This just in from the EFF:

In a devastating blow to user rights, an Arizona federal court has ruled that consumers can be guilty of copyright infringement if they violate the end user license agreement (”EULA”) that comes with the software–even where the so-called “violation” is specifically excluded from copyright liability. Why? Because those protections only apply if you own the software you buy–not if you license it. Stunningly, this means that “cheating” while playing a computer game can expose you to potentially huge statutory damages for copyright infringement.

As we noted back in May, Blizzard Entertainment, the company that makes the hugely popular massively multi-player online role-playing game World of Warcraft, sued Michael Donnelly, the developer of Glider, a program that helps WoW users raise their character level to 70 by “playing” for the user. Blizzard said that because the license agreement forbids using Glider with WoW, Glider users are committing copyright infringement when they load copies of WoW into RAM in order to play the game, and Donnelly is illegally contributing to that infringement.

As Public Knowledge explained in its brief, Blizzard’s theory confuses a copyright holder’s intellectual property rights in the software it develops with a buyer’s rights in the actual copy of the software. An owner of software has a right to copy it if that copy is essential to the customer’s use of the software. (See Section 117 of the Copyright Act.) This rule helps balance the rights of the copyright holder to manage and benefit from its expressive work, and the rights of the public to use and build on that work.

Blizzard argued that players aren’t owners but merely software licensees, so Section 117 doesn’t apply. But the question of whether a user is an owner for purposes of Section 117 depends the substance of the transaction, not just how one party wants to describe it. For example, if you buy the software, keep it on your own computer and don’t have to return it when you are done, you probably own it.

Sadly, the court in this case found otherwise. It held that because Blizzard says the software is licensed, and because it imposes restrictions on use (including such standard restrictions as a requirement that a user who transfers her copy of the software to another must delete all copies from her computer). And that means that users who violate the EULA could be on the hook for copyright damages–including statutory damages, which start at $750 and rise to as high as $150,000 per infringed work. Most disappointing, the court gave short shrift to the absurd policy consequences of treating users who violate a contract as copyright infringers. The logical implication of the holding is that any time you buy software, be it film editing software, accounting software, iTunes, Skype, etc., software owners can always use license agreements to prevent you from ever having full control over your software and taking advantage of standard copyright limitations (such as the right to sell your copy [Section 109 of the Copyright Act] or the right to make copies necessary for use of the software [Section 117]). You can buy it, but you can’t own it.

But this decision is not the whole story: this is the third holding on the issue by district courts in the Ninth Circuit in the past three months. Given that the recent decisions vary considerably, it’s likely the appellate court will address the issue in the near term.

There’s one bright light on the horizon: the court found that WoW Glider does not violate the DMCA anticircumvention provisions by allowing users to evade “Warden,” which scans games players’ computers for unauthorized software. The DMCA prohibits the manufacture and sale of technology that allows the circumvention of technological measures that control access to a work. The court correctly held that Warden doesn’t “control access” to the WoW software already loaded on a user’s computer, and, therefore, WoWGlider doesn’t circumvent that access. (Though the court did leave some aspects of the claim open for exploration at trial).