Published by LawTechie - September 21, 2010 - LawTechie

Recent DecisionIn Vernor v. Autodesk, Inc., the 9th Circuit has recently underscored the importance of properly delineating seller/buyer rights in the End-User Licensing Agreements (EULA) by holding that the first-sale doctrine does not apply where the software is exchanged via a license rather than a sale.

The “first-sale” doctrine provides that the buyer of a copyrighted work may freely resell that work to a subsequent buyer without fear of copyright infringement claims by the original seller or producer of the work. Accordingly, in the absence of any superseding contract, a software purchaser can resell the software as he pleases.

In Vernor, Timothy Vernor legitimately bought copies of Autodesk’s Release 14 software and then resold those copies on eBay. The 9th Circuit found that Vernor’s subsequent sales were not protected by the first-sale doctrine because his original software purchases were, in fact, licenses to use the software rather than outright purchases.

Take-away:

The 9th Circuit used three factors to decide whether the EULA called for an outright purchase or constituted a mere license to use:

The purchase is actual a license 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.

In sum: EULAs should be structured to account for the above factors.

Note: The 9th Circuit is considered persuasive but does not set precedent for other US circuits.

LawTechie is a blog focusing on trends in tech and digital media. Areas covered include intellectual property, cyberlaw, venture capital, transactions and litigation as they relate to the emerging sectors. The blog is edited by the firm's partner Tim Bukher with contributions from the firm's experts in their respective areas of law.

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