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The Lawbringer: License v. Purchase -- Sgt. Joe Friday Edition

Welcome to The Lawbringer, WoW.com's weekly look at the intersection of law and the World of Warcraft. I'm a recent law school grad acting as your tour guide and trying not to think about the Bar Exam in a few weeks.

Last week's discussion of seems to have left many of y'all rather confused. The occasional hazard of having an idea that is fun to write is discovering that it isn't always as much fun to read, so I apologize for that. This week we'll be skipping the dramatization about License v. Purchase issues to get just the facts, ma'am.

(If you were one of those who really enjoyed last week, you might want to check out my fiction.)

We'll begin by noting that the program of World of Warcraft comes with an End User License Agreement. While vocabulary isn't everything, one has a difficult time arguing that the relationship isn't a license when one has signed a license agreement.
Can software be licensed instead of sold? Of course -- it's like asking if cars can be leased instead of sold. Admittedly, General Motors isn't worried about someone making hundreds of copies of a car and distributing them for free on the internet, but licensing of software is a well-established practice that allows the developer of the software to maintain control of the software even when in the possession of the end user.

I highly recommend thinking of a software license as being analogous to a car lease as we go through this. A licensed program isn't a book, it isn't a computer, it's software that is part a contractual agreement in which the user gains possession and use of the software while the developer retains title. Furthermore, that possession is dependent on the terms of the agreement. In a car lease, those terms include making regular payments and keeping it fully insured; a software agreement often includes terms like not making copies and not using the software to make money. Yes, by taking out a lease instead of buying a car, the lessor loses the right to resell the car, to soup up the engine and jury rig repairs instead of visiting an actual mechanic. The same is true of our license agreement -- we don't get the first sale doctrine or back-up copy privileges given to regular software purchasers. Yes, it may not be fair that most software companies don't even give us the option of paying more to actually get title to the software, the way car drivers have the option of paying more to buy a car, but as my mom would say, "Put on your big girl panties and deal."

Now, the recent decision of Vernor v. Autodesk, a Federal District Court decision in Oregon, has shaken this area of law up quite a bit. Many people are confused about what this case means, thinking that it somehow transformed millions of software licenses into purchases the way Hawaii Housing Authority v. Midkiff turned thousands of long term leases into fee simple purchases of Hawaiian real estate.

Let's start with the facts: Vernor bought authentic copies of AutoCAD from AutoDesk with the intention of selling them on eBay. The AutoCAD EULA forbid any resale of the software, a very common prohibition. (Think back to leasing a car -- the lessor generally doesn't get to sell the car to a third party.) AutoCAD used a well established legal theory -- that violations of the scope of a contract involving copyrights are copyright infringements -- to sue for copyright infringement. To put this idea in car terms, missing a single payment or being a few days late renewing one's insurance is just a contract dispute; driving to Columbia with the intention of never giving the car back escalates the situation to a theft. (Protip: you cannot drive from the United States to any country that does not have an extradition treaty with the United States.)

Vernor argued that the license agreement wasn't really a license agreement, and the court, using an analysis from a 1977 film production case, agreed. Why? The previous case, United States v. Wise, dealt with who owned the film reels distributed to movie houses and turned on the issues of whether the contract provided that the film had to be returned to the studio. The contract for "American Graffiti" required the film stock to be returned to Universal, so it was a license; the one for "Funny Girl" made no such arrangements and was considered a sale. The AutoDesk "license" made no provisions for the return of AutoCAD to AutoDesk. Thus, the district court felt obligated to follow the Ninth Circuit Court precedent, though with some hesitation. As a result, AutoDesk lost its attempt to keep the case from going to trial and so settled.

Another case in the Ninth Circuit, UMG Recordings, Inc. v. Augusto, elaborated a bit on this idea of returning the materials and held that four fact would be highly influential on a determination of license v. purchase:
  • The copyright holder gives copies of its materials and does not ask that those materials are returned
  • There are no consequences for the recipient should she lose or destroy the copyrighted materials
  • The copyright holder does not make affirmative efforts to recover the copies.
  • The copyright holder does not keep permanent records identifying who received copies of the materials.
Going back to our car analogy, this makes sense -- is it really a lease if the dealer doesn't want the car back, doesn't care if you lose the car, doesn't try to recover it at the end of the lease, and doesn't keep track of to whom they leased the car? Common sense says "not really," and common sense is right. A court in Utah even went so far to say that any shrink-wrap license is invalid "insofar as it purports to maintain title to the software in the copyright holder." Novell, Inc. v. Network Trade Center, Inc.

But what does all this mean for World of Warcraft? Turns out, not much. All of these cases revolve around the "First Sale Rule" distribution right that the license was denying. AutoDesk was trying to stop Vernor from selling his legitimate copies, an action so unfair the judge wouldn't go along with it; the WoW EULA, however, makes specific provision for users who want to transfer the software and the license. Just as we saw back in our discussion of Bragg v. Linden Lab, Blizzard has crafted its EULA to avoid provisions that are so grossly unfair a judge might sympathize with the contract violator.

AutoDesk's other argument -- that violating the scope of a license constitutes copyright infringement -- is a big deal however, as it was one of Blizzard's main arguments in countersuing MDY over Glider. In preparation for MDY's appellate argument, to be held this month, next week we'll be looking at the lawsuit in all its gory detail.

This column is for entertainment purposes only. If you have a real legal issue, please consult a real lawyer. For questions about law or law school, email me lawbringerjd@aol.com or tweet me @wowlawbringer.

Filed under: The Lawbringer

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