Earlier, this blog discussed the controversial Autodesk v. Vernor decision recently issued by a district court in Seattle, Washington. Now, shortly after the Vernor decision, another federal district court declined to follow the reasoning in Vernor, and instead treated the software transaction as a license, not a sale. The decision in that case, Blizzard v. MDY, was issued on July 14th. Judge David Campbell of the U.S. District Court for the District of Arizona ruled that MDY Industries and its founder Michael Donnelly were contributorily and vicariously liable for infringing the copyrights of Blizzard Entertainment and Vivendi Games, Inc. (hereafter referred to as “Blizzard”). MDY created a software program called WowGlider (hereafter referred to as “Glider”) to play Blizzard’s World of Warcraft (“WoW”) video game for WoW users while the user is away from his computer. Users liked the Glider program because it allowed them to accumulate points and, in essence, make their game characters stronger without actually having to play the game. There were several important issues at stake in the case, but perhaps the most significant to software publishers and users was whether the court would give the software license its effect as a license, rather than treating users as the “owners” of their software as the Vernor court did.
The pertinent legal provision in the Blizzard case was section 117 of the Copyright Act. MDY asserted that section 117 allowed Glider users to copy the Blizzard software into RAM.
By way of background, Section 117 provides.
- … it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided:
- that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner, or…(emphasis added)
Under section 117, if the Glider users are “owners” of the software, they can make a RAM copy of the software with impunity. If, however, the Glider users are mere licensees, then section 117 does not apply and the RAM copy made by Glider users (as a result of using MDY’s game) may be infringing. Thus, MDY’s liability came down to the issue of whether Glider users owned or licensed the WoW program.
Judge Campbell correctly pointed out that there are three Ninth Circuit software cases directly on point: Wall Data Inc. v. Los Angeles County Sheriff's Dept; MAI Sys. Corp v. Peak Computer, Inc.; and Triad Sys. Corp. v. Southeastern Express Co. In each of these cases, the Ninth Circuit concluded that “the licensees of a computer program do not ‘own’ their copy of the program and are not entitled to the section 117 defense.” The court singled out the most recent case, Wall Data, to highlight the Ninth Circuit’s two–part test for determining whether the purchaser of a computer program is a licensee or an owner. This test requires the court to determine whether “the copyright holder (1) makes clear that it granted a license to the copy of the software, and (2) imposes significant restrictions on the use or transfer of the copy.” If both conditions are met, the transaction is a license.
As to the first condition, the court highlighted several sections and language in the Blizzard EULA that made it clear that Blizzard was granting a “limited license,” not ownership. After a detailed analysis of the EULA, the court seemed to be so impressed by all the steps taken by Blizzard to alert the user to the nature of the license that it went as far as to say that “[o]ne wonders what more could be done to make clear that the purchaser is a license, not an owner, of the software.”
The court concluded that the second condition also was met. Specifically, the court found “significant restrictions” including the fact that Blizzard prohibited transfer unless the user transferred the original media containing the software and all original packaging and other documentation, the user deleted all copies of the software, and the third-party recipient of the software agreed to the licensing terms. The court noted that a complete prohibition on transfer is not necessary to establish a license under the Ninth Circuit’s holding in Wall Data. Moreover, the court observed that Blizzard specifically retained title to the copies of the software.
The Blizzard and Vernor decisions are difficult to square. In a later entry to this blog, we will compare the two decisions in more detail, and explain where the court in Vernor went wrong.