In a major blow to user rights, the Ninth Circuit Court of Appeals has issued a decision that will go a long way toward ensuring that software buyers will rarely be software owners.

In a triumph of legal formalism over reality, the Court held that the copyright’s first sale doctrine – the law that allows you to resell books and that protects libraries and archives from claims of copyright infringement – doesn’t apply to software (and possibly DVDs, CDs and other “licensed” content) as long as the vendor saddles the transfer with enough restrictions to transform what the buyer may think is sale into a mere license.

Here's the back story: Timothy Vernor bought four packages of Autodesk's AutoCAD software at a garage sale and tried to sell them on eBay. Autodesk threatened Mr. Vernor with a copyright lawsuit, claiming that its software is only “licensed,” never sold and pointing to the fine print on the agreement it had with the original purchaser. With the assistance of the public interest litigators at Public Citizen, Vernor filed suit in Seattle against Autodesk, asking the court to clarify his right to resell the AutoCAD software packages that he paid good money for. He prevailed before the district court in 2009, prompting Autodesk to appeal.

Autodesk insisted that its software was “licensed,” rather than sold, and thus the original purchaser never “owned” it and neither could Mr. Vernor. And since Vernor didn’t own the software, Autodesk argued, his attempted sale of the software violated copyright law

EFF—joined by the Consumer Federation of America, the American Library Association, Association of Research Libraries, Association of College and Research Libraries, U.S. Public Interest Research Group, and Public Knowledge—filed an amicus brief supporting Mr. Vernor, arguing that copyright owners should not be able to trump the first sale doctrine by using a few “magic words” in a “license agreement.”

Unfortunately, the court agreed with Autodesk, holding that

a software user is a licensee rather than an owner of a copy where the copyright owner, in the documents included with the software packaging, (1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use restrictions.

In other words, the right “magic words” can turn unsuspecting buyers into renters, which means they can’t claim the longstanding protections owners normally get, such as the right to resell their legally purchased software when they are done with it.

This decision is deeply disappointing, and it is very bad news for consumers. By undermining the crucial balance between copyright owners and users that supports used bookstores, libraries, and DVD rentals, it hurts both our ability to save a few dollars and our ability to retain, archive and access older, out-of-print materials. Libraries and second-hand sellers are often the only hope for these materials and the “long tail” community of researchers, historians and hobbyists that value them.

But the potential effects of this decision don’t stop there: it risks creating a situation in which violating contracts and end-user license agreements (EULAs) could result in a copyright infringement lawsuit (with the heavy club of statutory damages, attorneys fees and low standards for injunctions) rather than just a simple breach of contract claim.

We understand Mr. Vernor may seek en banc review of this decision, which means the entire court will hear the case and could reverse this dangerous ruling. We hope that the court agrees to review the case and treats it as an opportunity to put consumer rights and expectations ahead of the overreaching demands of software vendors.