Hi, I put two Rosetta Stone items on sale on ebay. They got removed right away. I didn't sell even one.

Asked over 3 years ago - New York, NY

Now RS is asking me for money because they said I broke the law. But I did not sell any! They asked me to pay $800 if I will pay the amount in once, or $1000 if I will make a payment plan. Are they allowed to do that??? Once again I did not sell any RS on ebay!

Attorney answers (5)

  1. Charles E. Colman

    Contributor Level 11

    2

    Lawyers agree

    Answered . As the above answers indicate, it is difficult to respond to the question without more information. If the items you were selling were "pirated copies" (i.e. counterfeits), then as Pamela states, it doesn't matter whether any sale was consummated.

    However, if the items were genuine, the issues become much more complicated. It's generally not trademark infringement to sell a genuine good on a site like eBay, even if you refer to the product by its name. As for copyright, under the "first-sale doctrine," a company cannot prevent you from reselling copyrighted software that you OWN. (See http://en.wikipedia.org/wiki/First-sale_doctrine.) However, as Bret's answer indicates, you may not technically "own" the software at all -- a so-called "End User License Agreement" ("EULA") may govern your use of it, and may prevent you from reselling it. The issues surrounding the interpretation of EULAs are numerous, and include the following:

    1) Did you purchase the software directly from Rosetta Stone? If not, it's possible you aren't bound by the EULA.

    2) If you are bound by the EULA, what exactly does it prevent you from doing? Very precise language has to be used in EULAs in order to stop licensees from "assigning" their rights to others. A sale on eBay might be a valid "assignment," depending on the EULA's language.

    3) Even if the EULA is worded correctly, from Rosetta Stone's point of view, is it enforceable? Some courts have invalidated take-it-or-leave-it EULAs on the grounds of "unconscionability." (See http://en.wikipedia.org/wiki/Unconscionability.)

    4) If the EULA is enforceable, what remedies does it grant to Rosetta Stone? Have you actually done anything to constitute a "material breach" of the EULA? Is there a "liquidated damages" clause or other provision by which RS might have arrived at its $800 figure?

    As you can see, these questions are quite complicated, and almost certainly require the assistance of an IP lawyer. That assistance might, but will not necessarily, cost more than $800. (And with a lawyer's assistance, you might be able to resell the software and partly recoup your losses... though of course, there can never be such a guarantee.) At the very least, you should try to provide more information in your question, in order to assist other attorneys in answering it. Good luck!

    This answer does not constitute legal advice, and should not be relied on in place of a consultation with an... more
  2. Maurice N Ross

    Pro

    Contributor Level 20

    Answered . Mr. Colman has provided an excellent summary of the legal questions that should be answered. Rosetta Stone, like many other companies that license software, contends that the "first sale doctrine" does not apply, and that the licensee is not permitted to assign or transfer his license to third parties. Several recent court decisions have upheld Rosetta Stone's position on this, and unless Congress intervenes the law seems to be that the "First Sale Doctrine" does not apply to licenses of software, the terms of which expressly prohibit assignment or transfer of the license to third parties. Many believe that in the age of digital transmission of software, music, videos, and other works, application of the First Sale Doctrine to digital works would destroy the value of IP rights, since once one person bought a digital copy, there would be nothing to stop that person from sharing his copy with millions of others. Thus, the First Sale Doctrine is now construed very narrowly, and most providers of digital content make clear in their terms of sale (such as EULA's) that they are not providing a license that permits transfer and assignments of the digital works to third parties.

    Thus, as a practical matter, you probably do not have a good defense against Rosetta Stone. The best approach would be for you to attempt to settle this matter. In order to do so, you need to retain IP counsel (which unfortunately might cost more than the settlement amount). Note that when you settle a matter such as this, it is important that the settlement papers provide you a legally enforceable release of all claims against you arising from this incident. Settlement papers in these matters should be reviewed by experienced counsel---you need to make sure that the case it will never come back to haunt you.

    One more point about the economics--you have been asked to pay a settlement amount of $800. But your exposure in this case is far greater than $800. If you are sued for copyright infringement, you could be liable for statutory damages. Statutory damages could be as low as $750 per item, but if your infringement is found to be "willful" (i.e., you knew that you were not entitled to resell these items), you could be liable for up to $150,000 for each item that you attempted to sell. In addition, copyright law gives the court discretion to award the plaintiff its attorneys fees, and courts do not hesitate to award attorneys fees to the prevailing party in cases such as this. The attorneys fees often are thousands of dollars. Thus, your ultimately exposure in this situation is quite significant---potentially more than $300,000.

    Also, Rosetta Stone does not necessarily need to sue you in New York. It is quite possible that the suit against you could be brought in another jurisdiction, such as Virginia where it has its corporate headquarters. It can be very expensive to have to defend a law suit against you in another state--but it it is quite possible that the courts of another state would exercise jurisdiction over you in this matter. In fact, the EULA may have provisions pursuant to which you are deemed to consent to jurisdiction in another state.

    Given the risks that you face here, you would be well-advised to retain counsel to represent you in settling this manner. And you should act quickly--if you delay in responding and a law suit is brought, the settlement offer of $800 will be off the table, and Rosetta Stone's lawyers will ask for a lot more. It would be a really bad idea to attempt to resolve this on your own without professional legal assistance.

  3. Daniel Nathan Ballard

    Contributor Level 20

    1

    Lawyer agrees

    Answered . At the risk of stating the obvious, the "how to learn a language" cd's sold by Rosetta Stone [which are literary works] are NOT computer programs [the subject matter in the Autodesk case].

    In short, the analysis required to determine infringement of entertainment and entertainment-like works [such as the Rosetta Stone cd's] is different in kind than the infringement analysis required when the subject matter is a computer program. Specifically, computer programs are "used" by the licensee to do something for some effect whereas entertainment and entertainment-like works are complete in and of themselves -- they ARE the "use," So, in my opinion, the Terms of Use contract "first sale" analysis that the 9th Circuit used in Autodesk is not applicable to the Rosetta Stone cd's.

    The issue is whether a Rosetta Stone "how to learn a language" cd is more like a music cd -- which can unquestionably be lawfully be resold under the first sale doctrine -- or is it more like a computer program subject to the Autodesk analysis? I think they're more like the former. And so can be lawfully resold no matter what Rosetta Stone's "terms of use" state.

    The above is general information ONLY and is not legal advice, does not form an attorney-client relationship, and... more
  4. Pamela Koslyn

    Contributor Level 20

    Answered . Of course they're allowed to enforce their copyright and trademark rights. The fact that you didn't complete your illegal sales doesn't matter, because you tried to do it. Attempted murder is still a crime, even if murder isn't committed.

    I don't know if they'd sue for 2 sales, but they might. Hiring a lawyer will cost you more than $800, so see if you can get a better deal, but try to settle with them. Make sure you get a release of liablity in writing if you settle.

    PLEASE READ THIS BEFORE YOU COMMENT, EMAIL ME OR PHONE ME. I'm only licensed in CA. This answer doesn't make me... more
  5. Bret Stuart Moore

    Contributor Level 9

    Answered . I'm confused. Were you selling a complete copy of the product, used? Or were you selling a new copy of the product? Or were you selling a COPY of the product, like a ripped CD or whatever?

    I'd look at the End User License Agreement (EULA) and see what it says. I don't think that they can prevent you from selling the product that you bought, used or not. They can certainly prevent you from copying and distributing their software, though.

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