Name: Vernor v. Autodesk, Inc., 2010 WL 3516435 (C.A.9 (Wash.))
Facts: Timothy Vernor, plaintiff, purchased copies of Autodesk’s AutoCAD Release 14 software which he subsequently resold on eBay. Vernor relied on the first sale doctrine and the essential step defense as a lawful basis for the resale of the software. Autodesk licenses its software, meaning Vernor cannot resell the copies because he did not purchase them from an owner. Autodesk’s software is sold with an accompanying software license agreement (SLA), stating, among other things, the Autodesk retains title to the copies. After purchasing a sealed copy of the AutoCAD Release 14 software from a garage sale, Vernor resold the copy on eBay. Autodesk files a Digital Millennium Copyright Act (DMCA) take-down notice with eBay, claiming copyright infringement and eBay complied. Vernor filed a counter-notice to which Autodesk did not respond, allowing eBay to reinstate the auction. Vernor then purchases four more copies at an office sale from a company, CTA, who had a license agreement with Autodesk for its software. Autodesk again filed a DMCA take-down notice. Vernor’s eBay account was suspended as a result. Again, Vernor filed a counter-notice, Autodesk failed to respond, and Vernor’s account was reinstated.
Procedure: The district court denied Autodesk’s motion to dismiss Vernor’s complaint, requesting declaratory judgment, finding that Vernor’s sale was non-infringing under the first sale doctrine and the essential step doctrine. The district court granted summary judgment to Vernor as to copyright infringement. The district court, however, declined to decide Vernor’s affirmative defense that Autodesk misused its copyright, finding that that defense would not benefit Vernor since he prevailed on the copyright infringement issue. Autodesk appealed.
Issue: Whether the first sale and essential step doctrines are defenses when a person attempts to resell software that is issued to consumers per a license agreement.
Holding: No, the first sale and essential step defenses apply only to owners of copies of copyrighted works.
Reasoning:
The First Sale Doctrine
The Supreme Court articulated the first sale doctrine Bobbs-Merill Co. v. Strauss, 210 U.S. 339 (1908). That case held that a copyright owner’s copyright is exhausted following the first sale of a particular copy of a copyrighted work. The doctrine was codified by Congress in 1909, allowing “owners of a particular copy†to sell or distribute without authorization. It does not apply to licensees.
Relying on precedent, the court used the following test to determine if the holder of the copy was an owner or a licensee: whether the agreement (a) was labeled a license, (b) provided that the copyright owner retained title to the prints, (c) required the return or destruction of the prints, (d) forbade duplication of prints, or (e) required the transferee to maintain possession of the prints for the agreement’s duration. United States v. Wise, 550 F.2d 1180 (9th Cir. 1977).
The Essential Step Doctrine
The essential step doctrine was codified by Congress to allow a software user who is an “owner of a copy†of a copyrighted software program to make a new copy if that copy is ““created as an essential step in the utilization of the computer program in conjunction with a machine and . . . is used in no other manner.†17 U.S.C. § 117(a)(1). The court looked to MAI trio of cases to point to what an owner is pursuant to the essential step defense, holding that the essential step defense does not apply where the copy is given pursuant to a license and the copyright owner significantly restricts the user’s ability to transfer the software.
The court noted: “We read Wise and the MAI trio to prescribe three considerations that we may use to determine whether a software user is a licensee, rather than an owner of a copy. First, we consider whether the copyright owner specifies that a user is granted a license. Second, we consider whether the copyright owner significantly restricts the user’s ability to transfer the
software. Finally, we consider whether the copyright owner imposes notable use restrictions.â€
Analysis of this case
The court established a three-prong test to determine that a software user is a licensee as opposed to an owner: “where 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.â€
The court found that CTA, the company from whom Vernor purchased several copies, was a licensee pursuant to Autodesk’s SLA. Therefore, both CTA’s and Vernor’s sales infringed Autodesk’s exclusive copyright.
The court also found that Vernor’s customers who purchased the software from Vernor via eBay are not entitled to the essential step defense because they are also not owners.
The court further remanded the case to district court to consider whether Autodesk misused its copyright, since it is now relevant considering Vernor did not prevail on the copyright infringement on appeal.
Facts: Timothy Vernor, plaintiff, purchased copies of Autodesk’s AutoCAD Release 14 software which he subsequently resold on eBay. Vernor relied on the first sale doctrine and the essential step defense as a lawful basis for the resale of the software. Autodesk licenses its software, meaning Vernor cannot resell the copies because he did not purchase them from an owner. Autodesk’s software is sold with an accompanying software license agreement (SLA), stating, among other things, the Autodesk retains title to the copies. After purchasing a sealed copy of the AutoCAD Release 14 software from a garage sale, Vernor resold the copy on eBay. Autodesk files a Digital Millennium Copyright Act (DMCA) take-down notice with eBay, claiming copyright infringement and eBay complied. Vernor filed a counter-notice to which Autodesk did not respond, allowing eBay to reinstate the auction. Vernor then purchases four more copies at an office sale from a company, CTA, who had a license agreement with Autodesk for its software. Autodesk again filed a DMCA take-down notice. Vernor’s eBay account was suspended as a result. Again, Vernor filed a counter-notice, Autodesk failed to respond, and Vernor’s account was reinstated.
Procedure: The district court denied Autodesk’s motion to dismiss Vernor’s complaint, requesting declaratory judgment, finding that Vernor’s sale was non-infringing under the first sale doctrine and the essential step doctrine. The district court granted summary judgment to Vernor as to copyright infringement. The district court, however, declined to decide Vernor’s affirmative defense that Autodesk misused its copyright, finding that that defense would not benefit Vernor since he prevailed on the copyright infringement issue. Autodesk appealed.
Issue: Whether the first sale and essential step doctrines are defenses when a person attempts to resell software that is issued to consumers per a license agreement.
Holding: No, the first sale and essential step defenses apply only to owners of copies of copyrighted works.
Reasoning:
The First Sale Doctrine
The Supreme Court articulated the first sale doctrine Bobbs-Merill Co. v. Strauss, 210 U.S. 339 (1908). That case held that a copyright owner’s copyright is exhausted following the first sale of a particular copy of a copyrighted work. The doctrine was codified by Congress in 1909, allowing “owners of a particular copy†to sell or distribute without authorization. It does not apply to licensees.
Relying on precedent, the court used the following test to determine if the holder of the copy was an owner or a licensee: whether the agreement (a) was labeled a license, (b) provided that the copyright owner retained title to the prints, (c) required the return or destruction of the prints, (d) forbade duplication of prints, or (e) required the transferee to maintain possession of the prints for the agreement’s duration. United States v. Wise, 550 F.2d 1180 (9th Cir. 1977).
The Essential Step Doctrine
The essential step doctrine was codified by Congress to allow a software user who is an “owner of a copy†of a copyrighted software program to make a new copy if that copy is ““created as an essential step in the utilization of the computer program in conjunction with a machine and . . . is used in no other manner.†17 U.S.C. § 117(a)(1). The court looked to MAI trio of cases to point to what an owner is pursuant to the essential step defense, holding that the essential step defense does not apply where the copy is given pursuant to a license and the copyright owner significantly restricts the user’s ability to transfer the software.
The court noted: “We read Wise and the MAI trio to prescribe three considerations that we may use to determine whether a software user is a licensee, rather than an owner of a copy. First, we consider whether the copyright owner specifies that a user is granted a license. Second, we consider whether the copyright owner significantly restricts the user’s ability to transfer the
software. Finally, we consider whether the copyright owner imposes notable use restrictions.â€
Analysis of this case
The court established a three-prong test to determine that a software user is a licensee as opposed to an owner: “where 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.â€
The court found that CTA, the company from whom Vernor purchased several copies, was a licensee pursuant to Autodesk’s SLA. Therefore, both CTA’s and Vernor’s sales infringed Autodesk’s exclusive copyright.
The court also found that Vernor’s customers who purchased the software from Vernor via eBay are not entitled to the essential step defense because they are also not owners.
The court further remanded the case to district court to consider whether Autodesk misused its copyright, since it is now relevant considering Vernor did not prevail on the copyright infringement on appeal.