The end of ownership?

• Author: Jankowski, Donald F., II
• Position: Copyright misuse defense

INTRODUCTION I. A BRIEF HISTORY OF COPYRIGHT LIMITATION: FIRST SALE A. The Grounds and Goals of Modern Copyright Law B. The Evolution of First Sale II. EXPANDING RESTRICTIONS, CONTRACTING USER RIGHTS A. Combining Copyright and Contract Law B. Expanding Control at the Expense of Individual Use III. THE VERNOR DILEMMA: LICENSING TO OVERRIDE FIRST SALE A. Autodesk's Licensing Practices B. Vernor at the District Court C. Vernor at the Circuit Court IV. THE BIGGER ISSUE: CONSUMER USE AND THE VALUE OF THE AUTHOR'S INTEREST V. TWO METHODS OF DEALING WITH THE EXPANSION OF STRICT LICENSING PRACTICES A. The Wait and See Approach B. Expand the Doctrine of Copyright Misuse CONCLUSION The terms of the software license in the case are not very different from the terms of most software licensing. So I think it's safe to say that most people don't own their software.... The other ramification, there is no reason a similar license could not be put into the cover of a book. It wouldn't be difficult for everybody to implement this. (1)

Greg Beck, defense attorney in Vernor v. Autodesk

INTRODUCTION

Imagine for a moment that you are in the market for a new car. You find a sports car that you like, talk with a salesperson and ultimately purchase a new automobile. This car is effectively the same as thousands of other cars. It is a copy. You were not under the impression that you were buying the rights to the design of the car or to reproduce the car to the exact specifications as your own copy. However, you believe that you can do with this car what you will. You can put bigger wheels on it, put stickers on it, modify the engine, or paint it a new shade of green. You can sell the car. You can give it away. You have consumer freedom, based on a court-created and legislature-supported doctrine known as "first sale." (2)

Now, what would happen if the car manufacturer decided that you should not own a copy, but rather you should merely have a license to the car? After all, such agreements favor the automaker, allowing greater control over consumer use of their product after it has been purchased. Now, when you open the door to step into the car for the first time, an attorney is sitting in the passenger seat. This attorney, holding a package of papers by his side, tells you that all you have to do is turn on the car and he can be on his way. If you so desire, you can read his papers, which contain more terms that you must agree to now that you have bought the car. If you do not want to agree to these new terms, you can step out, return the car and go home. In this hypothetical transaction, all automobile sales are now really leases, as the car manufacturers have collectively stopped offering cars for sale. This car is actually being licensed to you. You will agree to this license by starting the car.

In your desire to expedite the process, you decide to just turn the keys. The engine fires up and the attorney leaves, papers in hand. When driving back from the dealership, however, the car begins to act up. You try to turn off the highway onto the exit to your home, but the car will not turn. There is a device in the car that prevents you from taking the exit; that action violates the agreement you made with the manufacturer when you started the car. You search around the dashboard, find the device and remove it. This is against the agreement as well. You are notified that you are breaking the law and are now in violation of your lease agreement. Unfamiliar with such things, you decide that this car is just not for you. You try to re-sell the car, as you can no longer return it. Again, you are notified you are breaking the law and the contract. You are not even permitted to give the car away. You are left with a perfectly useful car that you cannot use and cannot get rid of. The car has been legally handicapped by the manufacturer even though it is physically and perfectly functional. Your consumer freedom has been limited by the simple inclusion of a few terms in your agreement. A useful product is rendered useless.

The above hypothetical, although somewhat unbelievable when applied to the new car market, demonstrates an emerging and potentially problematic reality in the world of intellectual property rights: the growing use of contract law, specifically end user licensing agreements (EULAs), to usurp important rights legally endowed on both retail and consumer software purchasers. For more than one hundred years, the first sale doctrine has protected purchasers of books, movies and other intellectual property from extensive use restrictions pursued by copyright owners after a copy is first sold. (3) However, the increasingly large role of digital intellectual property in the average consumer's media access, combined with Congress's current deference to court-created copyright law, has led to a deviation in first sale doctrine protection and a weakening of individual rights in the realm of software sales.

Demonstrated by the Ninth Circuit decision in Vernor v. Autodesk, it appears that, through licensing agreements, first sale no longer applies to computer software users. (4) This business practice, while common among software copyright owners, threatens to spill over into other major copyright-based industries including music and movies; such support over time could very well lead to the end of digital ownership altogether. However, all is certainly not lost. As the Vernor court has stated, "Congress is free, of course, to modify the first sale doctrine and the essential step defense if it deems these or other policy considerations to require a different approach." (5) Also, the Ninth Circuit has now reigned in the rather low Vernor licensing threshold, in terms of copyrighted music, through the post-Vernor decision UMG Recordings, Inc. v. Augusto. (6) However, the time is ripe for the courts and Congress to clear up the currently murky legal waters stirred by the conflicting ideals of digital licensing and the first sale doctrine. The low software licensing threshold promulgated by the Vernor decision has demonstrated a movement away from the original end of copyright law, protection of the development of public knowledge, towards a more owner-centric value system. (7) The more courts interpret the currently unclear, seemingly conflicting doctrines, the more confused the law will become.

Ultimately, I will propose two methods of solving this lack of clarity through legislation. First, the courts could simply do nothing and see how legal jurisprudence, including a likely future Supreme Court decision, will decide how to deal with this intersection of contract and copyright law. Second, I will propose that the courts defend consumers' abilities to do with their purchased intellectual property what they will by establishing and consequently strengthening the judicially-created defense of copyright misuse.

1. A BRIEF HISTORY OF COPYRIGHT LIMITATION: FIRST SALE

   1. The Grounds and Goals of Modern Copyright Law

      In order to understand the impact of recent Ninth Circuit rulings on copyright law, I will first give a brief overview of the system's beginnings. The initial call for Congress to implement a copyright system into American law came from the United States Constitution, Article I, Section 8, Clause 8. This provision, now commonly known as the Copyright Clause, endowed Congress the power to "promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." (8) Since the adoption of the Constitution, Congress has ultimately established laws governing copyright use in Title 17 of the United States Code. Last revised in the Copyright Act of 1976, this Title abolished most state copyright law under a preemption provision given in 17 U.S.C. [section] 301(a). Simply put, we now have a uniform federal system governing copyrights.

      The final goal of our federal copyright law has consequently been endowed with a twofold purpose. First, copyrights incentivize creativity by giving limited, exclusive rights to copyright-owning creators. These property rights are limited in time and apply only to expressions rather than ideas. (9) Also, there exist further exceptions to the copyright owner's rights, which strike a balance between owners' rights and consumer use.

      The second purpose of copyright law is to promote and ultimately endow the public with the greatest amount of knowledge, cultivated through the encouragement of creativity. Thus, the duration limitation placed on copyrights serves to eventually disseminate all creativity from the original creator to the public domain, which benefits society as a whole through increasing our collective wealth of knowledge.

      Although the stated purposes of United States copyright law theoretically strike a balance between rewarding creators and increasing the public domain of knowledge for the good of all, the reality is that these two ideals are in great conflict. As a piece of intellectual rather than physical property, a creator's expression is intangible in its existence. Tangible property's value resides in its physical exclusivity; only one individual is capable of owning one specific physical object at a time. one piece of land has value because only one person can own it exclusively. However, intangible intellectual property, such as a story, can theoretically be copied over and over again without any loss or degradation to the initial work. Many people can access the work without excluding anyone else. Intellectual property, then, is like a well that cannot run dry. Copyrights serve to add value to creativity by giving authors the right to exclude others from using or accessing a work without the author's permission. (10) Through this right to exclude, copyright owners are free to sell and give away their works as they please for their own benefit for a limited duration of time.

      A...