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Seller Dodges Adobe’s Wrath in Software Saga

TUCSON, Ariz. (CN) - Clarifying copyright law's "first-sale doctrine," the Ninth Circuit held Wednesday that Adobe Systems didn't meet its burden of proof in a lawsuit claiming copyright and trademark infringement.

The software giant sued Joshua Christenson and his company Software Surplus in 2009, claiming that Christenson sold Adobe software - which he purchased from a third-party distributor - on his website without Adobe's authorization and infringed Adobe's copyrights and trademarks in the process.

A federal judge found for Christenson on both the copyright and trademark claims, holding that Adobe could not prove that "it merely licenses and does not sell" the relevant software and that Adobe's trademark claim was barred by Christenson's fair-use defense.

The Circuit's three-judge panel affirmed the ruling, finding that "in the face of an otherwise slam-dunk copyright violation," Christenson successfully shifted the burden of proof to Adobe under the first-sale doctrine.

The doctrine provides that once a copy of a work is lawfully sold or transferred, the new owner has the right to sell or otherwise dispose of that copy without the copyright owner's permission.

Writing for the panel, Circuit Judge Margaret McKeown said in the 21-page opinion that "broadly construed, the licensing exception in the software context could swallow the statutory first-sale defense."

"We have recognized, however, that some purported software licensing agreements may actually create a sale," she said.

In a case like this one, McKeown said "the party asserting the first-sale defense bears the initial burden of satisfying the statutory requirements," and that party must therefore show ownership through lawful acquisition.

She said that for the purposes of this case, this means that "the party asserting a first-sale defense must come forward with evidence sufficient for a jury to find lawful acquisition of title, through purchase or otherwise, to genuine copies of the copyrighted software."

She added, "To the extent that the copyright holder claims that the alleged infringer could not acquire title or ownership because the software was never sold, only licensed, the burden shifts back to the copyright holder to establish such a license or the absence of a sale."

Such a burden-shifting construct makes sense, she said, because "the copyright holder is in a superior position to produce documentation of any license and, without the burden shift, the first-sale defense would require a proponent to prove a negative, i.e. that the software was not licensed."

She continued, "This approach accords with the legislative history and with our general precedent that fairness dictates that a litigant ought not have the burden of proof with respect to facts particularly within the knowledge of the opposing party."

Since Christenson cannot produce records that do not exist - such as licensing documents - McKeown said he "discharged his burden with respect to the first-sale defense."

"Asking Adobe to produce the license agreements, which would include any terms or restrictions, is not a difficult burden," she said.

After a careful examination of the "rather tortured discovery process," McKeown said, "we conclude that the district court did not abuse its discretion in granting Christenson's motion to strike and excluding evidence purporting to document the licenses."

And with respect to the trademark claim, "Adobe's primary problem is that it confuses the claim that it made - trademark infringement - with the claim it wishes it made - unfair competition, or false advertising," she said.

Christenson's fair-use defense prevented Adobe from prevailing on that claim, McKeown said, because "the bottom line is that Christenson's nominal use of the marks was to identify the products themselves and not to 'inspire a mistaken belief on the part of consumers that the speaker is sponsored or endorsed by the trademark holder.'"

Neither side's lead counsel responded to emails requesting comment on Wednesday morning.

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