District Court Denies Injunction Against Unbundling

poemofatic writes: "The ruling posted on Cryptome of a disctrict court ruling denying an preliminary injunction against Softman Products Co. Softman "unbundles" and resells at a lower price stuff like photoshop. But of importance to us is that the court upholds the principle of first sale, and invalidates Adobe's claims that Softman is bound to Adobe's EULA. Here's a choice quote: 'In this case, through the use of licensing, Adobe seeks a vast and seemingly unlimited power to control prices and all channels of distribution. On the other hand, in the absence of copyright law violations, the market can often best regulate prices and all subsequent transactions that occur after the first sale. Sound policy rationales support the analysis of those courts that have found shrinkwrap licenses to be unenforceable. A system of 'licensing' which grants software publishers this degree of unchecked power to control the market deserves to be the object of careful scrutiny.'"

Some Choice Quotes

[manyoso]

"The Court finds that the circumstances surrounding the transaction strongly suggests that the transaction is in fact a sale rather than a license. For example, the purchaser commonly obtains a single copy of the software, with documentation, for a single price, which the purchaser pays at the time of the transaction, and which constitutes the entire payment for the "license." The license runs for an indefinite term without provisions for renewal. In light of these indicia, many courts and commentators conclude that a "shrinkwrap license" transaction is a sale of goods rather than a license."

IANAL, but this seems like they are basically making a tentative claim towards the illegitimacy of "licensing" software in general. This appears absolutely _huge_! The Doctrine of First Sale is might be back :)

"... the Third Circuit found that the terms of a contract were formed when the parties shipped, received and paid for the product. Therefore, the software shrinkwrap agreement constituted additional terms to the contract, and under Uniform Commercial Code 2-207 (governing commercial counter-offers), these terms were invalid without express assent by the purchaser."

Again IANAL, but if I understand correctly they are saying that even if software is transacted through "licenses" and EULA's instead of actual sale, then the EULA's are not a valid agreement because strong assent is not given by both parties.

"The Court finds it unnecessary to reach the question of the general validity of shrinkwrap licenses at this stage because the Court has determined that SoftMan is not bound by the EULA because there was no assent to its terms."

According to the court Adobe is not likely to win on the merits and even if they were the court believes the transaction is a sale and governed by the Doctrine of First Sale and that EULA's are not enforceable contracts because they lack strong assent.

Re:Some Choice Quotes

[b-side.org]

for someone who INAL, you make some good points. :)

I wonder why a story this big isn't on the front page?

Re:Some Choice Quotes

[poemofatic]

Well, since I submitted it, I think it should be on the front page too:)

But unfortunately, not all of those choice comments are so important, since this was a district court ruling on a preliminary injunction, not on the case itself, so those comments don't carry as much legal "weight."

The main point for me is that it shows we have some friendly judges here in CA. Hopefully, they will get to rule on actual cases such as this one sometime soon. I'm holding my fingers crossed that UCITA-like acts will get partially struck down on the basis of violating the first-sale principle. Just a wish.

Re:Some Choice Quotes

[manyoso]

I understand that the district court does not carry the same wieght as some higher courts, but this is still entered into the legal record and it's something that lawyers can draw upon for future cases with similar issues. Just having the opinions laid out so well and documented in the legal record is important. When making judgements courts often rely upon prior precedent and so this opinion should be useful.

Re:Some Choice Quotes

[Technician]

This goes back to the problem Microsoft has.. Is the software a product that is sold like a toaster, licensed like a compact disk or videotape, or a service that is licensed like a concert ticket or tape rental?

If it is sold like a toaster, then the judge is correct. That is pretty cut and dried. If you buy a car, you are free to pull the engine and sell it to someone else. The other two are still in the air. It's like getting satelite TV, and getting a package deal where the 1st year of subscription is cheap on the condition of purchase of the dish, getting the dish and reselling the service without the dish to someone else. Is the software a service? Can a service be tied to a hardware sale? Can the software/service be resold seprate from the hardware?

Re:Some Choice Quotes

[Murgatroyd]

IANAL, but this seems like they are basically making a tentative claim towards the illegitimacy of "licensing" software in general. This appears absolutely _huge_! The Doctrine of First Sale is might be back :)

This isn't really disputing the legitimacy of licensing per se, but rather suggests that "shrinkwrap licenses" aren't really "licenses" in the traditional sense. It seems that they are taking the view that the classic shrinkwrap license, because it is good indefinitely, isn't really a "license" at all, but is instead more of a sales contract.

Why we have to fight UCITA

[pdqlamb]

This decision illustrates that we, the consumers, still have a bit of common law (and common sense) on our side. Pass UCITA, and shrinkwrap licenses ARE legally binding (even if you can't read them before you buy, and even if it changes because somebody posts a change without notifying you on a web site 3,000 miles away). Gear up, gearheads, legislative season is not far off.

So, does this mean...

[Anonymous Coward]

... that it once again is legal to sell OEM, jewel-case versions of MS-Office on eBay?

Re:So, does this mean...

[Technician]

Those disks are about to become as useless as AOL CD's. Office is to become a subscription service, not a product. You will need a subscription to use it. Then again, maybe the older versions will still have value as they run stand alone.

Re:So, does this mean...

[epsalon]

Not exactly. E-bay is a private corporation. They're not required to allow you to sell anything.

Same goes to purchasing a new PC. The vendor can bundle anything she wants. The news is that you CAN sell your OEM version of [Insert name of crappy OS here] no matter what the EULA says.