Software Licensing: Who’s On First?

I’m a firm supporter of intellectual property rights. I fully support the rights of software publishers to own and profit from their creative work. I make my living as both a consumer of software and a publisher of software, so my views on software licensing reflect what I consider to be a healthy symbiosis between producers and consumers.

Intellectual property laws are (or should be) designed to protect this symbiotic relationship for the public good. The patent system is designed not to protect patent owners from pirates, but to promote inventions and improvements on previous inventions that benefit the public. The fact that patent laws do help to protect patent owners from pirates is merely a side effect of the underlying goal of promoting the public interest. We, the public, grant exclusive rights to patent owners for a specific time in exchange for them making public the details of their invention. Innovative inventors can thus build on a body of previously published inventions rather than starting from scratch. This system of “open source” innovation speeds the evolution of technology, and everybody benefits from it.

Copyright laws must be viewed in the same light. Copyright laws are designed to promote and enhance the public good by encouraging the production and publication of creative works. In exchange for giving copyright owners certain rights for a certain period of time, the public gets to enjoy and build upon a body of creative work. Some argue that the benefit of copyright protection provides a financial incentive to create the works in the first place, and that without such an incentive the works would never be produced at all. While this is undoubtedly true, consider that there are other ways to provide financial incentives (by providing government grants, for example), so I think it’s important to view this aspect of copyright protection as a consequence of the goal to promote the public interest, not as a goal in and of itself.

Copyright laws have long recognized a need to prevent copyrights from being abused by providing exceptions to the protection they afford to publishers. The Fair Use doctrine is the most common such exception in US copyright law. The First Sale doctrine (or “exhaustion rule” in some jurisdictions) is another example of a limitation on copyrights. These exceptions and limitations evolved in response to attempts by copyright owners to abuse copyrights in a way that contravened their purpose of promoting the public interest.

Software licenses are a relatively new phenomenon, but they rely on very old law: contract law. It is important to understand that a software license agreement is a contract. The commercial software publisher agrees to give us limited and conditional copy rights and authorizes us to use the software in exchange for a fee. If the license agreement that we agreed to authorizes us to install and use the software on one computer, but we install it on ten computers, then we are violating both contract and copyright law (because we copied the software without permission). If the license agreement that we agreed to forbids us to resell the software to someone else, but we decide not to use the software ourselves and sell it anyway, we are violating only contract law (because we made no unauthorized copies).

There are several contract law issues typically encountered with software license agreements.

First, typical commercial software license agreements suffer from their unilateral nature. The contract is drawn up by the publisher with no negotiation or input from the consumer. Some question whether these are valid contracts in the first place, because they lack the “meeting of the minds” element that some judicial interpretations of contract law require.

Second, software license agreements are not usually consummated until after the sale, when the software is finally installed. We purchase the software, essentially committing to our side of the bargain before we even know the terms of the contract to which we must eventually agree in order to use the software. This is inherently unfair, and there are still many unsettled questions about whether or not such a contract can ever be equitable and enforceable.

If you’ve been following the Vernor vs. Autodesk lawsuit, you’ll know that the US federal district court in that case ruled that AutoCAD software was sold, not licensed, and therefore subject to the First Sale Doctrine. The First Sale Doctrine says, in essence, that a publisher cannot contractually restrict the downstream resale or distribution of a copyrighted work beyond the “first sale”. The court, at least in its initial ruling, rejected Autodesk’s argument that AutoCAD was licensed, and therefore exempt from the First Sale doctrine. It should be noted that the Vernor lawsuit is far from over, and this first sale decision could well change before the dust settles.

The courts will eventually reach a final decision in the specific case of Vernor vs. Autodesk, but why was this lawsuit even necessary in the first place? It’s difficult to envision any outcome in which every injury is rectified. It could even be argued that everybody loses, no matter the outcome. And this is just one case in one jurisdiction.

In the end, the final result of the Vernor case may not have much impact on how software is sold. It ultimately comes down to us, the union of consumers, to decide what kind of system we want. Unfortunately, right now we’re doing the software limbo while we wait faithfully for the next service pack. I think that we need more than a service pack. A system restore might be in order.

One Comment

  1. In the main Owen I would agree completely with what you have said here with one notable exception; you say, “It is important to understand that a software license agreement is a contract.”

    This may be true in some instances but I believe I have adequately demonstrated Autodesk’s Subscription and Licence Terms and Conditions are NOT contracts.

    Furthermore it is not in the best interests of Autodesk’s customers, or the industry, for them to be recognized as contracts for the simple reason Autodesk have chosen to use their terms and conditions to impose invasive conditions that NO sensible person should accept or society should allow.

    But the crux of Autodesk’s problem lies in the fact Autodesk and its dealers are totally incapable of negotiating their terms and conditions; this refusal has rendered Autodesk’s Subscription and Licence Terms and Conditions VOID.

    In my blog Caveat emptor I have demonstrated how this has occurred and published my personal declaration.

    If more Autodek customers tackled this issue as I have done reform would occur in a manner more useful and of greater benefit to both vendors and customers alike without the costly involvment of the courts and lawyers.

    In the mean time I may be the only person, out of millions, that daily uses Autodesk software whilst being completely free of any obligation to Autodesk!

    At least for the moment ;-)

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