As digital media overtake
more traditional publication means, disputes over the distinction between sales
and licenses of copyrighted materials are more frequent. Disputes involving
software have dominated, but the distinction is also problematic with respect
to other categories of copyrighted works, such as motion pictures and sound
recordings. In this Analysis, Mary LaFrance discusses the new test created in Vernor v. Autodesk, Inc., 2010 U.S. App. LEXIS 18957 (9th
Cir. Wash. Sept. 10, 2010) [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law] and its
implications. She writes:
In Vernor v. Autodesk,
2010 US App LEXIS 18957 (9th Cir. Sept.
10, 2010), the first of several appellate opinions on the sale/license
distinction which are expected to issue in the coming months, the Ninth Circuit
developed a new test for resolving this question, at least in the context of
software. Specifically, the litigants disputed whether a particular copy of
copyrighted software had been sold or licensed to a customer, for purposes of
determining (1) whether the customer was entitled to resell the copy under the
first sale rule, 17 U.S.C. § 109(a), and (2) whether a later purchaser of
that copy was entitled to copy the software as an essential step in its
utilization under 17 U.S.C. § 117. In
resolving these questions, the court held that a copy of software has been
licensed rather than sold if the copyright owner (1) specifies that it is a
license, (2) significantly restricts the user's ability to transfer the
software, and (3) imposes "notable use restrictions."
. . . .
A. The First Sale
Although a copyright owner
has the exclusive right to publicly distribute copies of the copyrighted work
(whether by sale, rental, lease, lending, or gratuitous transfer) under 17 U.S.C. § 106(3), that right is limited by the first sale
rule. The first sale rule grants several privileges to the "owner" of
a lawfully made copy, or a person acting under the owner's authority. Among
these privileges is the right "to sell or otherwise dispose of the
possession of that copy." This right applies to all types of copyrighted
works, subject to an exception which allows copyright owners to prohibit
rentals (and, in some cases, lending) of software and sound recordings. The
latter exception was not at issue in Vernor.
B. The Essential
Section 117 creates an exception
to the copyright owner's exclusive reproduction right, by allowing the
"owner of a copy of a computer program" to make (or authorize the
making of) an additional copy (or adaptation) of the software as an
"essential step" in using the software, or for archival purposes
(i.e., as a back-up copy). Enactment of the "essential step"
privilege was deemed necessary because merely using software in a computer
arguably involves "copying" the software from its original storage
medium into the computer's Random Access Memory (RAM).
. . . .
Although the Vernor
court stated that its holding was required by precedent, in fact its opinion
marks the Ninth Circuit's first attempt to articulate a general principle for
distinguishing between sales and licenses of copyrighted goods. It remains to
be seen, however, whether the court will apply the same test in cases involving
goods other than software, or in cases where the "license" in
question is non-negotiable, as in the typical purchase of consumer software.
These issues are likely to be explored soon, in the upcoming decisions on
appeal in UMG Recordings, Inc. v. Augusto, 558 F.Supp.2d 1055 (C.D. Cal.
version], and MDY
Indus., LLC v. Blizzard Entertainment, Inc., 2008 U.S. Dist. LEXIS 53988
(D. Ariz. 2008) [enhanced
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