Confusing first sale doctrine and reproduction rights

Let's be careful to dissect the different rights granted to a copyright holder. Here is the distribution right:

Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: . . . to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending. 17 U.S.C. 106(3).

Here is first sale doctrine:

Notwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord. 17 U.S.C. 109(a).

Note that section 109 uses the word "owner" -- the one who controls title. The law makes a distinction between owning a CD (as plastic), and owning the music or software on that CD (as bits). In order to invoke first sale doctrine, you have to own the copy of the software, or be authorized. Now let's have a look at a typical MSFT EULA:

3. RESERVATION OF RIGHTS AND OWNERSHIP. Microsoft reserves all rights not expressly granted to you in this EULA. The Software is protected by copyright and other intellectual property laws and treaties. Microsoft or its suppliers own the title, copyright, and other intellectual property rights in the Software. The Software is licensed, not sold.
(MSFT retains ownership of the software)

13. SOFTWARE TRANSFER. . . . Transfer to Third Party. The initial user of the Software may make a one-time permanent transfer of this EULA and Software to another end user, provided the initial user retains no copies of the Software. This transfer must include all of the Software (including all component parts, the media and printed materials, any upgrades, this EULA, and, if applicable, the Certificate of Authenticity). The transfer may not be an indirect transfer, such as a consignment. Prior to the transfer, the end user receiving the Software must agree to all the EULA terms.
('the owner authorizes')

There are some who argue that software licenses are effectively sales. I tend to agree, because MSFT no longer controls the software. However, with 'activation' and other 'phone home' software, this may not really be the case. If MSFT exerts control over my PC from Redmond, then they have a legitimate claim that I'm 'just a terminal'.


Here is the reproduction right:

Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: . . . to reproduce the copyrighted work in copies or phonorecords. 17 U.S.C. 106(1).

Here is the fair use doctrine, 17 U.S.C. 107:

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

Factor (2) in this case is essentially that the work is commercial, mass-produced software. If you make a backup copy, factor (3) is "100% of the work". These factors weigh against fair use.

The last factor is the big one -- the effect on the (potential!) market -- and often combines with the first. If you're the only one who ever uses your backup, and only in the case your primary is destroyed, then (1) your use is noncommercial, and (4) doesn't affect the market for Windows licenses. This is probably OK. If you make a backup copy and sell it, then (1) your use is commercial, and (4) you have affected the market for Windows licenses. You lose.

Think about this carefully: because you improperly used your copy, that copy is an infringement of the reproduction right. Therefore, first sale doctrine with respect to distribution doesn't apply, because your copy wasn't legitimate in the first place.

You can't get around it by making a backup for legit purposes, then later deciding you want to sell the backup. The law looks at the purpose and character of the use, and the effect of the use. If you change how you use your archival backup, you can suddenly run afoul of the doctrine.

Purpose

The purpose of this blog is to capture my view of copyright, patent, and trademark law as developments in the field occur. I intend to analyze three aspects of these separate areas of law, commonly referred to collectively as "intellectual property": the positive law (the law as it stands), the normative law (the law as I think it should be), and current events.

For the positive law portion of the blog, I will report on current events in the law, as it changes along with the world around it. For the normative portion, I will lay out a framework of terminology, and then explain the positive law and current events in those terms.

Disclaimer: please understand that any information I give on this web site is not meant to be construed as legal advice. No one is asking me questions, I'm just giving my opinions.