Supreme Court backs software shrink wrap agreements

Software manufacturers are hailing a new decision by the U.S. Supreme Court to let a lower court’s ruling go unchanged. The highest court chose not to review a 9th U.S. Circuit Court of Appeals decision that gives software makers greater protection against copyright infringement.

A federal appeals court backed tougher intellectual property rules that allow software companies to have licensing agreements to prohibit product resales or transfers. The decision is seen as a partial dismantling of the century-old first-sale doctrine.

The first-sale doctrine gives someone who legally purchases a copyrighted product the right to sell or give it away. The Supreme Court’s silent stand behind the appellate court lets software makers, like Google and Oracle, enforce so-called shrink wrap license agreements.

The federal courts’ decisions concerned the case of an eBay seller who purchased AutoCAD software and wanted to resell it. The copies the eBay seller offered were purchases made from a company that had signed a shrink wrap agreement with the maker of AutoCAD. The agreement required the middleman company to dispose of the AutoCAD software and prohibited resales without the company’s consent.

Ebay removed the questionable software from its website, but the seller pushed the issue to court. First-round litigation in a lower court favored the seller due to the terms of the first-sale doctrine.

The higher courts, however, dismissed the ruling, giving more legal power to software makers over how its products are handled. The ruling was exclusive to the software industry, but other businesses may see the decision as a way to tighten security around intellectual property.

Some businesses and groups, like eBay and the American Library Association, worry that the ruling can only lead to trouble if book, music and movie industry officials adopt the same restrictive licensing paths as software makers. It will be interesting to see what kind of effect this ruling has on future intellectual property cases.

Source: WIRED, “Software Makers Win Big in Supreme Court Copyright Fight,” David Kravets, Oct. 5, 2011