Tobold's Blog
Saturday, September 11, 2010
US appeals court makes selling used software illegal

It appears the United States Court of Appeals for the Ninth Circuit agrees with Penny Arcade: You really can't sell used software legally. More specifically the court said yesterday that the first-sale doctrine, which e.g. allows you to sell used books, doesn't apply to "those who are only licensed to use their copies of copyrighted works". The judges upheld the legality of shrink-wrap and click-wrap software licenses, so if it says you can't transfer or resell that video game in the legal text you clicked through without reading while installing the game, that is legally binding.

Basically the court's opinion is that just because you are holding a physical copy of a copyrighted material in your hands, you aren't the legal "owner" of it. You only paid for a license to use that copyrighted material, and the company which licensed that software to you has the right to limit what you can do with that copy.
The thin end of the wedge becomes a slippery slope.
It will go to the Supreme Court, no doubt. The issue is ripe.
Thanks for posting the link to the actual judgment!

For those not inclined to read federal court-speak, here's a tl;dr. X buys copies of old AutoCAD software from a firm of architects that have upgraded to a newer version. X sells these copies on eBay. The makers of AutoCAD complain and say X is not entitled to sell these copies. Court agrees and says: no, it's not ok to sell these copies.

I think there are three interesting points worth noting here:

1. All the underlying facts were agreed between the parties. This means that the court didn't have to decide whether the original license agreement was validly concluded. In other words, the judges did not decide on the validity or legality of shrink-wrap or click-wrap licenses.

2. The court also specifically didn't decide whether these licensing terms are too restrictive. Right at the end, you'll see that the appeals court sent the case back to the first instance court. If this continues, the first instance court will now have to decide whether the AutoCAD license was too restrictive. I don't know the first thing about US copyright law, so I am not in a position to guess how that's going to work out.

3. The court specifically addressed a number of concerns raised by several parties. It concluded (in many more words) that it was bound by previous decisions to reach this one here, but that it might perhaps be a good idea for Congress to consider implementing new legislation. That's basically the courts' own "don't blame the messenger" defense.

This may indeed be a big step backwards/forwards/sideways for video game fans in the US, but remember that this decision by itself does not decide that you agree to a software license by buying a (new) video game in a box at GameStop or by launching it first time.
Oh, and what n1ck said. This is open to appeal, and may well be tried by the Supreme Court.

From my very limited perspective, I'm not sure the issue in this case is big enough for the court to try though. Again, there was no decision here on whether the license agreement had actually been entered into. Keep ripping that shrink-wrap and clicking those licenses... sooner or later some company will sue you instead! ;)
Oh, and I'm the only one that's amazed that some people were apparently prepared to pay in excess of $600 in 2005 for software more than six years old?
hmmm, if they don't appeal the judgment or do appeal and lose that too - it will creat one hell of a precedent.
I wonder what would then happen with all the game stores, making some very brisk business of trade ins, selling them used at markdown? moreover, will it go further and affect software rentals?
I'm a bit puzzled by this.

I remember those shrink-wrap licences from when I worked for an insurance company back in the mid 1980s. We certainly thought they were legally binding then and treated them as such. I've worked for at least two more companies since then that took the licensing very seriously. The company I currently work for enforces it rigidly within their own estate. If we even want to move (not copy) the software from one machine in the same location to another we need authorisation, for example.

On the other hand, games software has been traded second-hand with no adverse commentary for as long as I can remember. I can't recall ever seeing a game with a "No Resale" license on the shrink-wrap. Then again, I have played nothing but MMOs for a decade, where the concept of re-sale doesn't really apply.

My problem with this is collectability. I'm not interested in buying second-hand games to play, but I am interested in buying old boxes of games I play now. I'd love to complete my set of Everquest boxes for all the expansions I bought as digital downloads, for example. It's the physical objects I want, not the software.

Willit be legal to sell the discs/boxes if the software is never installed?
(Sorry for spamming your comments here, Tobold. Tell me if I should stop)


I don't know where the US is with the legality of shrink-wrap agreements (they belong to a wider category of agreements called "contracts of adhesion"), but it's certainly a controversial topic.

Most countries hold corporations to a higher standard than they do consumers in these and many other respects. For example, the courts in most countries would not automatically hold a consumer to the terms of a shrink-wrap contract if the terms are "unexpected", such as (probably) containing restrictions on the right of resale.

In addition, the first sale doctrine explained in the judgment also means (as far as I can understand it) that if a game publisher has sold the games to a retailer then the publisher can not prohibit further resales. I am not familiar with the type of agreement that publishers strike with GameStop et al, but I wouldn't be surprised if there's no "licensing" going on in that step of the chain. If that's the case, then it seems to me that this case has no relevance at all for bulk sales through retail.

Similarly, for rentals this appears to be a non-issue. Certainly, any serious rental company would have a special agreement (with the publisher) granting them the right to offer the game/film etc for rental.
Most rental companies DO get special permissions, and also pay more for the items.

Blockbuster pays upwards of $120 per dvd they put on the shelves for rental.
Don't really recall user agreements with console video games, so I'm not sure this accomplishes much.
"If we even want to move (not copy) the software from one machine in the same location to another we need authorisation, for example."
Did you ever encounter anything like a hard drive being switched between boxes? I don't know what is defined as the computer, but I could see some going with drive and some with CPU.
We knew it was coming to this. It's really just a matter of time till places like GameStop and eBay aren't allowed to resell.

It does seem odd compared to work like books and movies where resale is not an issue.

It's not odd if you compare video games to other computer software rather than other forms of media.

I can sell graph paper, but not AutoCad, while not the same you get the idea when you compare a game to a book.

Just think of video games as Adobe Paint or AutoCad. It is a much better comparison. I don't buy used games to play, but I do collect like Bhagpuss. I've been searching ebay for a Closed Beta CD from Diablo 2 for a few years, my wife threw mine out. I wanted to get it signed at Blizzcon.

Btw Bhagpuss I think we pretty much like the exact same things.
A couple of thoughts:

1) It's US law. Europe may not follow suit if this is upheld which will probably create a situation where certain works are not for sale in certain countries.

2) It has potentially massive implications for libraries, schools and universities. Anywhere really that shares resources. Even families. If the Eula says one user one licence all such places would be operating illegally.

3) However other cases may distinguish the precedent. Distinguishing is where a judge refuses to accept a precedent as binding on the grounds that the current case isn't similar in circumstances to the preceding case. This was some entrepreneur selling business software on a large scale, not the same as a parent helping their child with her homework in breach of a single user licence.

4) Even if fundamental behaviours in our current culture are criminalised it only wakes people up if legal action is taken. For instance just about every teenager has some downloaded unlicenced music - this doesn't matter for any practical purpose and would only become significant if large numbers of young people were suddenly prosecuted and imprisoned.

There are actually many areas of software use where people act illegally and no action is taken and personally I find it deeply unsatisfactory. I don't really accept the justice of shrink wrap at all because a contract is supposed to be a deal negotiated by both sides, not a minefield of improbable restrictions slipped in while one side isn't looking.
this is simply further evidence of how badly mangled our copyright law has become at the hands of digital media creators/corporations. Digital media should be treated like any other, there is no difference except the relative cheapness of reproduction.

Just to avoid uncertainty: there is nothing in this judgment that "favours" digital copyright holders. Quite The opposite: digital media actually has *less* protection than others.
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Libraries are switching to opensource library management systems anyways (though I'm not sure how fast the roll out will occur).

I don't know many libraries that resell, or allow you to "check out" computer programs. So I'm not quite sure what the deal is with mentioning them, or them getting upset.
To All in the US.

The Ninth Circuit (or as many comentators call them the Ninth "Circus") is a VERY overuled Court on appeal.

So don't bet that this ruling will stand. While it is rare that a case makes it to the Supreme Court a ruling this expansive will be reviewed.

Just a few thoughts on impact.

1/2-3/4 of Gamestop's revenue was just made illegal
A major new area of retail business for BestBuy was just made illegal

and since the RIAA has ALWAYS made the assertion that media is also a licensed good... you can bet that the recording industry will be jumping on this one too.

Oh by the way for all you Eurozone people I believe this flys in the face of most of Euro law rulings too... so you can bet that will be a factor... even though the Roberson court does not like citing international law I think it would be interesting to note odd scenarios like

What happens if I buy said used software in Canada or Mexico? etc etc

Oh I can see it now... gamestop goes web and bases operations in Mexico City... lol
To be clear, we need a law that allows the resale of a license without the approval of the copyright owner?
Angry Gamer,

None of what you say is what was decided here. None of the effects you describe follow from the judgment.

Solid advice: always take what the losing side's lawyer says with a HUGE pinch of salt.
Does it really matter what this or that court decides on the topic for now? Attitudes change. Laws change. The interpretation of laws change. It was once legal in our country to own human beings. It is not any more. Times change. Hopefully for the better.
Even if the license just grants the the right to use the software, typically these licenses are not limited in time. Essentially, the judgment forbids trading this right to someone else. In case of professional software, there should be newer versions that convince by their features and improvements rather than 'no recycling' lawsuits.

Now, just imagine this applied to games. I don't see any reseller examine the legalese of the EULA before resale.

Next - what's to stop greedy corps from sticking the same crap on CDs, DVDs and BDs?

Here's where the innate conservatism of the justice system will work to our advantage. Broadly speaking, courts will not allow *unexpected* contractual terms hidden in these long and hard-to-read click-through or shrink-wrap agreements.

Therefore, as long as the general consensus is that we actually buy something when we pay for it in a store and even a number of years after that ceases to be true, you can expect the courts to stick to that belief.
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