Court smacks Autodesk, affirms right to sell used software
By Timothy B. Lee | Published: May 23, 2008 - 12:21PM CT
A federal district judge in Washington State handed down an important decision this week on shrink-wrap license agreements and the First Sale Doctrine. The case concerned an eBay merchant named Timothy Vernor who has repeatedly locked horns with Autodesk over the sale of used copies of its software. Autodesk argued that it only licenses copies of its software, rather than selling them, and that therefore any resale of the software constitutes copyright infringement.
But Judge Richard A. Jones rejected that argument, holding that Vernor is entitled to sell used copies of Autodesk's software regardless of any licensing agreement that might have bound the software's previous owners. Jones relied on the First Sale Doctrine, which ensures the right to re-sell used copies of copyrighted works. It is the principle that makes libraries and used book stores possible. The First Sale Doctrine was first articulated by the Supreme Court in 1908 and has since been codified into statute.
As we discussed when the lawsuit was filed last year, Vernor makes his living selling used comic books, video games, software, and collectibles. He obtains these items at garage sales, office sales, and flea markets and auctions them off on eBay. When he began selling used copies of AutoCAD software, he attracted the attention of its manufacturer, Autodesk, which began filing infringement notices under the Digital Millenium Copyright Act. After each notice, Vernor filed a counter-notice stating that he was selling authentic, used copies of the software. After the fifth such altercation, eBay suspended his account, preventing him from earning a living for a month.
Wanting to continue selling used software but fearing another suspension of his eBay account, Vernor sought the help of the progressive advocacy organization Public Citizen. They filed suit in federal court last year seeking a declaration that his actions were legal under copyright law and that Autodesk was abusing the DMCA by filing take-down notices. He argued that under the First Sale Doctrine, he was entitled to re-sell authentic copies of Autodesk's software with or without the company's permission.
In its reply, Autodesk argued that Vernor was not the lawful owner of the software he was selling because Autodesk only licenses copies of its software rather than selling them. Therefore, Autodesk claimed, no "sale" to the software's original owner had occurred, and the First Sale Doctrine did not apply. Moreover, Autodesk noted, the license terms specifically prohibited transferring the software to another party, which meant that Vernor could not legally acquire it without Autodesk's permission.
But as Vernor's lawyers pointed out, the distinction between a lease and a sale is based on the actual characteristics of the transaction, not merely on how the transaction is described by the parties. And characterizing AutoCAD as merely licensed, rather than sold, barely passes the straight face test. AutoCAD customers pay a lump sum at the time of purchase, with no obligation to make further payments or to return the software at the conclusion of the supposed lease. Even more damning, Autodesk's own website offers customers a variety of "purchase options" and the opportunity to "buy online" directly from Autodesk, with no indication that "buy" really means "license." Similarly, online retailer CDW offers customers an option to "lease" AutoCAD as an alternative to purchasing a copy.
As the Electronic Frontier Foundation's Corynne McSherry put it in a Thursday blog post, "if it looks like a duck and quacks like a duck, chances are it's a duck." Autodesk clearly sells its software, and merely re-labeling the transaction as a license doesn't negate the First Sale Doctrine.
Vernor's lawyers also noted that he had never opened the AutoCAD packages and installed the software contained inside. Therefore, to the extent the licensing agreements were enforceable, they were enforceable against the original owners, not against Vernor. And even if the license agreements did somehow bind Vernor, at most Vernor could be guilty of breach of contract, not copyright infringement, which makes the use of the DMCA inappropriate.
Judge: AutoCAD is sold, not licensed In a 21-page decision, Judge Jones sided with Vernor. Citing the 1977 case of United States v. Wise, which involved the sale of used films obtained under dubious circumstances, Jones found that the Ninth Circuit's precedents suggested that the circumstances surrounding the sale of AutoCAD software constituted a sale, not merely a license. Therefore, the First Sale Doctrine applied, and Vernor was not bound by any of the terms in Autodesk's license agreement.
But the judge acknowledged that three more recent Ninth Circuit decisions involving software seemed to cut in the opposite direction without explicitly overturning Wise. Jones found that Wise was controlling precedent, and ruled in Vernor's favor. If the case gets appealed to the Ninth Circuit, the conflict among these precedents is likely to occupy the court's attention. The trio of more recent cases hints that the Ninth Circuit is sympathetic to characterizing software sales as licenses for legal purposes. However, none of those cases involved circumstances exactly like Vernor's, and the court never dealt squarely with the question of what factors determine whether software is sold or licensed.
If Jones's ruling is upheld on appeal, it will have important consequences for the software industry, where the legal fiction that software is merely licensed is widely employed. In addition to discouraging the market for used software, software firms have also attempted to use the "licensed, not sold" theory to enforce restrictions on reverse engineering that would otherwise be fair use under copyright law. If software is sold, rather than licensed, then no license is required to install and use the software, and the terms of shrink-wrap licenses may not be legally binding.
The Autodesk case is not the only case regarding the first sale doctrine working its way through the courts. Another lawsuit filed last summer concerns another eBay seller who sells used promo CDs. Like Vernor, the plaintiff in that case faced repeated DMCA takedown notices and sued to vindicate his right to sell used merchandise online. EFF is representing the plaintiff in that case, and McSherry tells Ars that while there are important differences between the cases, the opinion bodes well for EFF's case because "it affirms that copyright owners can't use license restrictions to strip away first sale rights."
Personal Opinion
This is a terrific ruling. Software vendors do indeed sell software and catagorizing every sale as a licensing right is completely out of this world.
If software is in fact licensed, as Intuit and CDW have done, then the arguement can be made that users trying to resell the software are truly in breach of the license scheme.
I hope this judgement does hold up as it will serve notice to companies like Microsoft and Adobe that their "licenses" are in fact a final sale. This is one of my personal pet peeves regarding Piracy, and the way companies interpret licensing rights.
I also believe this will open the door to more open source software, as if I purchase a car I am free to make any and all changes I would like to it with out big brother saying I can't. One could argue that since I purchased Windows Vista, that I should have the source code to also make any changes I would like to the core of the application.
That's my two cents, and I am sticking to it..
Landmark Judgement! Studios win $100 million judgment against TorrentSpy
The Los Angeles judge, U.S. District Judge Florence-Marie Cooper, also issued a permanent injunction against TorrentSpy, which was once one of the most popular indexes of BitTorrent files before it shut down in March after a two-year copyright battle with the Motion Picture Association of America (MPAA). The company closed its site on March 24, citing financial hardship and a desire to protect the privacy of its users.
MPAA CEO Dan Glickman said the judgment should serve as warning to other search services of file-sharing applications.
"The demise of TorrentSpy is a clear victory for the studios and demonstrates that such pirate sites will not be allowed to continue to operate without facing relentless litigation by copyright holders," he said in a statement.
The judge ordered TorrentSpy to pay $30,000 per copyright infringement--for 3,699 films and shows. That works out to be worth $110,970,000.
How that amount will be paid is unclear. A call to TorrentSpy's attorney was not immediately returned.
The judgment puts a fine point on another long battle between technologists and copyright holders.
The studios originally sued TorrentSpy in February 2006, alleging that the site promoted and contributed to online copyright infringement by helping people locate illegally copied films and television shows on the Internet. Last December, a federal judge sided with the MPAA by saying that TorrentSpy had destroyed evidence that would make a fair trial possible.
According to the court, TorrentSpy operators had intentionally modified or deleted directory headings naming copyrighted titles and forum posts that explained how to find specific copyrighted works; concealed IP addresses of users; and withheld the names and addresses of forum moderators. The company had previously been fined $30,000 for violations of discovery orders and were warned of severe sanctions if they continued to ignore the orders.
TorrentSpy's attorney, Ira Rothken, called that ruling "draconian in nature and unfair." He said he did not believe any data was intentionally destroyed, and that some actions were taken to protect the privacy of TorrentSpy users.
Rothken also said at the time that TorrentSpy would appeal any decision on damages.
Still, the permanent injunction prohibits Valence Media, operator of TorrentSpy, from engaging in any activity that "encourages, promotes or solicits, or knowingly facilitates, enables or assists, copyright infringement," according to the court.
The Origins
What started as a venture to reduce the level of piracy within the online Computer Chess Community, has now grown in to a full blown Anti-Piracy resource.
Kikrtech's primary goal still remains the same:
Help protect the copyright of author's who content is being infringed upon.
This no longer is limited to just Chess Software. We have branched out to all levels of software, online literature, and of course audio/video content. We target bit torrent sites, warez forums, warez irc channels, mass download storage sites; basically anything and anywhere software pirates store material to be distributed.
Online Piracy is part of what Law Enforcement call "Cyber Crime". It is estimated that cyber crime costs the global economy $1.6 Trillion dollars annually. Global music piracy is a $4.5-billion US business, with sales of illegal music discs rising four per cent in 2003, representing an all-time high of 1.1 billion units. Those numbers suggest that a record 35 per cent of all music discs sold worldwide were illegal copies. That was in 2003. In 2006, it was estimated that 16.7-billion US were lost to Global Music Piracy.
According to the first annual software piracy study released in 2004 by the Business Software Association of Australia, the United States was hardest hit by software piracy, with losses totaling almost $6.5 billion. In comparison, Canada ranked eighth, with $736 million in piracy losses. In the latest study (located here) the numbers were a staggering $39.58-billion globally, and $784-million in Canada.
Those are startling numbers considering the advertising done by Anti-Piracy groups and the Multimedia Industry as a whole. Something needs to change, and we have some ideas...
Education. The harm done by piracy is massive, and not just to recording artists or corporations. It hurts you and I every time we pay for a music cd or software. By educating young people about the harms of online piracy and the effect on the global market, we hope to reduce the level of theft. There are personal threats as well in our teachings. Sites that offer pirated materials for download may contain trojans, viruses, spy ware and mal ware. While you think getting music or a program for free is awesome, a pirate is thinking the exact same! He has just infected your system with a malicious file that could hand him over all the passwords to your bank accounts and other stored information on your system... but hey! You got your program :)
No one ever stops to think about a problem until it affects them personally, or until they realize it is affecting them personally. Kind of like the old adage, "You never liked the police until you actually need one." The same is true here.
Piracy... Who it hurts...
As I stated previously, we started out protecting Computer Chess Authors and their programs from online theft.
Computer System Specialists like Ken Thompson, Joe Condon, Murry Cambell, and Feng-hsiung Hsu built impressively strong chess computers that paved the way for software authors like Stefan Meyer-Kahlen, Amir Ban, Mark Uniacke, Frans Morsch, and Mathias Feist, to create some of the strongest chess playing software titles the world has ever seen.
ChessMaster, by far the most commercially known chess software product has helped spawn several other terrific programs. Shredder, Fritz, Junior, Hiarcs, and Chess Tiger to name only a few, are some of the other most popular programs that play Grandmaster level chess. While they all have different authors, originating countries, programming techniques, and styles of play, they all have one thing in common....
They are all victims of mass piracy.
When you pirate that program that costs $40, you are stealing $40 from someone's family. Make no mistake about it. You are a stealing and you are a thief.
Many people believe that piracy is only a "Big Business" issue. Well, let's go back to where Kikrtech started.
Chess Authors are regular people like you or I. They have jobs or are students, they might have a family to support, they have bills to pay. And yet through talent and knowledge they find the time to create a fantastic chess program for us to enjoy.
Countless hours are spent coding an engine and then debugging that code. Beta testers then test for countless hours to find errors here and there for the author's to correct. Opening book creators are busy making libraries so that the program can play virtually any opening under the sun that a user would like to try. Someone is programming an interface for the chess program, because after all, if you can't see what the program is doing or where it is moving, it is not much good to you right? Once it is considered near perfect, the real testing begins.
The author then has to take the ultimate chance. He must enter it into public tournaments and hope for good results, or allow his engine to be tested by an independant group called the SSDF. If his engine suffers during either of these two tasks, his sales would suffer. On the other hand, if his result is really good... his engine is likely to be the most pirated engine that year.
So why would someone take the time to do all this work? The answer is very simple: The chance to possibly make a secondary income for him and his family, or to help pay for tuition if their were a student.
Is this a big business example of Piracy?
Or how about a music group that is just getting off the ground and have a CD Release Concert. They have no label like Sony behind them. Just the money they forked out to get their own music heard and out there.
Someone goes to this release concert and purchases the groups first ever CD for $5. Enough to cover the costs of creating it, and they go home, rip it, and offer it for download to the masses because the now pirate thought it sounded good.
Big business again? Nope.
This is who piracy hurts. When you go to work, you expect to be paid for your efforts. Don't you think these artists deserve the same? WE DO.
