Communications - March 2009

plained in my November 2008 column, Some defer to the widespread practice
the Supreme Court ruled that a patent in the software industry of licensing
owner’s effort to restrict commerce in software rather than selling it. If cus-
licensed technologies was inconsis- tomers have agreed to be licensees and
tent with patent law’s first sale rule. the license forbids transfer of the soft-
The Court left open the question about ware, moreover, third-party purchasers
whether purchasers of thetechnologies such as Vernor are arguably incapable
could be held liable for breaching con- of being “owners” of that software. One
tractual restrictions, but made clear can generally not obtain broader prop-
that they were not patent infringers. erty rights in an artifact than had the
Vernor is a tougher first sale case person from whom you got it.
than Augusto for at least two reasons. Yet, other judges have agreed with
First, CTA had agreed to abide by terms the Vernor decision that a one-time
of the AutoCAD license. More general- payment of money for a package of
ly, there is a stronger basis for inferring mass-marketed software that gives the
assent to “license” restrictions when a purchaser rights to use software for an
purchaser of a software package clicks unlimited duration should be treated
“I agree” to terms of a license when in- as a sale, even if it may be subject to
stalling the software (although it is not some restrictions. Unless the Ninth
clear from the Vernor opinion whether Circuit overrules the Wise decision,
CTA had installed the Autodesk pro- Vernor may win the right to resell used
grams). Second, the case law on wheth- software on eBay.
er the first sale rule applies to mass- It is a separate question whether
marketed software is mixed. CTA breached a contractual obligation
Some judges have been persuaded to Autodesk by transferring the soft-
that software developers should be free ware to Vernor. But even so, should Ver-
to contract as they wish with their cus- nor be bound by the contract’s restric-
tomers who may return the software if tions on transfers? It would seem not
they find license terms unacceptable. since he has not installed the software

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on his computer and has not agreed to its terms. A fundamental difference between contract rights and intellectual property rights is that the former bind only the parties to the agreement, whereas the latter bind the world. Besides, Autodesk chose to make the license nontransferable, so how could it bind Vernor or his customers? The Ninth Circuit may view Vernor as an ordinary guy trying to make a buck in the used goods market, rather than an infringer of copyrights.

The software industry will likely weigh in heavily on the Augusto and Vernor cases, for the decisions challenge a long-standing industry practice. (Negotiated licenses will be unaffected if the Ninth Circuit affirms both rulings.) It remains to be seen whether the Ninth Circuit will recognize as legitimate the interests of people like Augusto and Vernor and their customers in the existence of a market for used goods protected by copyright law.

Pamela Samuelson ( pam@law.berkeley.edu) is the richard m. sherman distinguished Professor of law and information at the university of california, Berkeley.

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