Software Resale on eBay: Court Sided with Reseller

Take a look at the software boxes sitting on your shelf. You’ve already paid for them, I’m sure. But do you actually own them? Members of the Business Software Alliance (BSA) would argue you don’t. “When you purchase software, you are actually purchasing a license to use it, not the actual software,” declares BSA.

But the outcome of a recent case, Vernor vs. Autodesk, challenges this stance, long held by software makers.

Vernor Versus Autodesk Revisited

In Vernor vs. Autodesk, eBay reseller Timothy Vernor sought, among other things, “a declaratory judgment that his sales of [Autodesk CAD packages he had acquired from a third party], and any other AutoCAD packages that he might acquire in the future, would not violate the Copyright Act.”

Vernor has bought several copies of AutoCAD that once belonged to a Seattle architecture firm in a garage sale. When he tried to sell them on eBay, Autodesk contacted eBay to have the items taken down. Vernor claimed Autodesk’s “efforts not only delayed one or more sales, they caused eBay to bar [him] from selling anything for a month,” which affected his livelihood.

As summarized by the presiding judge, Honorable Richard Jones, “The parties disagree over whether Mr. Vernor has a first sale right to resell the AutoCAD packages, and they disagree over whether Mr. Vernor’s sales are contributory copyright infringement” (Order Denying Summery Judgment, September 30, 2009).

In Autodesk’s view, as recounted by Jones, “it licenses AutoCAD packages without transferring ownership of them, and thus remains the ‘owner’ of the copies of copyrighted material contained therein ... It thus claims that Mr. Vernor’s sales constitute both direct and contributory copyright infringement.”

The Court SpeaksIn his analysis, Jones wrote, “No one disputes that Autodesk holds the copyright in the AutoCAD software and the printed materials in the AutoCAD packages ... ” But he also acknowledged Vernor was the “owner of a copy of copyrighted material,” thus Vernor was entitled to “sell or otherwise dispose of that copy despite the copyright holder’s [in this case, Autodesk’s] distribution monopoly.”

Jones thought Autodesk’s license was “a hodgepodge of terms that, standing alone, support both a transfer of ownership and a mere license.”

Cutting through the hyperbole from both sides, Jones noted, “Autodesk’s claim that Mr. Vernor promotes piracy is unconvincing ... a pirate is presumably just as happy to unlawfully duplicate software purchased directly from Autodesk as he is to copy software purchased from a reseller like Mr. Vernor ... Mr. Vernor’s fear of the destruction of established resale markets also seems misplaced ... widespread piracy of musical recordings from compact disks has not led the music industry to adopt a restrictive licensing regime like the one Autodesk advocates [italics added for emphasis].”

As far as this case is concerned, “Mr. Vernor has prevailed in his claim that Autodesk’s copyright does not prevent him from reselling his AutoCAD packages,” Jones wrote.

But, by its own admission, the Court is unable to resolve the ownership vs. license issue definitively: “Although the interpretation of ‘owner’ in the Copyright Act no doubt has important consequences for software producers and consumers, the court is skeptical that its ruling today will have far-reaching consequences ... courts across the nation have issued rulings that adopt and reject the equivalent of the parties’ positions here ... Software producers and consumers alike find ways to meet their needs despite these contrary rulings,” wrote Jones.

Autodesk RespondsMichael Cabot, director of public relations at Autodesk, said, “While the court’s ruling on Vernor vs. Autodesk is limited to the facts of this particular case,  we are disappointed that the Court relied on a case about film prints that predated the advent of the PC software industry rather than follow more recent appellate cases dealing with software licenses. As the Court acknowledged, had it followed the software case law precedent, Autodesk would have won. We therefore will be appealing the court’s decision.”

In deciding the sales vs. license issue in Vernor vs. Autodesk, the Court looked to a 1977 case, U.S. vs. Wise (550 F.2d 1180), for guidance. The case involved Woodrow Wise, Jr., owner of Hollywood Film Exchange in Los Angeles, California, who made a living selling prints of old films to collectors. He ran into legal troubles for selling prints of “The Sting,” “Camelot,” “Paper Moon,” and “Funny Girl,” among others. Like Autodesk, movie studios that owned the copyrights to these titles insisted the prints were licensed to certain individuals, not sold. Hence, reselling the prints amounted to criminal copyright infringement.

“When you buy and use software from Autodesk, there is a contract with terms that set forth what you as the customer can and cannot do with the software,” said Cabot. “That contract prohibits transfer or resale of the software without Autodesk’s permission.  The Court agreed that the contract terms themselves may be enforced against customers.”

Ironically, in U.S. vs. Wise, the 9th Circuit Court upheld previous convictions of Wise for copyright infringement.

Timothy Vernor keeps a site as an eBay trading consultant.

The legal papers related to Vernor vs. Autodesk can be found at CAD/Court, a site that tracks technology-related legal cases.