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

[Alexander Terekhov]

<chuckles>

http://www.lexology.com/library/detail.aspx?g=a792f4c2-2da4-4e7e-9e06-b1690d1bec2d

"Recent decision reaffirms software license restrictions

Sullivan & Worcester LLP Kimberly B. Herman, Michael A. Matzka and
Christopher T. Stevenson USA 

September 29 2010 

For decades, software vendors have allowed customers to obtain and use
their computer software programs under contracts known as End User
License Agreements (“EULAs”). A typical EULA states that the customer
has not purchased the software from the vendor, but instead is merely
licensed to use the software for a specific purpose and for a limited
period of time. These restrictions serve to protect a vendor’s
intellectual property rights in the software and its ability to obtain
future revenues by restricting a customer’s right to transfer or resell
the software.    

The Copyright Act of 1976, 17 U.S.C. §109, gives a copyright owner
several exclusive rights related to the copyrighted work, including the
exclusive right to distribute copies of the copyrighted work. However,
if the copyright owner chooses to sell a copy of the copyrighted work,
the “first sale” of such copy serves to exhaust the exclusive right for
this particular copy. After the sale of the copy, the new lawful owner
of the copy is free to sell or dispose of such copy. This right is known
as the “first sale doctrine.” A consumer who purchases a copy of a book,
for example, may resell that copy of the book without infringing the
copyright owned by the copyright holder even though such consumer is not
allowed to make any copies of the book. While failure to comply with
terms of a contract for the original sale would likely expose the
original purchaser to a breach of contract claim, it should not affect a
subsequent purchaser’s right to possess the copy.  

In the case Vernor v. Autodesk, the plaintiff, Timothy Vernor, purchased
authentic used copies of Autodesk’s AutoCAD software for the express
purpose of reselling them through eBay. Autodesk claimed that those eBay
auctions infringed their copyrights in the AutoCAD software, and that
the EULA, accepted by the original customer, prohibited resale of the
software as well as transfer of the license to use the software without
Autodesk’s consent. As we reported in an earlier advisory, despite the
express prohibitions in the EULA, the U.S. District Court for the
Western District of Washington (the “District Court”) ruled that
Autodesk’s conveyance of the AutoCAD software to the original customer
was a sale of the software, not a license of the software and thus the
original customer and Vernor had the right to resell the software under
the Copyright Act’s “first sale doctrine.” Autodesk appealed the
decision. Had the original conveyance from Autodesk been considered a
license the EULA would have controlled the terms of any subsequent
transfer and prevented the applicability of the first sale doctrine.

On September 10, 2010, the U.S. Court of Appeals for the Ninth Circuit
reversed the District Court’s ruling holding that Vernor’s sale of the
software through eBay was not a sale protected by the first sale
doctrine and instead was a license subject to the terms and conditions
of the EULA. The Ninth Circuit Court ruled that because Autodesk’s
original customer obtained the software under license it did not have
the legal right to resell the AutoCAD software to Vernor in the first
place. The EULA stated, among other things, that Autodesk retained title
to all copies of the software and that the customer only had a
non-exclusive, nontransferable license to use the software. The EULA
also imposed significant transfer and use restrictions prohibiting any
rental, lease or transfer of the software without the express written
consent of Autodesk.

The Ninth Circuit reconciled two lines of cases that the District Court
viewed as irreconcilable and concluded that whether a user owns or
licenses software is determined by consideration of three factors: (i)
does the copyright owner specify that the user is getting a license;
(ii) does the license significantly restrict the user’s ability to
transfer the software; and (iii) does that license impose notable use
restrictions? If the answer is “yes” to all three, the user will be
considered a licensee and not an owner who would have the first sale
doctrine available as a defense to copyright infringement.

What this means for your business

The District Court’s ruling had undercut software vendors’ ability to
restrict software resales by EULA. The Ninth Circuit decision has
restored this ability. Software copyright owners and licensors may want
to reassess their current software license agreements to confirm that
they provide sufficient restrictions to pass the three part inquiry
applied by the Ninth Circuit.

To prevent the application of the “first sale doctrine” to software
conveyed under your EULA, it is important to assure that the initial
conveyance of the software is characterized as a license rather than a
sale. A software vendor should consider the following:

Clear Statement of License – The license must state that the agreement
is, in fact, a license not a sale of software. While this alone will not
guarantee that the agreement is actually considered a license, it
satisfies the first factor stated by the Ninth Circuit, and is a
necessary feature of any enforceable license.  

Significantly Restrict Transfer – To satisfy the second factor stated by
the Ninth Circuit, the license must explicitly limit the conditions
under which the software can be transferred to another user. Such
conditions can include:   

Explicit prohibition of both resale and transfer  
Return of all copies upon expiration or termination of the EULA  
Destruction of the software upon expiration or termination of the EULA  
Require written consent of the licensor to sell or transfer  

Impose Notable Use Restrictions – To satisfy the third factor, the
license can impose additional restrictions on the use of the software.
Such restrictions should include:   

Prohibitions on modifying, translating, or reverse engineering the
software  
Geographic limitations on where the software can be used  
Prohibitions on defeating any copy protection devices incorporated in
the software  

It is important to remember that this decision does not mean that
software is not transferable. Instead, it means that the transferability
of the software will be dictated by the terms in the EULA under which
the software was licensed. Also, it is important to note that this is a
Ninth Circuit decision and may not necessarily be followed in other
circuits.  

If you have any questions or would like to learn more about the issues
raised by this Advisory, please contact any of the attorneys listed
above.

Tags USA, Information Technology, Intellectual Property, Litigation,
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regards,
alexander.

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