Litigation

Ninth Circuit holds that software license may limit right to re-sell

By Lori Bauman

Last week the 9th Circuit held that, if a software manufacturer licenses rather than sells its software, and if a licensee sells the software outside the restrictions of the license, copyright law prevents the sale of the software by the subsenquent purchaser.  The result in the case turns on the interpretation of the first-sale doctrine, and on the distinction between sale and license of a copyrighted work.

In Vernor v. Autodesk, Inc., the court found in favor of Autodesk, a manufacturer of computer-aided design software, and against an individual who sought to sell on eBay copies of Autodesk software that he purchased from one of Autodesk's direct customers.  The Autodesk license agreement prohibits transfers by licensees.  Vernor, the thwarted eBay seller, argued that he was protected by the first-sale doctrine, which provides that the seller of a copyrighted work may not place conditions on subsequent sales. 

The Ninth Circuit held that the first-sale doctrine applies only when the copyright owner sells the copyrighted work, and not when it licenses the work.  According to the court, the transferee of a copy of a copyrighted work is a licensee if 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.  In this case Autodesk's transfer to its direct customer was a license and not a sale, and the subsequent eBay sale was an infringement of Autodesk's rights.

Full post as published by Northwest Business Litigation Blog on September 14, 2010 (boomark / email).