Who owns the firmware on a smartphone, the device manufacturer or the purchaser?  Ownership of copies of computer programs is a thorny issue with which the federal courts have grappled in numerous cases. The issue arose during the most recent round of triennial rulemaking that resulted in the promulgation of a new set of exceptions to 17 U.S.C. § 1201(a), which prohibits the circumvention of technological measures deployed to limit access to copyrighted works.

Among other things, the new rules modify an existing exception for unlocking mobile phones, and, perhaps most notably, add a new exception for “jailbreaking” smartphones, i.e., circumventing software locks in order to install an unapproved program on the device. Although the exception is written generically, as a practical matter it currently applies almost exclusively to the jailbreaking of Apple’s iPhone smartphones for the purpose of running applications obtained from sources other than Apple’s own iTunes App Store. The firmware that controls the iPhone operating system and controls its operation employs software locks that prevent the installation of any software on the phone that it cannot validate as approved for distribution through the App Store.

The rulemaking is conducted by the Register of Copyrights, who proposes the exceptions to the Librarian of Congress pursuant to the Digital Millennium Copyright Act. The issue of ownership arose in the context of the Register’s evaluation of whether the smartphone software locks constitute an anti-circumvention technology that diminishes the ability of individuals “to use works in lawful, non-infringing ways” (emphasis added). Thus, if the installation of unapproved software results in access to the copyrighted firmware on the device in a manner that is infringing, the proposed exception could not be recommended. The Electronic Frontier Foundation, proponent of the exception, argued that to the extent that the user has to copy or modify the firmware in order to run an unapproved program, that activity is non-infringing pursuant to 17 U.S.C. § 117(a), which provides:

[I]t is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided …that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner.

The EFF took the position that the purchaser of an iPhone smartphone is the “owner of a copy” of the firmware, based on language in the Apple license agreement, and the characteristics of the transaction:

The iPhone Software License Agreement expressly acknowledges that while Apple retains ownership of the copyrights to the software that accompanies the iPhone, “[y]ou own the media on which the iPhone Software is recorded…. ” Every iPhone owner obtains the firmware pursuant to a one-time payment, is entitled to keep the firmware forever, has the freedom to transfer the firmware when transferring the iPhone, and is free to discard or destroy all copies at any time.

In addition to numerous other arguments concerning the applicability of 17 U.S.C. § 117(a), Apple responded  that the purchaser of an iPhone smartphone is a licensee, not an owner, of the computer program copies on the device. Apple’s submission acknowledges the disagreement in federal courts over the test for determining ownership of a copy of a computer program, but argued that given the disagreement, the EFF had not satisfied the “high burden of proof to show that the activities that would be permitted by the exemption are non-infringing under current law.”

In her recommendations to the Librarian of Congress, the Register of Copyrights declined to resolve the question of ownership, stating that the law on ownership of computer programs is “in a state of flux,” and “unclear” and that as a result, she was unable to determine whether owners of smartphones are also the owners of the copies of computer programs on the devices. The Register also declined to determine whether jailbreaking is authorized under the contracts between Apple and iPhone purchasers. The proposed exception was approved nevertheless, not on the ground that the smartphone purchasers are owners of a copy, but on the ground that jailbreaking a smartphone in order to run unapproved copies constitutes fair use.

It should be noted well that, as the Register pointed out, the exemption does not validate jailbreaking for the purpose of making unauthorized copies of copyrighted content on the device. Neither does the exemption invalidate contractual provisions that may apply to the use of the device, such as provisions voiding a device warranty in the case of jailbreaking.

Ownership of a copy of a computer program is an issue also being considered by the U.S. Court of Appeals for the Ninth Circuit in a group of cases argued in June. The rulings on appeal are Vernor v. Autodesk (W.D. Wash. 2009) and MDY Industries, LLC v. Blizzard Entertainment, Inc. (D. Ariz. 2008). The issue in Vernor v. Autodesk is whether a transaction involving a transfer of packaged software is a license or a sale, and thus whether the purchaser is the owner of a copy for purposes of the copyright first sale doctrine. The issues in MDY v. Blizzard include whether a purchaser of a copy of a videogame is the owner of the copy under 17 U.S.C. § 117(a).   Also argued before the same panel was an appeal from the ruling in Universal Music Group v. Augusto (C.D. Cal. 2008), concerning ownership of a copy of a music recording on a promotional CD.

Links to the briefs on the merits and several amicus briefs in Vernor v. Autodesk are available on the Electronic Frontier Foundation Web site, as are the merits and amicus briefs in Universal Music Group v. Augusto. The amicus brief filed by Public Knowledge in MDY v. Blizzard is available here. Audio recordings of the oral arguments in Vernor, MDY and UMG v. Augusto are available on the Ninth Circuit’s Web site here, here and here, respectively.

Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Jeffrey Neuburger Jeffrey Neuburger

Jeffrey Neuburger is co-head of Proskauer’s Technology, Media & Telecommunications Group, head of the Firm’s Blockchain Group and a member of the Firm’s Privacy & Cybersecurity Group.

Jeff’s practice focuses on technology, media and intellectual property-related transactions, counseling and dispute resolution. That expertise…

Jeffrey Neuburger is co-head of Proskauer’s Technology, Media & Telecommunications Group, head of the Firm’s Blockchain Group and a member of the Firm’s Privacy & Cybersecurity Group.

Jeff’s practice focuses on technology, media and intellectual property-related transactions, counseling and dispute resolution. That expertise, combined with his professional experience at General Electric and academic experience in computer science, makes him a leader in the field.

As one of the architects of the technology law discipline, Jeff continues to lead on a range of business-critical transactions involving the use of emerging technology and distribution methods. For example, Jeff has become one of the foremost private practice lawyers in the country for the implementation of blockchain-based technology solutions, helping clients in a wide variety of industries capture the business opportunities presented by the rapid evolution of blockchain. He is a member of the New York State Bar Association’s Task Force on Emerging Digital Finance and Currency.

Jeff counsels on a variety of e-commerce, social media and advertising matters; represents many organizations in large infrastructure-related projects, such as outsourcing, technology acquisitions, cloud computing initiatives and related services agreements; advises on the implementation of biometric technology; and represents clients on a wide range of data aggregation, privacy and data security matters. In addition, Jeff assists clients on a wide range of issues related to intellectual property and publishing matters in the context of both technology-based applications and traditional media.