Some commentators on the ruling of the District Court in Vernor v. Autodesk [citation] are touting it as a victory for the applicability of the copyright first sale doctrine to licensed software, and while that is literally true in terms of the result in the case, it may not remain in the "win" column in the long run. In ruling on the issue, Judge Richard A. Jones sent a clear signal, something like a really loud shout, to the parties and to the appellate court to the effect that precedents in the Ninth Circuit on the copyright first sale doctrine are conflicting and need to be reconciled.
Judge Jones had before him a petition by a Vernor, an eBay auctioneer, seeking a declaratory judgment that his proposed auction of a copy of Autodesk’s Autocad software was lawful. Vernor pointed to DMCA takedown notices issued by Autodesk with respect to prior auctions of the same software in asserting the need for a declaratory judgment. Vernor asserted that he purchased of the software from a company that lawfully acquired it from Autodesk, and that consequently he was the "owner of a …. copy" of the software under §109(a) of the Copyright Act, which allows the owner of a copy to "sell or otherwise dispose of" the copy without permission of the copyright owner.
Autodesk disputed that Vernor is the owner of a copy of the software, pointing to the license agreement accompanying the software which grants a "nonexclusive, nontransferable license to use the enclosed program … according to the terms and conditions herein." Those conditions included a further prohibition on the rental, lease or transfer of the software without the consent of Autodesk.
Relying on United States v. Wise, 550 F.2d 1180 (9th Cir. 1977), the District Court in Vernor v. Autodesk concluded that the original transaction between Autodesk and Vernor’s transferor constituted a sale, based on a comparison with the transactions found to be sales in Wise.
However, the District Court also noted three subsequent rulings in the Ninth Circuit that, while not expressly overruling United States v. Wise, reached conclusions contrary to it. One of those rulings is MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993), an often cited ruling in which another panel of the Ninth Circuit concluded in rather broad terms, without referencing Wise, that software licensees do not qualify as owners.
Ultimately the District Court decided that because United States v. Wise is the earliest of the three rulings and has never been overruled, the Court was obliged to follow it, even though the three later rulings (the "Mai trio" as the court referred to them) would dictate a contrary result in the case:
If the court were to apply this trio of precedent (the “MAI trio”) to the license before it, it would conclude that Autodesk did not sell AutoCAD copies to CTA. The terms of the Autodesk License are either indistinguishably similar to or more restrictive than the licenses found not to be sales in the MAI trio. Like the defendants in the MAI trio, CTA agreed to restrictions on its use of the software. Compare License: Grant of License (setting forth concurrent use and copying restrictions) with MAI, 991 F.2d at 517 n.3 (same); Wall Data, 447 F.3d at 775 n.5 (same). The restrictions in the License are more severe, because they prohibit resale of the software without Autodesk’s permission. Cf. MAI, 991 F.2d at 517 n.3 (no restrictions on resale); Triad, 64 F.3d at 1333 (requiring owners to pay fee on resale); Wall Data, 447 F.3d at 775 n.5 (no restrictions on resale). If restrictions like those in the MAI trio are sufficient to warrant a “no sale” finding, then the transfer of AutoCAD copies from Autodesk to CTA was not a sale.
It will be interesting to see if the case makes its way to the Ninth Circuit, given how squarely the District Court has queued up the issue of the conflict in the appellate rulings. For now, the District Court ordered further submissions on what will be needed to resolve other issues in the case, including Vernor’s claims of unfair competition against Autodesk.