FOR PUBLICATION
`UNITED STATES COURT OF APPEALS
`FOR THE NINTH CIRCUIT
`
`
`
`TIMOTHY S. VERNOR,
`Plaintiff-Appellee,
`v.
`
`AUTODESK, INC.,
`Defendant-Appellant.
`
`No. 09-35969
`D.C. No.
`2:07-cv-01189-RAJ
`OPINION
`
`Appeal from the United States District Court
`for the Western District of Washington
`Richard A. Jones, District Judge, Presiding
`
`Argued and Submitted
`June 7, 2010—Seattle, Washington
`
`Filed September 10, 2010
`
`Before: William C. Canby, Jr., Consuelo M. Callahan and
`Sandra S. Ikuta, Circuit Judges.
`
`Opinion by Judge Callahan
`
`13861
`
`(cid:252)
`(cid:253)
`(cid:254)
`

`
`13864
`
`VERNOR v. AUTODESK, INC.
`
`COUNSEL
`
`Jerome B. Falk (argued), Clara J. Shin, and Blake J. Lawit of
`Howard Rice Nemerovski Canady Falk & Rabkin P.C., and
`Michael A. Jacobs and George C. Harris of Morrison & Foer-
`ster LLP, for defendant-appellant Autodesk, Inc.
`
`Gregory A. Beck (argued) and Deepak Gupta of the Public
`Citizen Litigation Group, for plaintiff-appellee Timothy S.
`Vernor.
`
`Randi W. Singer, Mark J. Fiore, and Lisa R. Eskow of Weil,
`Gotshal & Manges LLP, for amicus curiae eBay Inc.
`
`Fred von Lohmann of the Electronic Frontier Foundation and
`Sherwin Siy and John Bergmayer of Public Knowledge, for
`amicus curiae American Library Association, Association of
`College and Research Libraries, Association of Research
`Libraries, Consumer Federation of America, Electronic Fron-
`tier Foundation, Public Knowledge, and U.S. PIRG.
`
`

`
`VERNOR v. AUTODESK, INC.
`
`13865
`
`Scott E. Bain, Keith Kupferschmid, and Mark Bohannon, for
`amicus curiae Software & Information Industry Association.
`
`Robert H. Rotstein, Patricia H. Benson, and J. Matthew Wil-
`liams of Mitchell Silberberg & Knupp LLP, for amicus curiae
`Motion Picture Association of America, Inc.
`
`OPINION
`
`CALLAHAN, Circuit Judge:
`
`Timothy Vernor purchased several used copies of
`Autodesk, Inc.’s AutoCAD Release 14 software (“Release
`14”) from one of Autodesk’s direct customers, and he resold
`the Release 14 copies on eBay. Vernor brought this declara-
`tory judgment action against Autodesk to establish that these
`resales did not infringe Autodesk’s copyright. The district
`court issued the requested declaratory judgment, holding that
`Vernor’s sales were lawful because of two of the Copyright
`Act’s affirmative defenses that apply to owners of copies of
`copyrighted works, the first sale doctrine and the essential
`step defense.
`
`Autodesk distributes Release 14 pursuant to a limited
`license agreement in which it reserves title to the software
`copies and imposes significant use and transfer restrictions on
`its customers. We determine that Autodesk’s direct customers
`are licensees of their copies of the software rather than own-
`ers, which has two ramifications. Because Vernor did not pur-
`chase the Release 14 copies from an owner, he may not
`invoke the first sale doctrine, and he also may not assert an
`essential step defense on behalf of his customers. For these
`reasons, we vacate the district court’s grant of summary judg-
`ment to Vernor and remand for further proceedings.
`
`

`
`13866
`
`VERNOR v. AUTODESK, INC.
`I.
`
`A. Autodesk’s Release 14 software and licensing
`practices
`
`The material facts are not in dispute. Autodesk makes
`computer-aided design software used by architects, engineers,
`and manufacturers. It has more than nine million customers.
`It first released its AutoCAD software in 1982. It holds regis-
`tered copyrights in all versions of the software including the
`discontinued Release 14 version, which is at issue in this case.
`It provided Release 14 to customers on CD-ROMs.
`
`Since at least 1986, Autodesk has offered AutoCAD to cus-
`tomers pursuant to an accompanying software license agree-
`ment (“SLA”), which customers must accept before installing
`the software. A customer who does not accept the SLA can
`return the software for a full refund. Autodesk offers SLAs
`with different terms for commercial, educational institution,
`and student users. The commercial license, which is the most
`expensive, imposes the fewest restrictions on users and allows
`them software upgrades at discounted prices.
`
`The SLA for Release 14 first recites that Autodesk retains
`title to all copies. Second, it states that the customer has a
`nonexclusive and nontransferable license to use Release 14.
`Third, it imposes transfer restrictions, prohibiting customers
`from renting, leasing, or transferring the software without
`Autodesk’s prior consent and from electronically or physi-
`cally transferring the software out of the Western Hemi-
`sphere. Fourth, it imposes significant use restrictions:
`
`YOU MAY NOT: (1) modify, translate, reverse-
`engineer, decompile, or disassemble the Software
`. . . (3) remove any proprietary notices, labels, or
`marks from the Software or Documentation; (4) use
`. . . the Software outside of the Western Hemisphere;
`(5) utilize any computer software or hardware
`
`

`
`VERNOR v. AUTODESK, INC.
`
`13867
`
`designed to defeat any hardware copy-protection
`device, should the software you have licensed be
`equipped with such protection; or (6) use the Soft-
`ware for commercial or other revenue-generating
`purposes if the Software has been licensed or labeled
`for educational use only.
`
`Fifth, the SLA provides for license termination if the user
`copies the software without authorization or does not comply
`with the SLA’s restrictions. Finally, the SLA provides that if
`the software is an upgrade of a previous version:
`
`[Y]ou must destroy the software previously licensed
`to you, including any copies resident on your hard
`disk drive . . . within sixty (60) days of the purchase
`of the license to use the upgrade or update . . . .
`Autodesk reserves the right to require you to show
`satisfactory proof that previous copies of the soft-
`ware have been destroyed.
`
`Autodesk takes measures to enforce these license require-
`ments. It assigns a serial number to each copy of AutoCAD
`and tracks registered licensees. It requires customers to input
`“activation codes” within one month after installation to con-
`tinue using the software.1 The customer obtains the code by
`providing the product’s serial number to Autodesk. Autodesk
`issues the activation code after confirming that the serial num-
`ber is authentic, the copy is not registered to a different cus-
`tomer, and the product has not been upgraded. Once a
`customer has an activation code, he or she may use it to acti-
`vate the software on additional computers without notifying
`Autodesk.
`
`1Prior to using activation codes, Autodesk required users to return one
`disc of an earlier version of the software to upgrade to a later version.
`Autodesk has abandoned this return policy, deeming it slow and unwork-
`able.
`
`

`
`13868
`VERNOR v. AUTODESK, INC.
`B. Autodesk’s provision of Release 14 software to CTA
`
`In March 1999, Autodesk reached a settlement agreement
`with its customer Cardwell/Thomas & Associates, Inc.
`(“CTA”), which Autodesk had accused of unauthorized use of
`its software. As part of the settlement, Autodesk licensed ten
`copies of Release 14 to CTA. CTA agreed to the SLA, which
`appeared (1) on each Release 14 package that Autodesk pro-
`vided to CTA; (2) in the settlement agreement; and (3) on-
`screen, while the software is being installed.
`
`CTA later upgraded to the newer, fifteenth version of the
`AutoCAD program, AutoCAD 2000. It paid $495 per upgrade
`license, compared to $3,750 for each new license. The SLA
`for AutoCAD 2000, like the SLA for Release 14, required
`destruction of copies of previous versions of the software,
`with proof to be furnished to Autodesk on request. However,
`rather than destroying its Release 14 copies, CTA sold them
`to Vernor at an office sale with the handwritten activation
`codes necessary to use the software.2
`
`C. Vernor’s eBay business and sales of Release 14
`
`Vernor has sold more than 10,000 items on eBay. In May
`2005, he purchased an authentic used copy of Release 14 at
`a garage sale from an unspecified seller. He never agreed to
`the SLA’s terms, opened a sealed software packet, or installed
`the Release 14 software. Though he was aware of the SLA’s
`existence, he believed that he was not bound by its terms. He
`posted the software copy for sale on eBay.
`
`Autodesk filed a Digital Millennium Copyright Act
`(“DMCA”) take-down notice with eBay claiming that Ver-
`nor’s sale infringed its copyright, and eBay terminated Ver-
`
`2Autodesk brought suit in federal district court against CTA for these
`sales. The parties stipulated to entry of a permanent injunction against
`CTA from directly or contributorily infringing Autodesk’s copyrights.
`
`

`
`VERNOR v. AUTODESK, INC.
`
`13869
`
`nor’s auction.3 Autodesk advised Vernor that it conveyed its
`software copies pursuant to non-transferable licenses, and
`resale of its software was copyright infringement. Vernor
`filed a DMCA counter-notice with eBay contesting the valid-
`ity of Autodesk’s copyright claim.4 Autodesk did not respond
`to the counter-notice. eBay reinstated the auction, and Vernor
`sold the software to another eBay user.
`
`In April 2007, Vernor purchased four authentic used copies
`of Release 14 at CTA’s office sale. The authorization codes
`were handwritten on the outside of the box. He listed the four
`copies on eBay sequentially, representing, “This software is
`not currently installed on any computer.”5 On each of the first
`three occasions, the same DMCA process ensued. Autodesk
`filed a DMCA take-down notice with eBay, and eBay
`removed Vernor’s auction. Vernor submitted a counter-notice
`to which Autodesk did not respond, and eBay reinstated the
`auction.
`
`When Vernor listed his fourth, final copy of Release 14,
`
`3The DMCA provides that a service provider is not liable for infringing
`user-posted material on its service if, inter alia, it responds expeditiously
`to remove or disable access to the material upon receipt of a take-down
`notice claiming infringement. 17 U.S.C. § 512(c)(1)(C).
`4The DMCA also provides that a user whose material has been removed
`or disabled may provide a “counter-notification” to the service provider,
`including a sworn statement that the user has a good-faith belief that the
`material was mistakenly removed or disabled. 17 U.S.C. § 512(g)(3)(C).
`After receiving a counter-notification, the service provider must do the
`following to retain its liability exemption. It must promptly (1) provide the
`person who filed the original take-down notice with a copy of the counter-
`notification and (2) advise that it will replace the removed material or
`cease disabling access to it in ten business days. 17 U.S.C. § 512(g)(2)(B).
`It must also timely replace the removed material or cease disabling access
`to it, unless the person who provided the take-down notice gives notice
`that he or she has filed a court action to restrain the user’s infringement.
`17 U.S.C. § 512(g)(2)(C).
`5Vernor acknowledged at his deposition that he did not know whether
`this was true.
`
`

`
`13870
`
`VERNOR v. AUTODESK, INC.
`
`Autodesk again filed a DMCA take-down notice with eBay.
`This time, eBay suspended Vernor’s account because of
`Autodesk’s repeated charges of infringement. Vernor also
`wrote to Autodesk, claiming that he was entitled to sell his
`Release 14 copies pursuant to the first sale doctrine, because
`he never installed the software or agreed to the SLA. In
`response, Autodesk’s counsel directed Vernor to stop selling
`the software. Vernor filed a final counter-notice with eBay.
`When Autodesk again did not respond to Vernor’s counter-
`notice, eBay reinstated Vernor’s account. At that point, Ver-
`nor’s eBay account had been suspended for one month, during
`which he was unable to earn income on eBay.
`
`Vernor currently has two additional copies of Release 14
`that he wishes to sell on eBay. Although the record is not
`clear, it appears that Vernor sold two of the software packages
`that he purchased from CTA, for roughly $600 each, but did
`not sell the final two to avoid risking further suspension of his
`eBay account.
`
`II.
`
`In August 2007, Vernor brought a declaratory action
`against Autodesk to establish that his resales of used Release
`14 software are protected by the first sale doctrine and do not
`infringe Autodesk’s copyright. He also sought damages and
`injunctive relief. On January 15, 2008, Autodesk moved to
`dismiss Vernor’s complaint, or in the alternative, for summary
`judgment. The district court denied the motion, holding that
`Vernor’s sales were non-infringing under the first sale doc-
`trine and the essential step defense. See Vernor v. Autodesk,
`Inc., 555 F. Supp. 2d 1164, 1170-71, 1175 (W.D. Wash.
`2008).
`
`Following discovery, the parties filed cross-motions for
`summary judgment. The district court granted summary judg-
`ment to Vernor as to copyright infringement in an unpub-
`lished decision. However, the district court declined to resolve
`
`

`
`VERNOR v. AUTODESK, INC.
`
`13871
`
`Vernor’s affirmative defense that Autodesk had misused its
`copyright, reasoning that a misuse defense would not benefit
`Vernor since he had prevailed on copyright infringement. In
`October 2009, the district court entered judgment for Vernor,
`and Autodesk timely appealed.
`
`III.
`
`[1] Copyright is a federal law protection provided to the
`authors of “original works of authorship,” including software
`programs. 17 U.S.C. §§ 101-103. The Copyright Act confers
`several exclusive rights on copyright owners, including the
`exclusive rights to reproduce their works and to distribute
`their works by sale or rental. Id. § 106(1), (3). The exclusive
`distribution right is limited by the first sale doctrine, an affir-
`mative defense to copyright infringement that allows owners
`of copies of copyrighted works to resell those copies. The
`exclusive reproduction right is limited within the software
`context by the essential step defense, another affirmative
`defense to copyright infringement that is discussed further
`infra. Both of these affirmative defenses are unavailable to
`those who are only licensed to use their copies of copyrighted
`works.
`
`This case requires us to decide whether Autodesk sold
`Release 14 copies to its customers or licensed the copies to its
`customers. If CTA owned its copies of Release 14, then both
`its sales to Vernor and Vernor’s subsequent sales were non-
`infringing under the first sale doctrine.6 However, if Autodesk
`only licensed CTA to use copies of Release 14, then CTA’s
`and Vernor’s sales of those copies are not protected by the
`
`6If Autodesk’s transfer of Release 14 copies to CTA was a first sale,
`then CTA’s resale of the software in violation of the SLA’s terms would
`be a breach of contract, but would not result in copyright liability. See
`United States v. Wise, 550 F.2d 1180, 1187 (9th Cir. 1977) (“[T]he exclu-
`sive right to vend the transferred copy rests with the vendee, who is not
`restricted by statute from further transfers of that copy, even though in
`breach of an agreement restricting its sale.”).
`
`

`
`13872
`
`VERNOR v. AUTODESK, INC.
`
`first sale doctrine and would therefore infringe Autodesk’s
`exclusive distribution right.
`
`A. The first sale doctrine
`
`The Supreme Court articulated the first sale doctrine in
`1908, holding that a copyright owner’s exclusive distribution
`right is exhausted after the owner’s first sale of a particular
`copy of the copyrighted work. See Bobbs-Merrill Co. v.
`Straus, 210 U.S. 339, 350-51 (1908). In Bobbs-Merrill, the
`plaintiff-copyright owner sold its book with a printed notice
`announcing that any retailer who sold the book for less than
`one dollar was responsible for copyright infringement. Id. at
`341. Plaintiff sought injunctive relief against defendants-
`booksellers who failed to comply with the price restriction. Id.
`at 341-42. The Supreme Court rejected the plaintiff’s claim,
`holding that its exclusive distribution right applied only to
`first sales of copies of the work. Id. at 350-51. The distribu-
`tion right did not permit plaintiff to dictate that subsequent
`sales of the work below a particular price were infringing. Id.
`The Court noted that its decision solely applied to the rights
`of a copyright owner that distributed its work without a
`license agreement. Id. at 350 (“There is no claim in this case
`of contract limitation, nor license agreement controlling the
`subsequent sales of the book.”).
`
`[2] Congress codified the first sale doctrine the following
`year. See 17 U.S.C. § 41 (1909). In its current form, it allows
`the “owner of a particular copy” of a copyrighted work to sell
`or dispose of his copy without the copyright owner’s authoriza-
`tion.7 Id. § 109(a) (enacted 1976). The first sale doctrine does
`not apply to a person who possesses a copy of the copyrighted
`work without owning it, such as a licensee. See id. § 109(d);
`
`7The parties dispute who bears the burden to prove the first sale or the
`absence thereof in a civil case, a question we have not yet resolved. Since
`the facts in this case are undisputed, including the chain of software trans-
`fers, we need not decide the issue.
`
`

`
`VERNOR v. AUTODESK, INC.
`
`13873
`
`cf. Quality King Distribs., Inc. v. L’Anza Research Int’l Inc.,
`523 U.S. 135, 146-47 (1998) (“[T]he first sale doctrine would
`not provide a defense to . . . any non-owner such as a bailee,
`a licensee, a consignee, or one whose possession of the copy
`was unlawful.”).
`
`B. Owners vs. licensees
`
`We turn to our precedents governing whether a transferee
`of a copy of a copyrighted work is an owner or licensee of
`that copy. We then apply those precedents to CTA’s and Ver-
`nor’s possession of Release 14 copies.
`
`1. United States v. Wise, 550 F.2d 1180 (9th Cir. 1977)
`
`In Wise, a criminal copyright infringement case, we consid-
`ered whether copyright owners who transferred copies of their
`motion pictures pursuant to written distribution agreements
`had executed first sales. Id. at 1187. The defendant was found
`guilty of copyright infringement based on his for-profit sales
`of motion picture prints. See id. at 1183. The copyright own-
`ers distributed their films to third parties pursuant to written
`agreements that restricted their use and transfer. Id. at 1183-
`84. On appeal, the defendant argued that the government
`failed to prove the absence of a first sale for each film.8 If the
`copyright owners’ initial transfers of the films were first sales,
`then the defendant’s resales were protected by the first sale
`doctrine and thus were not copyright infringement.
`
`To determine whether a first sale occurred, we considered
`multiple factors pertaining to each film distribution agree-
`ment. Specifically, we considered whether the agreement (a)
`was labeled a license, (b) provided that the copyright owner
`retained title to the prints, (c) required the return or destruc-
`
`8In Wise, we construed former 17 U.S.C. § 27, since replaced by 17
`U.S.C. § 109(a), the current codification of the first sale doctrine. The pro-
`visions are materially similar.
`
`

`
`13874
`
`VERNOR v. AUTODESK, INC.
`
`tion of the prints, (d) forbade duplication of prints, or (e)
`required the transferee to maintain possession of the prints for
`the agreement’s duration. Id. at 1190-92. Our use of these
`several considerations, none dispositive, may be seen in our
`treatment of each film print.
`
`For example, we reversed the defendant’s conviction with
`respect to Camelot. Id. at 1194. It was unclear whether the
`Camelot print sold by the defendant had been subject to a first
`sale. Copyright owner Warner Brothers distributed Camelot
`prints pursuant to multiple agreements, and the government
`did not prove the absence of a first sale with respect to each
`agreement. Id. at 1191-92, 1194. We noted that, in one agree-
`ment, Warner Brothers had retained title to the prints,
`required possessor National Broadcasting Company (“NBC”)
`to return the prints if the parties could select a mutual agree-
`able price,9 and if not, required NBC’s certification that the
`prints were destroyed. Id. at 1191. We held that these factors
`created a license rather than a first sale. Id.
`
`We further noted, however, that Warner Brothers had also
`furnished another Camelot print to actress Vanessa Redgrave.
`Id. at 1192. The print was provided to Redgrave at cost, and
`her use of the print was subject to several restrictions. She had
`to retain possession of the print and was not allowed to sell,
`license, reproduce, or publicly exhibit the print. Id. She had
`no obligation to return the print to Warner Brothers. Id. We
`concluded, “While the provision for payment for the cost of
`the film, standing alone, does not establish a sale, when taken
`with the rest of the language of the agreement, it reveals a
`transaction strongly resembling a sale with restrictions on the
`use of the print.” Id. There was no evidence of the print’s
`whereabouts, and we held that “[i]n the absence of such
`
`9Although the Wise defendant contended that this repurchase provision
`created a first sale, we held that it merely allowed Warner Brothers to
`compensate NBC for its out-of-pocket cost in producing additional prints.
`Id.
`
`

`
`VERNOR v. AUTODESK, INC.
`
`13875
`
`proof,” the government failed to prove the absence of a first
`sale with respect to this Redgrave print. Id. at 1191-92. Since
`it was unclear which copy the defendant had obtained and
`resold, his conviction for sale of Camelot had to be reversed.
`Id.
`
`Thus, under Wise, where a transferee receives a particular
`copy of a copyrighted work pursuant to a written agreement,
`we consider all of the provisions of the agreement to deter-
`mine whether the transferee became an owner of the copy or
`received a license. We may consider (1) whether the agree-
`ment was labeled a license and (2) whether the copyright
`owner retained title to the copy, required its return or destruc-
`tion, forbade its duplication, or required the transferee to
`maintain possession of the copy for the agreement’s duration.
`Id. at 1190-92. We did not find any one factor dispositive in
`Wise: we did not hold that the copyright owner’s retention of
`title itself established the absence of a first sale or that a trans-
`feree’s right to indefinite possession itself established a first
`sale.10
`
`2. The “MAI trio” of cases
`
`Over fifteen years after Wise, we again considered the dis-
`tinction between owners and licensees of copies of copy-
`righted works in three software copyright cases, the “MAI
`trio”. See MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d
`511 (9th Cir. 1993); Triad Sys. Corp. v. Se. Express Co., 64
`F.3d 1330 (9th Cir. 1995); Wall Data, Inc. v. Los Angeles
`County Sheriff’s Dep’t, 447 F.3d 769 (9th Cir. 2006). In the
`MAI trio, we considered which software purchasers were
`
`10Cf. Hampton v. Paramount Pictures Corp., 279 F.2d 100, 103 (9th
`Cir. 1960) (holding in non-first sale doctrine case that the transferee of a
`movie print was a licensee because the parties designated their agreement
`as a perpetual license, even though their agreement provided for a one-
`time lump sum payment and imposed no requirement that the transferee
`would return the outstanding prints and negatives).
`
`

`
`13876
`
`VERNOR v. AUTODESK, INC.
`
`owners of copies of copyrighted works for purposes of a sec-
`ond affirmative defense to infringement, the essential step
`defense.
`
`[3] The enforcement of copyright owners’ exclusive right
`to reproduce their work under the Copyright Act, 17 U.S.C.
`§ 106(1), has posed special challenges in the software context.
`In order to use a software program, a user’s computer will
`automatically copy the software into the computer’s random
`access memory (“RAM”), which is a form of computer data
`storage. See MAI, 991 F.2d at 513. Congress enacted the
`essential step defense to codify that a software user who is
`the “owner of a copy” of a copyrighted software program
`does not infringe by making a copy of the computer program,
`if the new copy is “created as an essential step in the utiliza-
`tion of the computer program in conjunction with a machine
`and . . . is used in no other manner.” 17 U.S.C. § 117(a)(1).
`
`The Copyright Act provides that an “owner of a copy” of
`copyrighted software may claim the essential step defense,
`and the “owner of a particular copy” of copyrighted software
`may claim the first sale doctrine. 17 U.S.C. §§ 109(a),
`117(a)(1). The MAI trio construed the phrase “owner of a
`copy” for essential step defense purposes. Neither Vernor nor
`Autodesk contends that the first sale doctrine’s inclusion of
`the word “particular” alters the phrase’s meaning, and we
`“presume that words used more than once in the same statute
`have the same meaning throughout.” Moldo v. Matsco, Inc.
`(In re Cybernetic Servs., Inc.), 252 F.3d 1039, 1051 (9th Cir.
`2002). Accordingly, we consider the MAI trio’s construction
`of “owner of a copy” controlling in our analysis of whether
`CTA and Vernor became “owner[s] of a particular copy” of
`Release 14 software.
`
`In MAI and Triad, the defendants maintained computers
`that ran the plaintiffs’ operating system software. MAI, 991
`F.2d at 513; Triad, 64 F.3d at 1333. When the defendants ran
`the computers, the computers automatically loaded plaintiffs’
`
`

`
`VERNOR v. AUTODESK, INC.
`
`13877
`
`software into RAM. MAI, 991 F.2d at 517-18; Triad, 64 F.3d
`at 1333, 1335-36. The plaintiffs in both cases sold their soft-
`ware pursuant to restrictive license agreements, and we held
`that their customers were licensees who were therefore not
`entitled to claim the essential step defense. We found that the
`defendants infringed plaintiffs’ software copyrights by their
`unauthorized loading of copyrighted software into RAM.
`MAI, 991 F.2d at 517-18 & n.5; Triad, 64 F.3d at 1333, 1335-
`36. In Triad, the plaintiff had earlier sold software outright to
`some customers. 64 F.3d at 1333 n.2. We noted that these
`customers were owners who were entitled to the essential step
`defense, and the defendant did not infringe by making RAM
`copies in servicing their computers. Id.
`
`In Wall Data, plaintiff sold 3,663 software licenses to the
`defendant. Wall Data, 447 F.3d at 773. The licenses (1) were
`non-exclusive; (2) permitted use of the software on a single
`computer; and (3) permitted transfer of the software once per
`month, if the software was removed from the original com-
`puter. Id. at 775 n.5, 781. The defendant installed the software
`onto 6,007 computers via hard drive imaging, which saved it
`from installing the software manually on each computer. It
`made an unverified claim that only 3,663 users could simulta-
`neously access the software. Id. at 776.
`
`[4] The plaintiff sued for copyright infringement, contend-
`ing that the defendant violated the license by “over-installing”
`the software. Id. at 775. The defendant raised an essential step
`defense, contending that its hard drive imaging was a neces-
`sary step of installation. Id. at 776. On appeal, we held that
`the district court did not abuse its discretion in denying the
`defendant’s request for a jury instruction on the essential step
`defense. Id. at 784. Citing MAI, we held that the essential step
`defense does not apply where the copyright owner grants the
`user a license and significantly restricts the user’s ability to
`transfer the software. Id. at 784-85. Since the plaintiff’s
`license imposed “significant restrictions” on the defendant’s
`
`

`
`13878
`
`VERNOR v. AUTODESK, INC.
`
`software rights, the defendant was a licensee and was not enti-
`tled to the essential step defense. Id. at 785.
`
`In Wall Data, we acknowledged that MAI had been criti-
`cized in a Federal Circuit decision, but declined to revisit its
`holding, noting that the facts of Wall Data led to the conclu-
`sion that any error in the district court’s failure to instruct was
`harmless. Even if the defendant owned its copies of the soft-
`ware, its installation of the software on a number of comput-
`ers in excess of its license was not an essential step in the
`software’s use. Id. at 786 n.9 (citing Nimmer on Copyright
`§ 8.08[B][1][c] at 8-136; DSC Commc’ns Corp. v. Pulse
`Commc’ns, Inc., 170 F.3d 1354, 1360 (Fed. Cir. 1999) (criti-
`cizing MAI)).
`
`We read Wise and the MAI trio to prescribe three consider-
`ations that we may use to determine whether a software user
`is a licensee, rather than an owner of a copy. First, we con-
`sider whether the copyright owner specifies that a user is
`granted a license. Second, we consider whether the copyright
`owner significantly restricts the user’s ability to transfer the
`software. Finally, we consider whether the copyright owner
`imposes notable use restrictions.11 Our holding reconciles the
`MAI trio and Wise, even though the MAI trio did not cite
`Wise. See Cisneros-Perez v. Gonzales, 451 F.3d 1053, 1058
`(9th Cir. 2006) (“[W]e are required to reconcile prior prece-
`dents if we can do so.”)
`
`11Although use restrictions were not dispositive in the MAI trio, we con-
`sidered them in each case. See MAI, 991 F.2d at 517 n.3 (license limited
`user to making one working and one backup copy of the software, and for-
`bade examination, disclosure, copying, modification, adaptation, and
`visual display of the software); Triad, 64 F.3d at 1333 (license prohibited
`software duplication and third-party use); Wall Data, 447 F.3d at 775 n.5
`(license permitted software use on single computer, prohibited multi-
`computer and multi-user arrangements, and permitted transfer to another
`computer no more than once every thirty days).
`
`

`
`VERNOR v. AUTODESK, INC.
`
`13879
`
`In response to MAI, Congress amended § 117 to permit a
`computer owner to copy software for maintenance or repair
`purposes. See 17 U.S.C. § 117(c); see also H.R. Rep. No.
`105-551, pt. 1, at 27 (1998). However, Congress did not dis-
`turb MAI’s holding that licensees are not entitled to the essen-
`tial step defense.
`
`IV.
`
`A. The district court’s decision
`
`The district court interpreted Wise to hold that a first sale
`occurs whenever the transferee is entitled to keep the copy of
`the work. Since Autodesk does not require its customers to
`return their copies of Release 14, the district court found that
`Autodesk had sold Release 14 to CTA. It reasoned that thus,
`CTA and Vernor were successive “owner[s] of a copy” of the
`software and were entitled to resell it under the first sale doc-
`trine. The district court also found that Vernor’s customers’
`copying of software during installation was protected by the
`essential step defense.
`
`The district court acknowledged that were it to follow the
`MAI trio, it would conclude that Autodesk had licensed
`Release 14 copies to CTA, rather than sold them. However,
`it viewed Wise and the MAI trio as irreconcilable, and it fol-
`lowed Wise as the first-decided case. See United States v.
`Rodriguez-Lara, 421 F.3d 932, 943 (9th Cir. 2005).
`
`B. Analysis
`
`[5] We hold today that a software user is a licensee rather
`than an owner of a copy where the copyright owner (1) speci-
`fies that the user is granted a license; (2) significantly restricts
`the user’s ability to transfer the software; and (3) imposes
`notable use restrictions.12 Applying our holding to Autodesk’s
`
`12We review the district court’s grant of summary judgment to Vernor
`de novo. Padfield v. AIG Life Ins. Co., 290 F.3d 1121, 1124 (9th Cir.
`2002).
`
`

`
`13880
`
`VERNOR v. AUTODESK, INC.
`
`SLA, we conclude that CTA was a licensee rather than an
`owner of copies of Release 14 and thus was not entitled to
`invoke the first sale doctrine or the essential step defense.
`
`[6] Autodesk retained title to the software and imposed
`significant transfer restrictions: it stated that the license is
`nontransferable, the software could not be transferred or
`leased without Autodesk’s written consent, and the software
`could not be transferred outside the Western Hemisphere. The
`SLA also imposed use restrictions against the use of the soft-
`ware outside the Western Hemisphere and against modifying,
`translating, or reverse-engineering the software, removing any
`proprietary marks from the software or documentation, or
`defeating any copy protection device. Furthermore, the SLA
`provided for termination of the license upon the licensee’s
`unauthorized copying or failure to comply with other license
`restrictions. Thus, because Autodesk reserved title to Release
`14 copies and imposed significant transfer and use restric-
`tions, we conclude that its customers are licensees of their
`copies of Release 14 rather than owners.
`
`[7] CTA was a licensee rather than an “owner of a particu-
`lar copy” of Release 14, and it was not entitled to resell its
`Release 14 copies to Vernor under the first sale doctrine. 17
`U.S.C. § 109(a). Therefore, Vernor did not receive title to the
`copies from CTA and accordingly could not pass ownership
`on to others. Both CTA’s and Vernor’s sales infringed
`Autodesk’s exclusive right to distribute copies of its work. Id.
`§ 106(3).
`
`[8] Because Vernor was not an owner, his customers are
`also not owners of Release 14 copies. Therefore, when they
`install Release 14 on their computers, the copies of the sof