserve[d] title,” but 
on the
“general tenor” of the transactions. 550 F.2d at 1191. The district court 
correctly
concluded that Wise irreconcilably conflicts with the MAI line of authority on
which the panel relied. 1-ER-21. In this Court, “the appropriate mechanism for
resolving an irreconcilable conflict is an en banc decision.” Atonio v. Wards 
Cove
Packing Co., 810 F.2d 1477 (9th Cir. 1987) (en banc).
3. The panel’s approach conflicts with the Second Circuit’s decision in
Krause, which, like DAK and Wise, held that Congress did not intend owners’
rights under the Copyright Act to hinge on a “narrow, formalistic definition of
ownership dependent on title.” 402 F.3d at 123. In stark contrast to Krause, the
panel here relied heavily on Autodesk’s formal reservation of title and gave no
weight to the factor (equally applicable here) that Krause held to be 
determinative
of a sale—the copyright owner’s permanent relinquishment of possession of the
copies at issue in exchange for a one-time payment. Id. at 124-25.
The panel distinguished Krause on the ground that “the parties [there] did
not have a written license agreement, the defendant-employer had paid the
plaintiff-employee significant consideration to develop the programs for its 
sole
12
benefit, and the plaintiff had agreed to allow the defendant to use the programs
‘forever,’ regardless of whether the parties’ relationship terminated.” Op. 
13883.
Of those facts, the first and third also exist in this case—the “parties did 
not have a
written license agreement” because Vernor never agreed to Autodesk’s terms, and
Autodesk relinquished possession of the copies permanently (i.e., “forever.”) 
The
remaining factor—the payment of “significant consideration” to develop software
for the defendant’s “sole benefit”—might be relevant to the question of who owns
the copyright in software, but it sets far too high of a bar for ownership of
particular copies. Nobody would suggest that ownership of a book depends on
whether there was payment of “significant consideration” or whether the book was
written for one’s “sole benefit.”
B. Whether the Copyright Owner Significantly Restricts the User’s
Ability to Transfer the Software
The second question under the panel’s three-part test is whether the
copyright owner “significantly restricts the user’s ability to transfer the 
software.”
This element of the test is entirely circular—under the panel’s analysis, a 
licensing
notice that allowed resale would indicate that the recipient is an owner who is
entitled to resell the work, while a notice that purported to prohibit resale 
would
indicate that the recipient is a licensee for whom resale would be prohibited. 
Such
reasoning is irreconcilable both with Bobbs-Merrill and § 109’s guarantee that
particular copies of copyrighted works may be resold “without the authority of 
the
13
copyright owner.” 17 U.S.C. § 109 (emphasis added). Indeed, it was in the course
of rejecting this precise argument that the Supreme Court in Bobbs-Merrill
recognized the existence of the first-sale doctrine, concluding that Congress 
did not
intend the Copyrigtht Act to “create the right to impose, by notice … a 
limitation at
which the book shall be sold at retail by future purchasers.” 210 U.S. at 350.
C. Whether the Copyright Owner Imposes Notable Use Restrictions
The final prong of the panel’s test asks whether the copyright owner
imposed “notable use restrictions.” Under the panel’s test, such restrictions 
need
not be enforceable or reflect the actual relationship between the parties. As 
long as
they are included in the fine-print of the licensing notice, they are relevant 
to the
question of ownership.
This portion of the panel’s test conflicts with this Court’s decisions holding
that contractual restrictions on use do not demonstrate a lack of ownership. In
Wise, this Court concluded that certain “licenses” were actually sales in cases
involving carefully controlled distributions of films to networks and 
celebrities.
550 F.2d 1180. For example, the Court concluded that a studio’s transfer of a 
copy
of the film Camelot to actress Vanessa Redgrave was a “sale with restrictions on
use,” focusing on the fact that Redgrave (like Vernor) retained permanent
possession of the copyrighted work in exchange for a one-time fee. Id. at 1192.
The Camelot license was far more restrictive than the license here—where the
14
Camelot license restricted use to Redgrave’s home, Autodesk’s license allows use
anywhere in the Western Hemisphere; and where the Camelot license restricted
any use that was not personal or non-commercial, Autodesk’s license purports to
restrict reverse engineering and removal of proprietary notices.1
To be clear, Vernor does not dispute that Autodesk can impose restrictions
on those who purchase its software by contract and can enforce those terms 
against
the original purchaser. Indeed, Autodesk pursued the original purchaser in this 
case
(Cardwell/Thomas & Associates) and obtained a consent judgment. Op. 13868 n.2.
But the panel’s holding would give Autodesk additional causes of action against
every person who, like Vernor, subsequently possessed and transferred a copy
during that copy’s lifetime. Bobbs-Merrill rejected this approach based on the
common-law’s traditional hostility to contractual restrictions that “run with”
personal property to bind future possessors. See Molly Shaffer Van Houweling,
The New Servitudes, 96 Geo. L.J. 885, 910-14 (2008). By concluding that the
imposition of such restrictions has the effect of destroying ownership, which in
turn renders the restrictions enforceable, the panel turned Bobbs-Merrill on its
head. Indeed, the panel’s test would have the perverse effect of encouraging
1 See also United States v. Atherton, 561 F.2d 747, 750-51 (9th Cir. 1977)
(even a “sale to a purchaser with restrictions that are subsequently breached
constitutes a first sale”); Restatement (First) of Prop. §10 cmt. c (1936) (“The
owner may part with many of the rights … that constitute complete property and
his relation to the thing is still termed ownership both in this Restatement 
and as a
matter of popular usage.”).
15
copyright owners who wish to circumvent the first-sale doctrine to include use
restrictions in their licenses.
III. This Case Involves a Question of Exceptional Importance Because the
Panel’s Rule Undermines Consumers’ Personal Property Rights and
Destroys the Balance Created by the First-Sale Doctrine.
The first-sale doctrine is one of the key components of the balance of
interests under the Copyright Act, reconciling copyright’s interest in 
encouraging
creative works with the countervailing individual interests in property 
ownership
and societal interests in free alienability. See Bobbs-Merrill, 210 U.S. at 
349-51.
The doctrine reflects “the traditional bargain between the rights of copyright
owners” and “ensures that the copyright monopoly does not intrude on the 
personal
property rights of the individual owner” by providing that owners of particular
copies of a copyrighted work have the same right to sell, give away, or destroy
those copies as they traditionally have with other personal property. Brilliance
Audio, Inc. v. Haights Cross Commc’ns, Inc., 474 F.3d 365, 373-74 (6th Cir.
2007); see Sebastian Int’l v. Consumer Contacts, 847 F.2d 1093, 1096 (3d Cir.
1988) (“The first sale rule is statutory, but finds its origins in the common 
law
aversion to limiting the alienation of personal property.”).
By giving copyright owners the authority to control disposition of their
works by “license” after releasing them into the stream of commerce, the panel’s
decision cuts deeply into traditional rights of ownership and converts a wide 
range
16
of otherwise innocent activities into copyright infringement. The panel’s 
holding
means that individual consumers will face the risk of copyright liability every 
time
they distribute a work by selling it, donating it to a library, or loaning it 
to a friend.
In the case of software, consumers would be liable for copyright infringement
simply by using the software, because the panel held that a non-owner’s act of
loading software into a computer’s memory is copyright infringement. Op. 13880-
81 n.13. Even worse, copyright liability could attach not only to obviously
copyrighted works like books and software, but to any product that is sold with
labels, logos, packaging, or instruction manuals in which the copyright owner
claims a copyright interest.2
To avoid the risk of liability under the panel’s holding, consumers would be
forced to trace the chain of title of copyrighted works to ensure that 
ownership has
been properly transferred and that no licensing terms have been imposed in the
copy’s history. A consumer purchasing a package of new software from a
computer store, for example, would face copyright liability for installing and
running the software if either the store or its suppliers breached any 
licensing terms
2 See, e.g., Quality King, 523 U.S. at 138 (copyrighted shampoo label);
Omega, S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2010), cert.
granted, 130 S. Ct. 2089 (copyrighted watch logo); Denbicare U.S.A. Inc. v. Toys
R Us, Inc., 84 F.3d 1143 (9th Cir. 1996) (copyrighted diaper packaging); Parfums
Givenchy v. Drug Emporium, 38 F.3d 477 (9th Cir. 1994) (copyrighted perfume
boxes); 2-ER-171 (Autodesk license claiming copyright in software
documentation).
17
contained in their distribution agreements. But unlike real property, for which
transfer of titles are recorded, there is no practical way for a purchaser of 
consumer
goods to obtain such information. Moreover, a mistake in determining a product’s
ancestry could subject the purchaser to severe liability, including up to 
$150,000 in
statutory damages per infringing work, attorneys’ fees, and, if the 
infringement is
willful, even criminal penalties. See 17 U.S.C. §§ 504, 506(a)(1); 2-ER-171
(Autodesk license agreement warning of civil and criminal penalties). Such 
costly
burdens on the stream of commerce are the basis for the common law’s hostility 
to
restrictions on alienation. See Thomas F. Merrill & Henry E. Smith, Optimal
Standardization in the Law of Property, the Numerous Clauses Principle, 110 Yale
L.J. 1, 26-34 (2000).
Allowing copyright owners to restrict downstream distribution by license
also harms consumers by giving copyright owners an easy way to prohibit all
resale and rental. The availability of second-hand stores, rentals, and 
libraries
promote the distribution of copyrighted works and exert a downward pressure on
prices by requiring copyright owners to compete with used copies of their own
works. Rothchild, 57 Rutgers L. Rev. at 79-80. Under the panel’s decision,
textbook publishers, for example, could prohibit resale by used book stores and
online sites like eBay, thereby requiring every student to buy a new copy at a
higher price. The inevitable outcome of the panel’s rule, if adopted by this 
Court,
18
would be to undercut copyright’s purpose of encouraging distribution of creative
works by lessening the availability of those works and increasing their price. 
See
id. at 15; R. Anthony Reese, The First Sale Doctrine in the Era of Digital
Networks, 44 B.C. L. Rev. 577, 627 (2003).
CONCLUSION
The Court should grant rehearing en banc.
Respectfully submitted,
/s/Gregory A. Beck
Gregory A. Beck
Deepak Gupta
PUBLIC CITIZEN LITIGATION GROUP
1600 20th St., NW
Washington, DC 20009
Phone: (202) 588-1000
19
CERTIFICATE OF SERVICE
I certify that on October 1, 2010, I electronically filed the foregoing with the
Clerk of the Court for the United States Court of Appeals for the Ninth Circuit 
by
using the appellate CM/ECF system.
I certify that all participants in the case are registered CM/ECF users and
that service will be accomplished by the appellate CM/ECF system.
/s/Gregory A. Beck
Gregory A. Beck"

regards,
alexander.

-- 
http://gng.z505.com/index.htm 
(GNG is a derecursive recursive derecursion which pwns GNU since it can 
be infinitely looped as GNGNGNGNG...NGNGNG... and can be said backwards 
too, whereas GNU cannot.)