The practical effect of this language is to significantly circumscribe a copyright owner's exclusive distribution right “only to the first sale of the copyrighted work” because “once the copyright owner places a copyrighted item in the stream of commerce by selling it, he has exhausted his exclusive statutory right to control its distribution.” Quality King Distribs., Inc. v. L'anza Research Int'l, Inc., 523 U.S. 135, 141, 152, 118 S.Ct. 1125, 140 L.Ed.2d 254 (1998); see also Vernor v. Autodesk, Inc., 621 F.3d 1102, 1107 (9th Cir.2010) (“[A] copyright owner's exclusive distribution right is exhausted after the owner's first sale of a particular copy of the copyrighted work.”). Before answering the question left open in Augusto of who bears the burden of proof as to this defense, it is important to understand the contours of the term “sale.”See Augusto, 628 F.3d at 1178.

S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1085 (9th Cir. 1989) ("To prevail on its claim of copyright infringement, [the copyright owner] must prove ... ‘copying’ of protectable expression by [the accused infringer] beyond the scope of [the] license.") A restrictive license exists where the copyright owner "(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." Vernor v. Autodesk, Inc., 621 F.3d 1102, 1111 (9th Cir. 2010). Here, there is no dispute that the language on the redemption sites imposes significant use restrictions and forbids the user from transferring copyrighted movies.

We've described this provision as an "affirmative defense to infringement." Vernor v. Autodesk, Inc., 621 F.3d 1102, 1109 (9th Cir. 2010).

Thus, the first sale doctrine does not apply to a licensee. See Vernor v. Autodesk, Inc., 621 F.3d 1102, 1107–08 (9th Cir.2010) (“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.”), petition for cert. filed,

17 U.S.C. § 117(a)(1). However, these limitations only apply when the particular copies of the copyrighted works at issue are owned rather than merely licensed for use. Vernor v. Autodesk, Inc., 621 F.3d 1102, 1107 (9th Cir. 2010). A true licensee cannot resell the software under the "first sale" doctrine or assert the "essential step" defense against a claim of unlawful reproduction.

The first sale doctrine enables an "'owner of a particular copy' of a copyrighted work to sell or dispose of his copy without the copyright owner's authorization."Vernor v. Autodesk, Inc., 621 F.3d 1102, 1107 (9th Cir. 2010) (quoting 17 U.S.C. § 109(a)). The doctrine "does not apply to a person who possesses a copy of the copyrighted work without owning it, such as a licensee."

Particularly with regard to computer software, we have recognized that copyright owners may create licensing arrangements so that users acquire only a license to use the particular copy of software and do not acquire title that permits further transfer or sale of that copy without the permission of the copyright owner. Our most recent example of that rule is Vernor v. Autodesk, Inc., 621 F.3d 1102 (9th Cir. 2010). Others are Wall Data Inc. v. Los Angeles Cnty. Sheriffs Dept, 447 F.3d 769 (9th Cir. 2006); Triad Sys. Corp. v. Se. Express Co., 64 F.3d 1330 (9th Cir. 1995); MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993).

In Vernor v. Autodesk, Inc. , the Ninth Circuit held that the first sale doctrine did not bar defendant Autodesk from restricting reselling of its software because reseller was merely a licensee of the software and not an owner. See 621 F.3d 1102, 1104–05 (9th Cir. 2010). The question at issue in Vernor was whether the reseller owned or merely licensed the software.

“Copyright is a federal law protection provided to the authors of ‘original works of authorship,’ including software programs.” Vernor v. Autodesk, Inc. , 621 F.3d 1102, 1106–107 (9th Cir.2010) (citing 17 U.S.C. §§ 101 - 103 ). In this case, the FAC alleges that Defendants distributed its copyrighted software in violation of the Reseller Agreement, thereby willfully infringing Adobe's copyright registrations.

First, the doctrine applies only to the owner of a particular copy, not to a mere licensee authorized only to possess and use the copy. See17 U.S.C. § 109(d); Vernor v. Autodesk, Inc., 621 F.3d 1102, 1107 (9th Cir.2010). Whether a transferee obtains ownership or only a license is an issue of law.