Software Resellers Can’t Rely on First Sale Doctrine in California.

The U.S. District Court for the Northern District of California has ruled that an eBay reseller of copyrighted software could not rely on the first sale doctrine. The Ninth Circuit has previously held that the first sale defense is unavailable to licensees.  The decision in this case centered on the distinction between a sale and a license.

The defendant in the case purchased bundled computer hardware and software and then subsequently resold only software from Adobe on eBay.  After Adobe filed a copyright infringement suit, the reseller attempted to raise a defense under the first sale doctrine, which allows the owner of a lawfully made copy of a copyrighted work to resell those copies.

The Court’s Ruling

In a previous copyright case, Vernor v. Autodesk, the Ninth Circuit held that the first sale doctrine does not apply to the resale of software by users that are licensees of a copy, rather than owners.  Therefore, the court’s decision turned on the reseller’s status.

The court ultimately found that the Adobe software in question was licensed to the original purchasers (the computer manufacturer) rather than sold to them. When determining whether the software was licensed or sold, the court highlighted that the agreement between Adobe and the original purchasers (a) specified that it granted a license to the software, (b) significantly restricted the user’s ability to transfer the software, and (c) imposed significant use restrictions on the software.

The court further relied on the precedent established by another Ninth Circuit case, Omega S.A. v. Costco Wholesale Corp., which established that the first sale doctrine does not apply to software manufactured abroad.

As this case highlights that, in order to maintain copyright protection, software vendors should draft agreements that make it clear that the software is being licensed, not sold. For resellers, the distinction is equally as important because a reseller will not be protected by the first sale doctrine as a licensee.

If you need help to draft a license to protect your software, or need help with a patent, copyright or trademark infringement issue, or know someone that can use my help, please contact me for a free 30 minute consultation at nvantreeck@usip.com or call TOLL FREE at 1-855-UR IDEAS (1-855-874-3327) and ask for Norman.

– Ex astris, scientia –

I am and avid amateur astronomer and intellectual property attorney.  As a former Chief Petty Officer in the U.S. Navy, I am a proud member of the Armed Service Committee of the Los Angeles County Bar Association working to aid all active duty and veterans in our communities.  Connect with me on Google +

Norman

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.