Copyright First Sale Doctrine

The First-Sale doctrine is a defense to copyright infringement under Section 109 of the Copyright Act. Importantly, it was codified before the digital age. Our Case Note discussion of this doctrine is here and illustrates how technological advance require the law to change and adapt.

For software, the issue that has emerged for the first sale defense is whether the copyright holder sold or licensed the software. This is key, since the first sale defense only applies to sales and not licenses. The pertinent issue and analysis regarding allegedly unauthorized sales of certain physical copies of software, and whether they are protected under the first sale doctrine, turns on whether to copyright holder can prove contract terms showing that the software was in fact licensed, not sold.

Under the first-sale doctrine, copyright holders relinquish the right to control distribution of lawful, authentic (non-pirated) copies of a copyrighted work regarding the first sale to the original purchaser. The software context for application of the doctrine is when there is an alleged infringement from a sale usually under a shrinkwrap license.

Historically, if a copyrighted work like a CD or DVD had been purchased, the first purchaser had the right to transfer that copy under the "First Sale Doctrine." But prior law distinguished software. It was not the first sale defense or any other provision in the copyright law that controlled the issue of infringement, but rather, the terms of the software or content license that controlled whether software or content could be transferred. Accordingly, licensees needed to consult their license agreements to determine whether the licensed copies could be re-distributed.

Traditionally, however, problems with application of these legal default rules regarding software arose where sellers of OEM and academic software had typically claimed to be and considered themselves "buyers" of the software, and would mistakenly assert a right to re-sell the software under the "first sale" defense. If licensed software was not a sale, then a seller of OEM software would be selling unauthorized hardware and violating its license agreement with a software publisher. This scenario would signal software piracy.

So, the First Sale doctrine did not apply, since the “purchaser” of a software license did not “own” anything; they were considered to be a software licensee.

Now, notwithstanding the provisions of Section 106 of the Copyright Act, under certain circumstance, it is no longer a copyright infringement for a software “owner” to make or authorize a copy or adaptation, as described in our Case Note here. The true economic substance of the transaction controls.

The copyright and trademark lawyers at Lubin Austermuehle have over thirty-years of experience defending and prosecuting intellectual property claims for large and mid-size corporations and businesses. We are knowledgeable regarding the changes and complexities of copyright and trademark law. We are committed to fighting for our clients' property rights or defending them against baseless infringement claims at both the trial and appellate court levels. We have successfully defended large corporations in multi-million-dollar copyright or trademark infringement suits and regularly prosecute complex copyright infringement cases for computer software having achieved large six and seven figure settlements for our clients. Conveniently located in Chicago and Elmhurst, Illinois, we have successfully litigated intellectual property, trademark and copyright cases for clients all over the Chicago area. To schedule a consultation with one of our skilled attorneys, you can contact us online or give us a call at 630-333-0333.