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Vernor v. Autodesk, Inc.

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This article is about the 2010 Ninth Circuit decision on whether resale of used AutoCAD copies was protected by the first sale doctrine. It is not legal advice.

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Vernor v. Autodesk, Inc. is a 2010 decision of the United States Court of Appeals for the Ninth Circuit about whether a person who bought used, boxed copies of Autodesk’s AutoCAD Release 14 software could resell them without Autodesk’s permission. The court held that a software user is a licensee rather than an owner of a copy where the 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.[1] Because Autodesk’s original customer was a licensee under that test, neither the first sale doctrine nor the essential step defence protected the resale. The Supreme Court declined to review the decision in October 2011.[3]

Background

Autodesk distributed AutoCAD Release 14 on CD-ROM with a software license agreement (SLA) that customers had to accept before installing the software; a customer who did not accept could return the software for a refund.[1] As described by the Ninth Circuit, the Release 14 SLA stated that Autodesk retained title to all copies, granted a nonexclusive and nontransferable license, prohibited renting, leasing or transferring the software without Autodesk’s prior consent, prohibited transfer or use outside the Western Hemisphere, and barred modification, reverse engineering and defeating copy protection. It also provided for termination on unauthorized copying and required a customer that upgraded to destroy the earlier version within sixty days.[1]

The copies at issue came from Cardwell/Thomas & Associates, Inc. (CTA), an Autodesk customer. According to the opinion, Autodesk had accused CTA of unauthorized use of its software, and in a 1999 settlement Autodesk licensed ten copies of Release 14 to CTA under the SLA. CTA later upgraded to AutoCAD 2000 and, instead of destroying the Release 14 copies as the upgrade SLA required, sold them at an office sale.[1] Autodesk then sued CTA over those sales, and the parties stipulated to a permanent injunction against CTA.[1]

Timothy Vernor, an eBay seller, bought one used copy of Release 14 at a garage sale in 2005 and four copies at CTA’s office sale in 2007. He had not installed the software or accepted the SLA. When he listed the copies on eBay, Autodesk sent take-down notices under the Digital Millennium Copyright Act; Vernor filed counter-notices, and eBay at one point suspended his account for a month.[1]

The dispute

In August 2007 Vernor filed a declaratory judgment action in the Western District of Washington seeking a declaration that his resales were protected by the first sale doctrine and did not infringe Autodesk’s copyright.[1] The first sale doctrine, codified at 17 U.S.C. § 109(a), allows the “owner of a particular copy” to sell or dispose of it without the copyright owner’s authority; the essential step defence in 17 U.S.C. § 117 similarly applies only to owners of copies of computer programs.[1]

Vernor’s position was that the Release 14 copies had been sold, not licensed, so that CTA and later he owned them. He also argued that Autodesk had misused its copyright.[1] Autodesk’s position was that it distributed Release 14 under non-transferable licenses, that its customers never became owners of their copies, and that resale therefore infringed its exclusive distribution right.[1]

The district court ruled for Vernor. As summarised by the Ninth Circuit, it read United States v. Wise (9th Cir. 1977) to mean that a first sale occurs whenever the transferee is entitled to keep the copy; because Autodesk did not require customers to return their copies, it found that Autodesk had sold Release 14 to CTA. It acknowledged that following the Ninth Circuit’s later software cases would lead to the opposite result, but viewed them as irreconcilable with Wise and followed Wise as the earlier decision.[1] In its October 2009 order the district court denied Autodesk’s motion, directed entry of judgment for Vernor, and declined to decide the copyright misuse allegation because Vernor had already prevailed.[2] The court remarked that its ruling placed Autodesk’s licensing efforts “in the realm of contract law, rather than copyright law”.[2] Autodesk appealed.

Decision or outcome

A panel of the Ninth Circuit (Judges Canby, Callahan and Ikuta; opinion by Judge Callahan) vacated the judgment and remanded on 10 September 2010.[1] The court reconciled Wise with its later software cases (the “MAI trio”: MAI Systems v. Peak Computer, Triad Systems v. Southeastern Express and Wall Data v. Los Angeles County Sheriff’s Department) and stated the three-part test quoted above: license designation, significant transfer restrictions and notable use restrictions.[1]

Applying that test, the court found that Autodesk retained title, made the license nontransferable, required its consent for any transfer, restricted use and transfer outside the Western Hemisphere, imposed use restrictions, and provided for termination on breach. It concluded that CTA was a licensee, that CTA’s sale therefore did not convey ownership to Vernor, and that both CTA’s and Vernor’s sales infringed Autodesk’s exclusive distribution right. It also held that Vernor’s customers, not being owners, could not rely on the essential step defence when installing the software.[1]

The opinion set out the policy arguments of Autodesk, the Software & Information Industry Association and the Motion Picture Association of America on one side, and of Vernor, eBay and the American Library Association on the other. It concluded that these did not change the result required by precedent and that “Congress is free” to modify the first sale doctrine and the essential step defence.[1] The copyright misuse defence was remanded for the district court to consider.[1]

The Ninth Circuit denied rehearing en banc in January 2011, and the Supreme Court denied Vernor’s petition for certiorari on 3 October 2011.[3] On remand the district court ordered Vernor to state whether he wished to pursue the remainder of the case. On 7 November 2011, under a stipulation of the parties, the court entered judgment for Autodesk on the remaining claim, including the copyright misuse defence, disposing of the case.[4]

Significance for software licensing and SAM practice

Vernor is binding precedent in the Ninth Circuit on how to tell a software licensee from the owner of a copy. The court’s test looks at the terms of the agreement: whether it grants a license, restricts transfer, and restricts use.[1] Under that test, whether perpetual, boxed software may be resold depends on the transfer and use terms of the licence rather than on the one-time payment or the fact that the customer keeps the disc.

For software asset management, the case bears on several recurring questions:

  • Second-hand and transferred licences. Where an agreement of the kind described in Vernor applies, a used copy bought from a third party may not carry a valid entitlement, and the reseller’s purchaser may not be able to rely on the essential step defence to install it.[1]
  • Upgrade terms. The copies in Vernor reached the market because CTA had upgraded and did not destroy the earlier version, as the upgrade licence required.[1]
  • Copyright as well as contract. The district court had treated Autodesk’s restrictions as matters of contract law; the Ninth Circuit’s holding meant that transfers outside the licence terms were copyright infringement.[2][1]

The decision concerned AutoCAD Release 14 and the terms of its SLA as the court described them.[1] Autodesk’s current licensing models are covered in Autodesk Single User and Flex licensing. The holding is Ninth Circuit precedent on United States copyright law; it does not decide the position in other circuits or other countries.

Lessons learned

  • Licence terms decide ownership. Under the Ninth Circuit’s test, a user who is granted a licence with significant transfer and use restrictions is a licensee, not an owner, and a used copy bought from such a user may not carry a valid entitlement.[1] Buyers of second-hand software in the United States should check the original licence terms first.
  • Follow upgrade terms. The copies in this case reached the market because Autodesk’s customer upgraded and sold the earlier version instead of destroying it as the upgrade licence required.[1]
  • Copyright, not only contract. The district court had treated Autodesk’s restrictions as contract matters, but the Ninth Circuit held that the unauthorised resales infringed Autodesk’s distribution right.[2][1]

References

  1. Vernor v. Autodesk, Inc., No. 09-35969, opinion (9th Cir. Sept. 10, 2010)Opinion by Judge Callahan; reported at 621 F.3d 1102Effective 2010-09-10. Retrieved 2026-09-30.
  2. Vernor v. Autodesk, Inc., No. C07-1189RAJ, order on cross-motions for summary judgment (W.D. Wash. Oct. 23, 2009), Dkt. 78Public copy of the district court order from the RECAP archiveEffective 2009-10-23. Retrieved 2026-09-30.
  3. Supreme Court of the United States, docket No. 10-1421, Vernor v. Autodesk, Inc.Docket: rehearing denied below 2011-01-18; petition denied 2011-10-03Retrieved 2026-09-30.
  4. Vernor v. Autodesk Inc, No. 2:07-cv-01189 (W.D. Wash.), docketPACER-derived docket; entries 88-98 (mandate, stay, stipulation and judgment of 2011-11-07)Retrieved 2026-09-30.

See also

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