In 2005, Apple publicly announced their transition from the IBM/Motorola PowerPC chipset to the Intel x86 chipset. In addition to the speed improvements, and efficiency gains (higher performance per watt) with the Intel processors, the transition also gave Mac users greater flexibility in the operating systems and programs that could be run without an x86 emulator. Apple openly endorsed this flexibility releasing Mac OS X Leopard with Boot Camp – a utility to facilitate installing and booting from multiple operating systems on Apple computers. Unfortunately, the switch also made it easier to install Mac OS X on non-Apple computers, something explicitly prohibited in Apple’s Mac OS X End User License Agreement (EULA).
This License allows you to install, use and run one (1) copy of the Apple Software on a single Apple-labeled computer at a time. You agree not to install, use or run the Apple Software on any non-Apple-labeled computer, or to enable others to do so.
Though Apple has implemented technology locks to prevent against this type of usage, the underground hacker community quickly circumvented and provided a tutorial to the internet at large.
Taking it one step further, a Florida company, Psystar has made a business of selling non-Apple computers with Max OS X pre-installed (Mac clones).
Apple, responded with legal action in July 2008 against Psystar claiming copyright infringement, breach of contract, trademark infringement, trade dress infringement, and unfair competition.
To date, Psystar has made little attempt to dispute the trademark infringement claims, however they have filed an anti-competition counter-claim against Apple. The claim was dismissed, and Psystar returned with an amended counterclaim. The new counterclaim relies in-part on the doctrine of first sale:
Apple attempts to usurp [the doctrine of first sale] limitations by telling Psystar and its customers that Apple—and Apple alone—will say whether, how or by whom its software is … distributed or used.
The doctrine of first sale has recently become an important issue within the software industry given the decisions in Vernor v. Autodesk by a US Ninth Circuit court. In that case, Vernor, an Ebay vendor, was seeking a declaration from the court that it was lawful to re-sell copies of AutoCAD which had been acquired from architecture firm CTA. The court summarized the first sale doctrine as follows:
When a copyright holder chooses to sell a copy of his work, he exhausts his exclusive statutory right to control its distribution…Future distributions of the copy do not implicate the Copyright Act. A first sale does not, however, exhaust other rights, such as the copyright holder’s right to prohibit copying of the copy he sells.
Applied to the present case, the reasoning is that once Psystar acquired the Mac OS X software, it was no longer in Apple’s power to restrict the distribution of that software. The problem with this argument though is that installing Mac OS X on a non-Apple computer is probably not within the meaning of a distribution. The prohibition against installing on non-Apple computers more closely resembles one of the other rights that are not exhausted by a first sale (eg. copying).
If the court can somehow navigate around this difficulty, the second, and more contentious issue when applying this doctrine to software distributions is whether there has been an actual sale of the software or merely a transfer of possession pursuant to a license. If the former is found, then the doctrine of first sale will apply, and a breach of the terms and conditions of a EULA may only be a breach of contract. If however the latter is found, then the doctrine of first sale does not apply and a breach of the EULA could in fact be held to be a breach of the Copyright Act.
In Vernor, the court relied on the reasoning in United States v. Wise to find that even though AutoCAD had a license that imposed onerous restrictions on transfer and use, it was none-the-less considered a sale because CTA was allowed to retain possession of the software. Running contrary to the Wise decision however, are a line of three cases (MAI Sys Corp v. Peak Computer Inc, Triad Sys Corp v. Southeastern Express Co. and Wall Data) that held that contracts banning duplication of software, or restricting transfers of software were sufficient to classify the transaction as a grant of license and not a sale. This distinction could have far reaching implications. If the line of reasoning in Wise and Vernor continue to be upheld, the distribution models of business software vendors – licensing rather than sale – may be threatened under current EULAs.
As the copyright battle continues to unfold between Apple and Psystar, hopefully the court will be able to considered the doctrine of first sale and inject some certainty into distinguishing between a sale and mere licensing of software.