Too Slow.

It's both a vindicating and deflating experience when you get behind an argument or a practice only to have your move pretty much mooted by society at large shortly thereafter. On one hand, there's the feeling that you were right, which is encouraging; and yet on the other hand, it can be a bit of a letdown when the battle's over almost at more or less the moment you join.

I've had this happen to me a few times over the last month, but the most recent time around probably takes the cake. I'd written a seminar paper for one of my classes about software licensing -- in particular, the legal distinction between sales and licenses -- arguing that software developers and retailers should be wary of overreaching licenses for various reasons, but most of all because the judicial landscape is unsettled. There have been cases (all involving Adobe, strangely) finding both that software sold under a EULA is and isn't "sold," which in turn triggers various protections under the Copyright Act.

(I wrote about this a while back, but I'm going to revisit it, both because I'm now done with the paper and because of a recent judicial development which I'll get to at the end.)

Sounds a bit dry, but it's an interesting topic, once you dig in to it, because the implications are wide-ranging. The practice of "shrinkwrap" and "clickwrap" licenses has been spreading in recent years: for example, many commentators constantly repeat this joke about how this sort of thing should in theory just let traditional publishers wrap their books in shrinkwrap, slip in a license, and -- ta-da! -- now you can't resell the book to a bookstore, copy it, lend it, etc. That's supposed to be an illustration of why all this is total nonsense of course, harumph. And that's all very humorous, except that recently the Maryland Bar Association started doing exactly that with their official directories of lawyers and judges. Oops. Oh, and Monsanto has also made millions doing the same thing with their Roundup seeds. In other words, the old joke is currently more of a description of reality, which in my experience generally indicates some sort of problem.


There have been a lot of live issues here recently, too, for example:

- There's a suit about to be filed wherein some legal publishers are trying to get rights to publish Oregon's legal code using their organization, which the state is claiming is protected by a license agreement (as with the Maryland Bar directory, this is especially weird since the Supreme Court's holding in Feist that compilations aren't protectable would seem to flatly prohibit this sort of thing).

- There's an ancillary issue of whether many of these rights can be protected under contract rather than copyright and to what extent, as well as how they're allowed to overlap or be disclaimed. The federal statutes clearly preempt state applications of copyright law, but that doesn't, in reality, solve much. First, it's still not clear which rules are mandatory and which can be contracted out of (warranties, first sale, fair use, etc.). Second, in order to reach most of these issues you have to decide whether a transaction is a "license" or a "sale," which is inherently a contract law issue and generally covered by state laws. But, if the question of which body of law applies is by nature a state-law issue, then the notion of absolute federal preemption would seem to be somewhat problematic.

- MSN Music recently announced that they were going to end support for all music purchased on their online store, meaning that consumers have to decide which devices(s) they want to validate their music on now, and which they can never change (i.e., if you want to upgrade your system later, tough luck). That's pretty clearly not the deal those buyers thought they were getting from Microsoft at first, but since the DMCA prohibits circumventing MSN Music's DRM scheme, those consumers are pretty much out of luck. (This is especially weak in that there's no real reason that Microsoft can't support revalidation except that it would compete with their new online music store.) Major League Baseball did something similar last year and Congress rejected a legislative loophole for it in the DMCA.

- But there have been a number of recent cases where the courts have applied a "copyright misuse" doctrine (supposedly an old rule, but not the way it's been used in these cases) to invalidate anticompetitive licenses that employ DRM/DMCA protections. You might remember that Lexmark got smacked down for trying to use some DRM tech to control the market for their printer cartridges. This is kind of a weird development, because while some courts have been really aggressive about applying this rule, it's practically a 180 degree shift from the previous judicial policy of validating aggressive EULAs under freedom-to-contract principles, and it's also been done without touching any of the prior license-friendly rules. The courts just came up with a new doctrine and started going nuts with it. (It's also not clear whether the rule only applies where certain combinations of DRM/license/hardware/software restrictions are used; there has been some implication that pure software controls are fair game, which really doesn't make a lot of analytic sense.)


So, at any rate, my paper generally focused on the first sale doctrine, state/federal preemption, and copyright misuse, essentially arguing that in addition to being a doctrinal mess, there were cases and practices coming down on both sides of the law and that a lot of people were going to end up getting burned when things finally shook themselves out.

So, of course, within a month, things decided to shake themselves out. The U.S. District Court in Seattle just ruled in a case involving Autodesk trying to restrict the resale of its CAD software on eBay, and the Court did not pull any punches:

The US District Court in Seattle has rejected Autodesk's myriad arguments regarding its software licenses and found in favor of eBay seller Timothy S. Vernor. The ruling started by ruling that Vernor was within his rights to resell copies of AutoCAD Release 14 he got in an auction. Once the court settled the legitimacy of reselling, it used that ruling as a lens to dismiss all of Autodesk's various claims. More than once the court described Autodesk's arguments as 'specious' and 'conflicted.'

Ouch. Makes me feel obsolete -- I'd made fun of this specific practice in my paper, pointing out that though you shouldn't be able to resell a copy of Photoshop under a EULA (since you don't "own" it) under the "license not sale" theory, the reality is that there's dozens of individuals and retailers doing exactly that on Amazon right now with no consequences. And really, what's Adobe going to do about it?


Well, turns out I was right. The judge had no mercy for Autodesk when they argued precisely that. (Here's a blog post from Google's Senior Copyright Counsel on the subject that does a good job explaining the decision and which comes down the same way I did.) The court even went a few steps beyond what I'd have predicted: there are some shots taken at preemptive DMCA takedown notices as a prima facie cause of harm, which is really significant; there's a definitive integration of the redundant parts of §109 and §117 of the Copyright Act; there's a declaration that the pace of technological change doesn't change the doctrine, which is something that's really needed to be said for a while; and most importantly, the Court held that there could be no contributory infringement since the right to copy is essential to effective use and thus immunized. That last conclusion in particular is huge.

The court also took time to discuss the issue that I ended up wrestling with the most in the end, which was whether contract law would still apply even in the case of a "sale." This is a big concern here, since the problem -- as I see it -- is the drafting of highly restrictive licenses in the first place; there's a perverse incentive to throw the kitchen sink at the problem and think hey, if the court doesn't buy the copyright claims, at least we'll win on the contract claims. That "fallback" strategy puts licensees in a tough legal position.

The court didn't spend a great deal of time here since Autodesk didn't really advance the issue properly, but the judge did take time to point out that the governing precedent generally turns on first-sale issues, not contract. In the end, this part of the opinion is really just judicial ribbing, since it avoids the real issue mentioned above: that the question of whether a transfer is a "sale" or a "license" actually raises a threshold issue of state contract law that's inextricable from the rest of the analysis. But the Court does at least highlight the distinction.

The Court does also hold regarding the copyright issue that the initial question is whether the license is binding on retailers in the first place, and that if so there would be additional questions of whether the license constitutes copyright misuse, is unconscionable, etc. That reads to me like a warning to Autodesk -- and it was also one of my arguments, namely that every step the EULA draftee takes toward making a license airtight increases the very real risk of judicial invalidation under Lexmark and related cases.


The court ends up relying solely on 9th Circuit precedent, but does point out -- correctly -- that the authority on the first-sale question is in total disarray. That's also very important, in that it's made clear in one spot just how contradictory the precedent is. (It's also kind of entertaining to see the court cite to the two Adobe cases I discussed at length in my paper, Softman and One-Stop Micro, one after the other, noting as I did that they reach absolutely contrary and incompatible results in the same California state circuit and within a year of one another. It's a great example of how little sense the caselaw makes.)

Regardless, this is mostly for my own edification, but since my paper is basically moot now if this opinion gets any traction -- and I expect that it will -- it felt important to write. Perhaps some companies out there will be looking for someone that can redraft their EULAs...