The no-sale doctrine

Copyright The first thing to bear in mind when thinking through the implications of the Ninth Circuit’s ruling on the first sale doctrine last week in Vernon v. Autodesk is that there are two related rulings yet to come from the same court, probably any day now. One concerns the resale of promotional CDs; the other involves online video games.

All three cases were argued on the same day before the same three-judge panel. Only when we see all three opinions will we know how thoroughly the Ninth Circuit has rewritten first sale doctrine law.

Until then, however, a few observations about last week’s ruling:

  • The court in Vernon made much of the strict use limits imposed by Autodesk through its EULA and through technical measures, including extensive restrictions on the user’s ability to transfer a copy of the software. It’s unclear from the ruling whether distributing digital content under a less-restrictive EULA or less-robust technical measures would lead to the same legal result.
  • Some of the lengths Autodesk goes to to enforce the use restrictions in its EULA could render many cloud-based media storage and distribution models impractical if not quite technically impossible. Again, it’s unclear whether it is required that a licensor go to those lengths to sustain a finding that no sale has occurred, but it could become a critical issue with respect to industry efforts like UltraViolet or Apple’s rumored iTunes in the cloud service.
  • How long before someone tries to argue that DRM on physical media imposes the same sort of use restrictions as Autodesk employed and that therefore even the “sale” of a disc is not really a sale?
  • Courts in other circuits have reached very different conclusions about the enforceability of EULA’s, which could invite Supreme Court review.
  • The court in its opinion openly invites Congress to step in and clarify how, if at all, the first sale doctrine should be applied to digital media. Should Congress accept the invitation (frankly a long shot) it would have quite an extensive copyright agenda on its hands.

Further readings:

Guess What, You Don’t Own That Software You Bought

Court Ruling Could Lead to the End of Used CD/Record Stores, Blockbuster, Netflix

Courts Nix Reselling Digital Content–It Really Isn’t Yours

Ninth Circuit opinion