ALTOM: Think before selling your old software

Tim Altom
September 25, 2010
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Tim Altom

The Ninth Circuit Court of Appeals has made it official: You don’t own your software if the software maker says you don’t own it. In other words, it’s not like a book, which you can sell even if you don’t own the copyright. Instead, it’s as if you licensed the book’s words, and couldn’t sell the book itself even though you bought it from a bookstore originally. Forget about ever selling your software when you’re done with it, if the software company doesn’t allow you to.

The core of this restriction is the software EULA. Have you ever noticed that whenever you load commercial software on your computer, there appears a lengthy batch of language and a button that asks you to acknowledge that you agree to its terms? That’s a contract that nobody ever reads. It’s referred to in the trade as an “end-user license agreement” or EULA.

Some EULAs are fairly benign, allowing you to make one backup copy, for example, and permitting resale if you no longer use the software. But others are exceedingly strict, specifying that under no circumstances do you ever own anything, and that you’re paying only for a one-time use. AutoDesk, which makes one of the most popular computer-aided drafting packages, AutoCAD, is particularly restrictive. Under AutoDesk’s EULA, you can’t transfer anything to anyone else—not the software, and not the license to use the software. One owner, one use, then no more, forever.

This tight control has irritated software users for years. What brought the court of appeals into the picture was a combination of eBay and an enterprising fellow named Tim Vernor. In 2005, Vernor was earning good money selling odd items on eBay, and one of the things he offered was a boxed, but used, copy of AutoCAD. AutoDesk found out about it, and issued a stern takedown order to eBay, which promptly complied.

Vernor fought back with a counter-notice, which resulted in yet another notice from Autodesk. Finally eBay, apparently tiring of the growing argument, suspended Vernor’s account. Vernor upped the ante by taking AutoDesk to court, on the theory that his purchase of the software came under a fairly obscure copyright provision called the “first-sale doctrine.”

It’s the first-sale doctrine that permits you to sell your copy of that old James Patterson novel in a garage sale. Under the doctrine, the copyright holder controls only the first sale. After that, it’s out of his hands. Vernor contended that he had bought his copy of AutoCAD just that way, and that he had never agreed to any EULA. AutoDesk, of course, responded that the license still applied.

When the U.S. District Court took a look, it found that the whole issue of ownership versus licensing for software was a bit of a mess in the U.S. Ninth Circuit, which encompasses nine Western states and Guam. Licensing didn’t seem to always mean the same thing in every case. In the end, the district court ruled for Vernor, pointing to the 1977 case of United States v. Wise, where the court said that if a buyer got a physical copy that he could keep for as long as he wanted, it was a sale, not a license, no matter what the EULA might say. That meant Vernor, who hadn’t agreed to any licensing terms at all, was a legitimate owner and could resell the software.

The appellate court, however, took a different and possibly more ominous view. The original buyer had never actually held anything but a license, and therefore couldn’t pass along ownership to Vernor or to anyone else. The court acknowledged that its ruling had widespread implications for users of software, but also for the music and movie industries.

The court’s finding can allow companies to destroy any after-market in software, music or films if the CD or DVD you buy is only licensed and isn’t really yours. From a business perspective, it means you can never recoup a part of your investment in old software by reselling it after you’re done using it. You may not even be able to resell any old computer gear with the software still on it.

Although the software industry’s claims of protecting themselves sound pious, it would seem their real goal is to make sure everyone has to go back to them for each new copy, and pay the same high price for it. This seems odd in light of the government’s concerns about antitrust, but so far the federal government doesn’t appear to have worried about this loophole.

The court observed that Congress has to take action if the situation is to be changed, because the law as it stands allows software companies to legally throttle the used software market.•


Altom is an independent local technology consultant. His column appears every other week. He can be reached at taltom@ibj.com.


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