Vernor v. Autodesk: does it matter in an age of cloud computing?

Today the Ninth Circuit issued an opinion in the case of Vernor v. Autodesk [PDF], making an important ruling about copyright, software and the first sale doctrine. At a fundamental level, however, one could wonder whether the case is all that big a deal, since the first sale doctrine concerns rights that the owner of a physical copy of a work has. For software — especially these days when an increasing amount of software is either distributed over the internet or provided in the cloud — questions about the rights associated with physical copies are becoming increasingly irrelevant.

No doubt the distribution of physical copies of software is less important than it was in the past. But the Vernor case is worth looking at inasmuch as the ruling could translate into some potentially wacky arrangements depending on the desires of copyright owners and the accompanying restrictions they may put on the uses of their works. The holding of the case is not limited to software, but to any copyrighted work capable of being distributed in physical form. As Vernor’s attorney Greg Beck has written, “there is no obvious reason why other publishing industries couldn’t begin imposing the same terms. If they do, it may be the end of ownership of books and music.” (I’m proud to mention that Beck has been a guest blogger here at Internet Cases.)

What the case was about

Vernor bought several used copies of AutoCAD software from a customer of Autodesk, which is the software’s original distributor and copyright owner. Vernor then tried to sell those copies on eBay. Autodesk asserted that this sale of the copies violated Autodesk’s exclusive rights under the Copyright Act to distribute the software. So Vernor filed suit to ask the court to declare that such sales were not infringing. (Cases like these, where the accused goes on a preemptive offensive, are called declaratory judgment actions.)

The trial court found in Vernor’s favor. Autodesk sought review with the Ninth Circuit. On appeal, the court reversed, holding that Vernor could not rightly assert that his conduct was protected under copyright law’s first sale doctrine, and that Vernor’s customers’ installation of the software was not protected by the essential step defense.

These defenses failed because the court found that Vernor (and his customers) were merely licensees of the software, not owners.

The Software License Agreement

When Autodesk sold the software to CTA (the company from whom Vernor bought the discs before trying to sell them on eBay), it included a shrinkwrap license agreement, as well as a screen containing the same terms that appeared during the installation agreement.

The agreement provided, among other things, that the software was being provided under a limited license and that Autodesk retained ownership of the copyright in the software. It also placed onerous restrictions on the use and transfer of the software, e.g., the user could not rent, lease or transfer it to other users, or transfer it out of the Western Hemisphere, either physically or electronically.

The first sale doctrine

In general, the owner of a copyright in a work has the exclusive right to determine how copies of the work are distributed. The century-old first sale doctrine, however, is an exception to this general rule.

Under Section 109 of the Copyright Act (17 USC 109), the “owner of a particular copy” of a work may sell or dispose of his or her copy without the copyright owner’s authorization. Selling the copy of a painting you by at an art auction, for example, should not subject you to copyright infringement.

The essential step defense

The Copyright Act also provides that the owner of the copyright in a work has the exclusive right to make copies of the work. But there’s an exception to that exclusivity when it comes to software — the RAM copy made when the software is being used, according to Section 117 of the Copyright Act, cannot give rise to an infringement if that copying is being done by the “owner of a copy” of the software as an “essential step” in using the program.

The lower court’s decision

Vernor won at the lower court level because the court held that he was the “owner” of the copies of software he had bought, and therefore was protected by the first sale doctrine. His customers, also as owners, would be protected by the essential step defense.

Why these defenses failed

The court of appeals held otherwise, namely, that Vernor (as well as the company from whom he had bought the copies, and his customers) were merely licensees and not owners of the software. Only “owners” can claim protection under the first sale doctrine and the essential step defense.

The court looked to the circumstances surrounding the transfer of the software, and formulated the following test to determine that a software user is merely a licensee when 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.

In this case, all these criteria were met. Since neither Vernor nor the company he bought the software from were “owners,” these defenses were not available.

Room for criticism

The decision is subject to criticism in a number of ways. First, it might go against the sensibilities of many ordinary folks who think, quite naturally, that when you buy something (like a CD containing software), you own it. This case confirms that that is not always the case.

A second possible criticism is how the case makes possible some strange situations not involving software. What’s to stop hard copy book publishers from entering into shrinkwrap agreements with people who buy the books, purporting to retain ownership and calling the arrangement a license, while placing restrictions on use and transfer? Under the test in this case, it could be an infringement to lend or sell or otherwise distribute that book. Seems like a dangerous way to lock up information. But I guess it’s better than including curses as DRM.

Finally, the case lends itself to criticism in the way it gives great power to the software companies to really tie up tangible media to the detriment of consumers. Once an application has been sold once, where’s the harm to the software company if it’s transferred to someone else? The company has already been paid once, why must it insist on getting paid again? This grabbiness is really no surprise, though, especially when one sees that the likes of the Business Software Alliance joined as amici on the side of Autodesk.

In any event, tangible media for software is becoming a thing of the past. To the extent this case allows some negative consequences, the move to the cloud will mitigate that negativity.

Can a robot perform a valid marriage ceremony?

Mashable has this little story and video of a couple in Japan getting married in a ceremony performed by a robot. Looks like it went off without a hitch. But it’s an interesting harbinger of some of the legal questions that will arise as intelligence based on nonbiological substrates gets more human-like.

Is a marriage ceremony performed by a robot “legal”?

I looked up the Illinois statute that provides the requirements for a marriage ceremony (750 ILCS 5/209). A couple can get married if the marriage is “solemnized” by a judge, a county clerk, or “in accordance with the prescriptions of any religious denomination, Indian Nation or Tribe or Native Group, provided that when such prescriptions require an officiant, the officiant be in good standing with his religious denomination, Indian Nation or Tribe or Native Group.”

I expected the statute to be phrased in a way that would at least strongly imply that the ceremony has to be solemnized by a person. But I’m not sure it’s totally clear. I’m not a family lawyer — so take this with a grain of salt. It looks like a couple can still be validly married in a religious ceremony if the “prescriptions” of that religion do not require an officiant.

So it may not be too hard to work around the robot problem. Just find a church out there to establish some prescriptions that don’t make the officiant an essential part. Then the robot ceremony could ostensibly be a side show, like the cutting of the cake or tossing of the bouquet.

If you think about it, does it really matter whether the officiant is a person? There remains the obligation to get a license, which serves as a vetting process of sorts for the couple. And the psychological effect of “solemnization” is to get the couple to take it seriously. Does anyone care whether the officiant is conscious of what’s going on in the same way a human would?

UDRP loser did not commit fraud on USPTO by saying it was exclusive user of mark

Salu, Inc. v. Original Skin Store, Slip Copy, 2010 WL 1444617 (E.D.Cal. April 12, 2010)

This is kind of a wonky trademark/domain name case. So if that’s not in your wheelhouse, don’t strain yourself.

Plaintiff sued defendant for infringement of plaintiff’s registered trademark. Defendant moved for summary judgment, claiming that the asserted trademark registration was obtained by fraud on the United States Patent and Trademark Office. Specifically, defendant argued that plaintiff misrepresented when it told the USPTO that its SKINSTORE mark had “acquired distinctiveness” (i.e., was not merely descriptive of the goods and servcies) by means of “substantially exclusive” use in commerce.

The court denied the motion for summary judgment.

Defendant had argued that plaintiff committed fraud by saying its use was exclusive. It pointed to a case under the Uniform Domain Name Dispute Resolution Policy (UDRP) that the plaintiff had brought against the user of the domain name eskinstore.com. The WIPO panel in that case refused to find a clear case of cybersquatting.

In this case, defendant argued that plaintiff’s earlier unsuccessful UDRP challenge to a similar mark showed there were third parties using the mark and therefore the claim of exclusivity was fraudulent.

The court rejected this argument, noting that the plaintiff had undertaken significant efforts to protect its exclusive rights in the trademark. (It had sent out an astounding 300 cease and desist letters in the past couple of years alone!)

Moreover, and more importantly, the court noted that the WIPO panel hearing the UDRP complaint specifically declined to determine cybersquatting had occurred, finding it to be a question of infringement better addressed by the United States courts.

Wife posts pics with boyfriend on MySpace, loses child custody

And you should have heard what the judge said in open court!

Lipps v. Lipps, 2010 Ark. App. 295, 2010 WL 1379803 (Ark. App. April 7, 2010). [Read the opinion]

This is one of those cases that’d do well as a movie on Lifetime Television for Women. Unlike other cases I talk about on this blog, this one only kind of deals with the internet Here the husband (an Iraq war veteran) saw pictures on MySpace of his wife in bed with another man, so he filed for divorce and sought child custody.

What’s worth paying attention to in this case is the “disparaging and intemperate remarks” made in open court by the judge.

At a hearing where the judge entered a temporary order granting joint custody of the couples’ infant son, the court admonished the wife/mother, characterizing her situation as “a nightmare every parent faces . . . when you have got a child that acts like a slut, quite frankly, a slut.”

Later in the case the judge granted sole custody to the husband. The wife sought review with the Arkansas appellate court. On appeal, that court affirmed the trial court’s order on custody.

The wife had argued that the trial court judge was biased, and asked for a new trial with an impartial judge. Although the appellate court was “deeply troubled” by judge’s rude remarks, it held that because the wife had not raised that argument in the trial court, and had not asked the judge to recuse himself, the court could not consider that question on appeal.

So the court affirmed the foul-mouthed judge.

The appellate opinion is embedded below:

2010-04-07_lipps_v_lipps

Supreme Court clarifies basis for why copyright suits over unregistered works should be dismissed

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Supreme Court overturns Second Circuit, holding that a copyright plaintiff’s failure to register the work before filing suit does not deprive the court of subject matter jurisdiction.

Reed Elsevier v. Muchnick, Slip. Op., 559 U.S. ___ (March 2, 2010) [View opinion here]

“Subject matter jurisdiction” refers to a court’s power to hear the matter before it. The Constitution sets out the general contours for the federal courts’ jurisdiction, and Congress enacts statutes that give more detail to this set of powers. Particular statutes can define whether the federal courts have subject matter jurisdiction over certain types of cases. For example, Congress has declared that the federal courts have exclusive jurisdiction over copyright cases (See 28 U.S.C. 1338).

If a court does not have subject matter jurisdiction over the type of matter before it, it has no power to adjudicate the case. So the question of whether subject matter jurisdiction exists is critical.

The Supreme Court just decided a case that deals with the scope of subject matter jurisdiction in copyright cases, and clarifies a notion that has been the subject of some uncertainty. The question the court decided was whether a federal court has subject matter jurisdiction over a copyright case when a work at issue is not the subject of a copyright registration.

Section 411(a) of the Copyright Act (at 17 U.S.C. 411(a)) provides, among other things, that “no civil action for infringement of the copyright in any United States work shall be instituted until . . . registration of the copyright claim has been made in accordance with this title.”

Some courts have held, and many litigants have argued, that this provision of Section 411 is a “jurisdictional prerequisite.” Said another way, some have argued that if the copyright plaintiff files suit without having secured a registration, the court is without subject matter jurisdiction over the case. In the case of Reed Elsevier, Inc. v. Muchnick, however, the Supreme Court held that Section 411 does not deprive the court of subject matter jurisdiction, but instead merely provides a “claim-processing rule,” akin to an element of the case.

The lower court proceedings

A group of freelance writers filed a class action copyright infringement case in federal court in New York. They settled the case and the judge approved the settlement. Some of the plaintiffs objected to the settlement on procedural grounds, and when the court entered final judgment, those objecting plaintiffs appealed to the Second Circuit. On its own motion, the Second Circuit raised the question of whether it had subject matter jurisdiction over the case, as some of the plaintiffs in the class had unregistered works.

The case took on a peculiar procedural aspect — neither side in the dispute argued that the federal court was without subject matter jurisdiction, but the Second Circuit decided anyway that it did not. (After all, subject matter jurisdiction pertains to the power of the court, not the rights of the parties, so parties cannot waive the absence of subject matter jurisdiction.) Concluding that it didn’t have jurisdiction, the Second Circuit reversed the approval of the settlement.

The defendants in the underlying case sought review with the Supreme Court, and the high court took on the case. It reversed the Second Circuit, holding that the court did indeed have jurisdiction, even though some of the plaintiffs’ copyrights at issue were unregistered.

The court’s holding

It is worth noting that this case does not address the bothersome question of whether Section 411 requires that a copyright plaintiff actually have a registration certificate in hand before filing the complaint, or whether he or she simply needs to have the application on file. The case also does not stand for the proposition that one can pursue copyright infringement litigation without having registered his or her copyright. A plaintiff without a registration will still lose, just for different reasons.

Justice Thomas wrote the majority opinion. He began the analysis by noting the court’s recent efforts to curtail “drive-by jurisdictional rulings,” which can “miss the critical differences between true jurisdictional conditions and nonjurisdictional limitations on causes of action.” It was with this eye toward careful analysis that the court looked to the present question.

The court reviewed the general approach it set out in the case of Arbaugh v. Y&H Corp., 546 U.S. 500 (2006) for distinguishing jurisdictional conditions from claim-processing requirements or elements of a claim, stating in part that “when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character.” Said another way, if a statute somehow limits the way a case can be brought before federal court but doesn’t come out and say that it’s a limitation on subject matter jurisdiction, it should not be read as limiting jurisdiction. In this way, the court’s approach is to broaden federal jurisdiction.

In this case, the court found that Section 411(a) did not “clearly state” that the registration requirement is jurisdictional. Moreover, the section of federal law that provides for federal court jurisdiction in general (28 U.S.C. 1331) and federal jurisdiction over copyright claims (28 U.S.C. 1338) says nothing about a requirement that there be a registration before the court has subject matter jurisdiction. Furthermore, Section 411 provides on its face certain exceptions for the registration requirement (e.g., no registration is required for non-United States works). The court observed that “it would be at least unusual to ascribe jurisdictional signifcance to a condition subject to these sorts of exceptions.”

What does it mean?

The case actually addresses a rather nuanced point of copyright law. And the effect of the holding will not change the end results of cases brought in the future with the same facts — after all, a non-registering plaintiff will still lose either way, now just for a different reason. Motions to dismiss copyright complaints alleging infringement of unregistered works will clearly fall under Fed. R. Civ. P. 12(b)(6) (failure to state a claim) and not 12(b)(1) (lack of jurisdiction).

But the question of a federal court’s jurisdiction is of significant import, regardless of how nuanced the question is, or the lack of difference in practical effect. The question of whether a court should dismiss a case because it doesn’t have the power to hear it, as compared to dismissing it because the plaintiff has not jumped through the appropriate hoops, is an important one.

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Group sex photos case heads to trial

Peterson v. Moldofsky, No. 07-2603, 2009 WL 3126229 (D.Kan. September 29, 2009)

Defendant took pictures of his ex-girlfriend “engaged in various sex acts with two other people.” Later he emailed some of the photos to his ex-girlfriend’s mother, ex-husband, ex-in laws, boss and co-workers.

The ex-girlfriend sued for intentional infliction of emotional distress and invasion of privacy. Defendant moved for summary judgment. The court denied the motion in large part.

Infliction of emotional distress

Defendant argued that the court should toss the intentional infliction of emotional distress claim because Plaintiff ex-girlfriend failed to show that Defendant’s conduct was sufficiently extreme and outrageous, and that the alleged distress exceeded what a reasonable person would experience in the circumstances.

The court rejected Defendant’s arguments. It found that an average citizen would think emailing photos of a person engaged in a manage a trois to one of the participants’ mother, among others, was outrageous. Moreover, Plaintiff’s distress was shown to be severe, as she had to get counseling. It sounds as if the court would have found it severe enough even without the counseling — Defendant’s conduct was “so shocking and outrageous as to give rise to an inference of severe emotional distress.”

Invasion of privacy

Plaintiff claimed two forms of invasion of privacy — intrusion upon seclusion and publication of private facts. The court held she had presented enough facts for the latter but not the former.

The court granted Defendant’s motion for summary judgment as to intrusion upon seclusion because no intrusion occurred. Plaintiff knew Defendant was there taking pictures of the activities. The court rejected Plaintiff’s argument that publication of the no doubt intimate photos constituted intrusion. It held that the disclosure of properly obtained information could not give rise to the claim.

But as to the argument that emailing the photos unlawfully publicized private facts, the court sided with Plaintiff. Defendant had argued that emailing the photos to only a half dozen or so people did not amount to “publication,” which is one of the elements of the tort. He pointed to Comment “a” of the Restatement (Second) of Torts §652D which says that “it is not an invasion of the right of privacy to communicate a fact . . . to a single person, or even to a small group of people.”

In rejecting this argument, the court engaged in what some might characterize as “Internet exceptionalism,” — applying the law in response to a perceived substantial difference between online and offline communication. The court observed that “the Internet enables its users to ‘quickly and inexpensively’ surmount the barriers to generating publicity that were inherent in the traditional forms of communication.” Finding this distinction to be significant, the court held that distribution of the photos even to a small group of people through the private means of electronic mail could be considered a “publication” for purposes of the tort of invasion of privacy.

Threesome photo courtesy Flickr user curgoth under this Creative Commons license.

What are the top 10 internet cases of 2008?

I’m working on gathering a list of the most important internet- and technology-related cases from the past year. There are many cases to choose from, and I’m trying to crowdsource the nomination process. I invite you to nominate the case or cases you think have been most significant by leaving a comment to this post. Think in terms of (1) the decision’s practical implications, (2) the novelty of the judge’s thinking, and (3) the “interestingness” of the facts.

For inspiration, browse the Internet Cases archives, or go visit Professor Goldman who doesn’t let much in the way of interesting cases slip by.

Thanks in advance for your help!

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