Is It a Sale or a License? Ninth Circuit Sides With Autodesk – The First Sale Doctrine Doesn’t Apply to a License

In a decision filed yesterday, the Ninth Circuit reversed the USDC (Western Dist. Of Washington) in the long-running litigation between Timothy Vernor and Autodesk, Inc. Vernor purchased used copies of Autodesk’s AutoCAD Release 14 software from one of Autodesk’s direct customers and resold the copies on eBay. The problem, the Ninth Circuit found, was that those direct customers didn’t own the software – they merely licensed the right to use it from Autodesk, according to the terms that governed the original transaction. Since the customer didn’t own the software, they couldn’t lawfully sell it to Vernor, and thus Vernor couldn’t count on the first sale doctrine to protect his subsequent sale of it on eBay.

If this decision withstands a possible en banc review or Supreme Court challenge, it may offer a more definitive set of standards for evaluating cases that arise out of the long-standing debate over whether software licensing agreements are true leases or are merely disguised sales agreements. The Ninth Circuit opinion devotes considerable space to a review of the Wise and MAI trio of cases, and rejects, again in significant detail, the arguments advanced by Vernor and amicus supporters of his position. The opinion may be reviewed at http://www.ca9.uscourts.gov/datastore/opinions/2010/09/10/09-35969.pdf.