Internet Litigation Update

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Software Users Might Be Licensees, Not Owners: The Ninth Circuit recently held that someone who pays for software is a mere licensee, and not the owner of the copy of the software, if the vendor “(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.” If the software user owned the copy, the user would be permitted under the copyright law’s “first sale” doctrine to sell that copy. However, as a licensee, the user can be prohibited from transferring the software to others. Several factors may have influenced the Ninth Circuit’s decision: the software license agreement (“SLA”) at issue had to be accepted before the software could be installed; several SLAs having different terms were available; if the software was an upgrade of a previous version, the SLA required proof that the earlier version had been destroyed; and the developer utilized license enforcement measures and customers were required to input separate activation codes. See Vernor v. Autodesk, Inc, No. 09-35969, ___ F.3d ___, 2010 WL 3516435, 96 U.S.P.Q.2d 1201, 2010 Daily Journal D.A.R. 14,404 (9th Cir. Sept. 10, 2010).

Digital Music Downloads Are Not Public Performances: The Second Circuit has held that the download of a digital file containing a musical work is not a “public performance” of the underlying work. Accordingly, on-line music vendors need not purchase public performance licenses covering their distribution of, and their customers’ use of, digital music files. The Second Circuit further held that public performance license fees for streaming music services may not be determined solely

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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