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Licensing of software does not give rise to patent exhaustion

BananaIP Counsels > Copyrights  > Licensing of software does not give rise to patent exhaustion

Licensing of software does not give rise to patent exhaustion

First Publication Date: 20th September 2010

The United States Court of Appeals for the Ninth Circuit clarified the legal confusion that was existing on the application of the first sale doctrine or doctrine of patent exhaustion with respect to software licenses. The Court clarified that the exclusive distribution right is limited by the first sale doctrine, which is an affirmative defense to copyright infringement that allows owners of copies of copyrighted works to resell those copies. Further the Hon’ble Court held that the exclusive reproduction right is limited within the software and this affirmative defense is unavailable to those who are only licensed to use the copies of copyrighted softwares.

The US court of Appeal dealt with this issue while deciding the matter of Timothy S. Vernor v. Autodesk Inc. and the Circuit Court comprising of Circuit Judges William C. Canby, Jr., Consuelo M. Callahan and Sandra S. Ikuta, passed this significant judgment on 10th September 2010.

Timothy Vernor had bought four packages of Autodesk’s AutoCAD software at a garage sale and tried to sell them on eBay but Autodesk threatened Vernor with a copyright lawsuit, claiming that its software is only licensed and never sold as they were bound by the end-user license agreements it had with the original purchaser.
Subsequently, Vernor had filed a suit in Seattle against Autodesk, asking the court to clarify his right to resell the computer-aided design software packages that he purchased.  The US District judge then had held that Vernor was a successive owner and was entitled to resell the copies he purchased under the first sale doctrine. Autodesk later appealed to the US Court of Appeal for the Ninth Circuit.
Writing for the 9th Circuit, Judge Consuelo M. Callahan ruled that “a software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license, (2) significantly restricts the user’s ability to transfer the software and (3) imposes notable use restrictions.”
Experts in the field opine that this decision of the ninth Circuit is highly disappointing and is bad news for software consumers.

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