A Washington court recently held that an individual who resold packages of software did not commit copyright infringement under the “first-sale doctrine,” which allows the owner of a copyrighted work to resell that copy. In the case, an individual, Vernon, who makes his living selling merchandise on eBay, obtained several software disks in their original packaging from CTA, a company which originally obtained the disks from Autodesk, a software manufacturer and owner of the copyright for the software. The software disk’s case contained a sticker indicating that the software was subject to a license agreement, which agreement was displayed on-screen during installation. A copy was also included in the box. Upon learning of Vernon’s attempt to sell several packages of its software on eBay, Autodesk contacted eBay and asked that the auctions be halted as a violation of the Copyright Act. In response, Vernon filed suit seeking a declaratory ruling that his sales of the software did not constitute an infringement. Both sides filed motions for summary judgment. The court noted a split in Ninth Circuit cases regarding whether a software transaction is a sale (and as such Vernon would have had the right to sell the software) or a license (which would mean that Vernon should not have sold the software). The court resolved the conflict by looking at the agreement that came with the software disks. In that agreement, while there were numerous restrictions on use of the software and a requirement that the user destroy older versions of the software in the event of an upgrade, there were no provisions requiring return of the software to Autodesk or destruction of the software if the user did not upgrade to a newer version. As such, the user was essentially able to retain possession of the software indefinitely as long as the purchaser did not upgrade to a newer version. The court concluded that the transaction thus constituted a sale, not a license. Accordingly, the court held that Vernon was an owner of the software and was protected by the first-sale doctrine, which gave him the right to sell the software, and granted summary judgment to him on the issue of copyright infringement.

TIP: Software manufacturers who wish to prevent resale of their software should include provisions in their license agreements which provide for return or destruction of the software should the purchaser attempt to sell or transfer the software to a third party without the manufacturer’s authorization.