If you live in the 9th Circuit, you don’t own your software anymore.

Posted by: David Brookshire

We’re all guilty of it. Tossing aside that thick packet that accompanied our new software. Clicking ‘I Agree’ to 50 pages of contract that we scrolled past or didn’t even bother clicking through to read. How could anyone be bound by a contract for a product they already paid for? These End-User License Agreements (or as the trade calls them, EULA’s) have frequently been ruled or legislated unenforceable for being unconscionable, in that they force a conditional contract upon the consumer after they think they’ve purchased a product. After all, few consumers read the terms and realize that the software they purchased is in fact being leased to them.

But the Court of Appeals for the Ninth Circuit took a different tack recently in Vernor v. Autodesk holding that a man who purchased old used copies of Autodesk from an office company was infringing copyright by selling them on eBay. The rationale was that the office company had not actually purchased the software from Autodesk, they had only leased it, and therefore could not sell the software to Vernor. Why is this an important (and awful) decision? Because the test the Ninth Circuit set out to determine if a EULA binds you and restricts your use of the product is:

“First, we consider whether the copyright owner specifies that a user is granted a license. Second, we consider whether the copyright owner significantly restricts the user’s ability to transfer the software. Finally, we consider whether the copyright owner imposes notable use restrictions.”

…or as I like to read it:

  1. The company says so
  2. The company says so
  3. The company says so

It doesn’t matter that the EULA was 90 pages of indecipherable print that you clicked past without a glance. It doesn’t matter that the contract wasn’t seen until after you purchased the product. It doesn’t matter that you might have actually never seen the contract all (how many times have you ignored the “Click to see the Terms of Service” link before clicking “I Agree”). All that matters is what the company says. In fact the ruling seems to imply that companies need to err on the side of being overly restrictive in their licenses so they can make sure they meet the “significantly restrictive” requirements.”

Effectively this ruling allows software companies to get all the protections of copyright law while preventing their consumers from enjoying any of their rights under the statute.

In the long run I think this is poor policy on the part of companies. Previously you had three main markets: those that purchased new copies of the software through you, those that purchased older versions through the secondary market, and those that pirated the software. While software companies often can convert users of the secondary market to new purchasers by including new features, there is no such effective enticement for software pirates who can get even the newest software for free. In eliminating the secondary market you are eliminating any customer who can’t afford your products new. These customers will either pirate the software, making them less likely to purchase it at any point later, or they will find a cheaper competitor’s product. Either way, Autodesk seems to be hurting themselves in the long run.

So if you are lucky enough to live in the jurisdiction of Ninth Circuit, congratulations; you no longer own the software you are purchasing. Just remember that the next time you fork over $600 for a copy of Rosetta Stone you won’t be getting any of that back by selling it used.


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