May I share a secret with you? I don’t always read the Terms of Service on the websites I visit, or the Terms & Conditions for services I use either. When I open the boxes for new software or gadgets I don’t generally read the license agreements.
But, you know that old adage “do as I say, not as I do?” There is some truth to it. I don’t feel compelled to read Terms of Service, Terms & Conditions or License Agreements because I draft them on a regular basis for clients and have an idea of what I can, and cannot, do on websites, online services, with devices and software too. I know there are limits on my use, things the companies can do with my data, and so on.
As thousands, upon thousands, of law students begin their careers let me share one of the first things they will learn in law school: Contracts are generally enforceable and binding on the parties to them. Even “contracts of adhesion,” a contract where one party has no bargaining authority, like website terms and software licenses. (When I was in law school the example professors used were the contracts auto repair shops used… oh how time flies.)
Contracts are enforceable whether or not I read them before using the product, website or service. Similarly, contracts are enforceable even if you don’t “believe” that you are bound by their terms.
Whenever you buy software for your computer, or download an application for your smartphone, you are not buying the software. If you read the terms and conditions (note to self: do that more often) you will likely see language similar to, or the same as:
“Subject to the terms of this Agreement, Skype hereby grants You a limited, personal, non-commercial, non-exclusive, non-sublicensable, non-assignable, free of charge license to download, install and use the Skype Software on Your computer, phone or PDA for the sole purpose of personally using the internet communication applications provided by Skype and any other applications that may be explicitly provided by Skype.” Skype End User License Agreement, updated August 2010
In Vernor v. Autodesk, Inc., the plaintiff purchased used software which was subject to an End User’s License Agreement (a “EULA”). The EULA imposed a variety of conditions on the licensees of the software including one that required that they destroy the original software when it has been upgraded. The plaintiff decided that the provision did not apply to him because he had purchased the software from a company that had never installed it on a computer, because it upgraded before it could. The plaintiff then tried to sell the software on eBay but having received cease & desists for similar actions in the past also brought an action against Autodesk to have a court declare that his actions did not violate the EULA.
Significantly, Mr. Vernor argued that the EULA did not apply to him, or any purchaser of software, under what is commonly called the “First Sale Doctrine.” The First Sale Doctrine refers to a provision in the Copyright Act of 1976, as amended, that allows the “owner of a particular copy” of a copyright protected work to be able to sell that particular copy of the work without infringing on the exclusive rights of the underlying copyright owner. Mr. Vernor and his lawyers argued that he owned the copies of the software, and could therefore sell it.
Relying on existing case law, the 9th Circuit considered the following three factors to determine whether Mr. Vernor had a license to the software or owned it outright:
- Did the copyright owner specifically grant the user a license?
- Did the copyright owner significantly restrict the user’s ability to transfer the software?
- Did the copyright owner impose notable use restrictions?
Here, Autodesk includes a EULA with every copy of software it sells that specifies that the user is a licensee not an owner, as well as restrictions on the user’s ability to transfer the software. Additionally the EULA limited the user’s ability to use the software in a manner that violated the EULA (i.e., could be used only on a certain number of machines, had to be destroyed upon upgrade et al). Therefore, the 9th Circuit held that Mr. Vernor was a “licensee” and not an owner, so the First Sale Doctrine does not apply.
What is the Takeaway from Vernor v. Autodesk? Contracts are enforceable even when they have not be negotiated between the parties so should be read with care. If you do not agree with terms opt not to use the goods or services to which they attach.