Is Software Licensed or Sold?

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software licenseSelling software is a legal minefield. When you purchase a digital product, you’re not buying the CD/DVD and packaging, but a license to use the software. The license is a legally-binding agreement that determines how you may use that product. If software was “sold”, you would be the legal owner and could do what you wanted, e.g. install it anywhere, disassemble it, give it away or anything else that didn’t contravene copyright laws.

However, what happens when you no longer need that product? Is it possible to re-sell your software license to another party in the same way that you can sell a second-hand book, music CD or movie DVD? It’s a legal grey area which has been highlighted by the case of Vernor v. Autodesk, Inc.

A SitePoint forum post by Dan Schulz describes the full legal arguments in detail. In summary, Vernor attempted to sell legal copies of AutoCAD on eBay but had his account suspended following intervention by Autodesk Inc. Vernor sued Autodesk in federal court:

  • Vernor claimed he purchased the license from vendors who must have been the legal owners of the software. Therefore, the ownership transferred to him on purchase.
  • Autodesk contended that ownership was never transferred, Vernor’s sale infringed copyright, cited that its license was a “computer software agreement”, and the industry normally restricted ownership transfers.

The court disagreed with Autodesk and felt it had “little competent evidence of software industry practice” presented before it. The ruling therefore allows the licensed party to transfer software ownership and the copyright owner has no say in the matter. Software companies are selling a product that an end-user owns; if they receive the full value up-front, they cannot control that software once it’s in the stream of commerce.

Autodesk may yet appeal, but at least a dozen copies of AutoCAD are currently available on eBay.com.

Could the ruling be good news for web developers? End users rarely purchase web applications or “own” the software — they subscribe to a service. Many software companies will be re-considering their software distribution options.

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  • http://www.dan-schulz.com Dan Schulz

    Craig, the ruling basically says (and I mentioned this in the thread you linked to) that when you buy the software, you only own the copy of it. You don’t own the rights to disassemble, reverse engineer, or copy it. It works basically the same way books do. You own the copy of the book, but you can’t read it in front of a live audience, you can’t copy the book word for word, and you can’t claim authorship. What you can do is keep it, give it away, sell it, bury it in the back yard, douse it with gasoline then set it on fire… well you get the idea.

    The owner retains the lions share of the rights under the Copyright Act, but you get a limited subset of rights as the owner of that copy. The only way the author would be able to retain those limited rights you enjoy would be if he or she could somehow retrieve every copy of the book (and that would have to be spelled out clearly when the book is purchased that you only have a “license” to read it, and nothing more.)

    Oh, and expect Autodesk to appeal the judgment. Probably either later today (Friday) or first thing Monday morning.

  • http://www.optimalworks.net/ Craig Buckler

    Thanks Dan.

    The main problem for Autodesk (and some other companies) is the ruling legalises the second-hand software market — and the license cannot overrule it. Some companies already permit re-selling assuming you pass over all original media and uninstall/destroy your copies. Autodesk don’t — that may cut their revenues but they shouldn’t have been attempting to control re-distribution in the first place.

  • http://www.baymard.com jamieappleseed

    This is only fair. You buy a private copy of something and should be allowed to sell that copy to someone else, like a book as Dan suggests.

    I guess the main concern in software companies is that copies are easy and free to make, so they’ll have to rely on people being honest and not reselling the software and then keep using a copy of it themselves afterwards. The problem with this logic of course, is that if someone don’t care about breaking the law, they’ll just download an illegal copy in the first place (instead of buying at full price and then reselling at a lower price, incurring a loss) since they’re breaking the law either way.

  • kmx

    Sigh! The dated commercial model for commodities just doesn’t scale with software. It seems so stone-age-ish. And makes me wonder huge corporations are involved in a stone-age-ish rat-race rather than thinking of amending the model itself to suit the present and future needs.

    I fail to come up with a solution though! :(

    FOSS and service based businesses seem to one practical way out; but WTH, some ppl make their bread and butter suing ppl and living in courts! :P

    (sigh)

  • Jasconius

    It won’t have an effect. These things have a way of disappearing in our legal system because honestly nobody gives a shit except the guy who files the suit.

  • walterbyrd

    Try to sell your used copy of Rosetta Stone on eBay, tell me how that works out for you.

    Also, have you followed the Apple v Psystar case?

    It does not seem to me that the courts have ruled that software is owned.

  • walterbyrd

    It works basically the same way books do

    No it does not. I can always sell my used copy of a book. Book publishers tried to stop that, but the courts ruled against them.

    Also, when it comes to books, the BSA thugs can not show up with an armed federal marshal, and demand that you have original receipts for all the books you purchased.

    When it comes to software, the courts usually rule that the software is licensed. However, if you never installed the software, or agreed to the license, that may be different.

  • walterbyrd

    I guess the main concern in software companies is that copies are easy and free to make, so they’ll have to rely on people being honest and not reselling the software and then keep using a copy of it themselves afterwards.

    I don’t think that is the concern. If I want to buy software, the software companies want me to buy a new copy from them, they don’t want me to buy a used copy from you.

  • Elpie

    Reselling of software happens all the time. End users rarely buy boxed software from the original producer – it almost always goes through distributors and resellers. None of this infringes on copyright as the software is not re-engineered, disassembled, or otherwise interfered with.

    I agree that software that is distributed physically should be treated like a physical book, and becomes the physical property of the purchaser. Activation checks should be enough to ensure that the original purchaser cannot retain a working copy. Adobe does this well – if you want to move the software from one computer to another the original install must be deactivated in order to activate the software on a different machine.

    However, electronic distribution is not the same as buying a boxed product. With software, activation keys are useful for ensuring only one genuine install is used (at least until someone cracks the key, but then they will use illegal copies anyway). Electronic books are often tied irrevocably to the original device on which they are downloaded, so we should be careful about saying we want software to be viewed in the same way as books!

    I’m following this case closely and hope that it sets a precedence in law that physical media can be owned by the end-user, not simply licensed. I’ve purchased software in the past that had lifetime licenses only to have the company sold and the terms changed, with the software disabled by the new company – not even an option to keep using it without updates. If this ruling stands I might just ask for my key to be reactivated ;)