Blog The Effect of the Bilski Case on Software and Business Methods

It is an unsettled question whether the first-sale doctrine of copyright law applies to software, and today the U.S. District Court in Seattle said no. The first-sale doctrine says that once you legally buy a copy of a copyrighted work, you have the right to sell or give away your copy after that as you please (but you still cannot make additional copies). It has been debated for years whether a copyright owner that distributes software is giving the purchaser a license or selling a copy of the software.

If the original transfer is treated as a license, then the first-sale doctrine does not apply and the copyright owner can control how the item is transferred (or even prevent transfers). If the original transfer is treated as a sale of a copy, then the first-sale doctrine applies and the copyright owner has no further control over the sold copy.

In the case today, Verner v. Autodesk, the District Court held that the original transfer was a sale, and that Verner could legally resell the software. The case involved Timothy Vernor's EBay store where he sold legitimate copies of AutoCAD among other things. Autodesk asked him to take down the software and he refused, so AutoDesk got EBay to take down the software. Verner sued, and today won.

This still doesn't resolve the overall conflict, it is just one more point on the board. The 7th and 8th Circuits of the U.S. Court of Appeals have held in cases that the original transfer is only a license, while the 3rd circuit has held that the original transfer is a sale of a copy. We will have to wait and see if Autodesk appeals this case to the 9th Circuit.

In the meantime, software manufacturers should look at their end-user license agreements (EULA) based on the court's decision and not rely on preventing subsequent transfers of software as a key element of their business model.

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By Mason Boswell

Mason Boswell - Seattle Software Patent Attorney

Mason Boswell is a patent attorney in Seattle that focuses his practice on software, semiconductor, and game companies. In this patent advice blog, you will find current thoughts on patent strategy, patent-related news, and other interesting intellectual property topics.