Licensing and Digital Exhaustion 1 Software Copyright Oren Bracha, Summer 2015

U.S. Exhaustion: The First Sale Doctrine First sale §109(a). Rental, lease & lending exception §109(b): – phonorecord or a copy of a computer program – May not be disposed of by owner of copy by rental, lease, or lending, or by any other act or practice in the nature of rental, lease, or lending. – for the purposes of direct or indirect commercial advantage. 2

First Sale Doctrine §109(a) (a)Notwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord…. §109(d): The privileges prescribed by subsections (a) and (c) do not, unless authorized by the copyright owner, extend to any person who has acquired possession of the copy or phonorecord from the copyright owner, by rental, lease, loan, or otherwise, without acquiring ownership of it. 3

First Sale Issues Digital transfers – Capitol Records v. ReDigi (SDNY 2013): No “digital first sale” doctrine. Licensing – Vernor v. Autodesk (9 th Cir. 2010) a user is a licensee rather than an owner of a copy when copyright owner: specifies that the user is granted a license significantly restricts the user's ability to transfer the software And imposes notable use restrictions. 4

E.U. Exhaustion First sale of a copy of a program exhausts the distribution right within the Community of that copy (Art. 4(2)). – Exception: the right of rental of the copy.

E.U. Exhaustion UseSoft v. Orcale (ECJ 2012) – A licensing agreement under which a user receives in return for payment of a fee designed to enable the copyright holder to obtain a remuneration corresponding to the economic value of the copy of the work, a right to use that copy for an unlimited period is a transfer of the right of ownership of the copy, which is a first sale under Art. 4(2). – Applies whether the copy was made available as a tangible object or by download. – The original acquirer must make his own copy unusable at the time of its resale. The subsequent acquirer is a ‘lawful acquirers’ of the copy within the meaning of Article 5(1). – A download by the subsequent acquirer is a reproduction of a computer program that is necessary to enable the new acquirer to use the program in accordance with its intended purpose under Art. 5(1).

UsedSoft v. Oracle (ECJ 2012) Oracle’s license agreement provided: “With the payment for services you receive, exclusively for your internal business purposes, for an unlimited period a non-exclusive non- transferable user right free of charge for everything that Oracle develops and makes available to you on the basis of this agreement.”

Directive 2009/24/EC Art. 4(1) (c) any form of distribution to the public, including the rental, of the original computer program or of copies thereof. Art. 4(2) The first sale in the Community of a copy of a program by the rightholder or with his consent shall exhaust the distribution right within the Community of that copy, with the exception of the right to control further rental of the program or a copy thereof.