have been cheered
by the ninth circuit’s
ruling in Vernor.
But the rest of us
should be worried
about its implications.
between experiences, people,
and technology, showcasing
emerging innovations and industry
Vernor and Augusto seem to be owners
of copies. Those from whom they obtained the products had, it seems, the
right of perpetual possession in the copies, and they could destroy or discard
the copies if they wished. The software
in Vernor had been purchased through
a mass-market transaction, and the CDs
in Augusto had been mailed for free to
people who had not requested the CDs
and indeed, UMG had not even kept
track of the persons to whom the promotional CDs had been sent.
In a previous case, U.S. v. Wise, the
Ninth Circuit reversed a conviction for
criminal copyright infringement because the actress from whom Wise obtained a copy of a movie was the owner
of that copy, notwithstanding various
restrictions on what she could do with
the copy, including transfers to third
In Vernor’s petition for rehearing by
the full Ninth Circuit Court of Appeals,
he argues the Ninth Circuit’s ruling is in
conflict with Wise and with precedents
from other appellate courts, including
first-sale argument. But the license label was, as in MAI v. Peak, given considerable weight. The court directed that
two other factors be taken into account:
whether the license restricted transfers
of the copies and whether it contained
other substantial restrictions. The panel ruled that Autodesk should prevail
against Vernor under this test. The restrictions in Augusto, by contrast, were
less substantial than those in Vernor.
Labeling and Restrictions test
The Ninth Circuit in Vernor relied in
part on MAI Systems Corp. v. Peak Computer, in which a Ninth Circuit panel
in 1993 ruled that customers of Peak’s
computers, on which Peak software
was installed, were not owners of copies of this software, but rather licensees. Owners of copies of copyrighted
software are entitled to make copies
for their use and to authorize third parties to make use-copies; non-owners
are not entitled to this privilege.
MAI provided maintenance services
for Peak computers to Peak customers.
When MAI technicians turned on Peak
computers to service them, they made
temporary copies of Peak software in
the random access memory. Peak argued, and the Ninth Circuit agreed, that
these copies were infringing because
they were not authorized by Peak.
MAI v. Peak cited no authority and offered no analysis in support of its ruling
that Peak’s customers were non-owners
of their copies of Peak software. Peak’s
characterization of the transaction as a
license was, for that panel, dispositive.
The three-judge panel decision in
Vernor did not rely on the license label
alone as a basis for rejecting Vernor’s
Software companies have been
cheered by the Ninth Circuit’s ruling
in Vernor. But the rest of us should be
worried about its implications. Think
about what Vernor may mean for flea
markets, bookstores, libraries, garage
sales, and auction sites. Even selling a
used computer loaded with software
is infringing on this theory. Think also
about how easy it is for a vendor to put
a “license” label on a mass-marketed
product with copyrighted or patented
components that states that any transfer of that copy to third parties will subject the transferor to copyright or patent infringement charges.
Consumers enjoy significant benefits from the existence of secondary
markets. The first-sale limit on patent
and copyrights is essential to the operation of those markets. Vernor and
Augusto’s cases are important to the future of competition in product markets
and to preservation of the long-standing balancing principle in copyright
law that the first-sale rule represents.
Pamela Samuelson ( firstname.lastname@example.org) is the
richard m. sherman Distinguished Professor of law and
Information at the university of California, berkeley.
Copyright held by author.