“First Sale” Doctrine – Keep it to “Sale” and Don’t Extend it to “Use”

by on August 31, 2007 · 8 comments

You’ll have to listen to the latest Tech Liberation Front podcast to get the full
thought-provoking discussion on copyright law and the first sale doctrine, but
let me tease out a portion of the discussion on extending the first sale to apply
to use in addition to transfer.

The main focus of the podcast is a case Fred von Lohmann and EFF are defending concerning the "first sale" doctrine of copyright law. Fred describes first sale on the EFF website:

The idea, set out in Section 109 of the Copyright Act, is simple: once you’ve acquired a lawfully-made CD or book or DVD, you can lend, sell, or give it away without having to get permission from the copyright owner. In simpler terms, "you bought it, you own it" (and because first sale also applies to gifts,
"they gave it to you, you own it" is also true).

While Fred’s right when he says "you bought it, you own it" that doesn’t mean you can do anything you want with a copyrighted work. First sale
currently only applies to transfers of the copyrighted good. Fred said in the podcast that he would like to see the first sale doctrine expanded into the area of "use."  Extending it to use means content owners
couldn’t use a copyright license to enforce certain use restrictions, such as the sharing and presentation of copyrighted material. Although this wasn’t mentioned on the podcast, I think this would have the effect of expanding "fair use." 

Fred surely thinks this liberal copyright world would benefit consumers and society writ large – but it would come at some costs, too. The reality is that content creators would impose use
restrictions in other ways, especially for legitimate price and market segmentation (ie. for software, discounted OEM copies are often labeled "not for resale" to avoid competing with the normal retail channel). This would have to be done by using contract, not copyright law.

If we rely more on contract instead of copyright rules, would there be a
click-wrap agreement every time a music listener inserted a CD or played an
audio file on an iPod? This may be an extreme example, but keep in mind that the first-sale doctrine was meant to reduce the
transaction costs of contacting the copyright owner every time the copyrighted
product is sold and resold. Moving toward contracts to replace licenses for use
agreements would increase transaction costs because it would require more contract-like manifestations of assent (ie. shrink-wrap and click-through agreements). 

No system is perfect, and the law is often called-upon to
create artificial constructs to solve practical, real-world problems. I like the current framework that allows copyright owners to rely on copyright for default rules, but allows them to grant more freedoms via licensing. Just look at the Free Software Foundation’s GPL license. It is permissive in some ways (allows for the modification of code) but restrictive in others (the GPLv3’s anti-tivoization provisions that require any consumer product using software licensed under the GPLv3 to “open up” the software).

As I said in the podcast, I’d hate to see a broader use right come afoul of licensing schemes we see in the software industry, an industry that relies heavily on copyright. And as Professor Picker said on the podcast, competitive markets will yield optimal results without the need to change copyright law, where consumer demand for less use restrictions will be met by producers supplying products to meet that demand.

  • Walter E. Wallis

    There is an increasing attitude in working software to prohibit transfer of ownership. I bought it, I carry it on the bools as an asset, and yet if I can no longer make personal use of it its value goes to zero.

  • Walter E. Wallis

    There is an increasing attitude in working software to prohibit transfer of ownership. I bought it, I carry it on the bools as an asset, and yet if I can no longer make personal use of it its value goes to zero.

  • http://www2.blogger.com/profile/14380731108416527657 Steve R.

    The assertion that including “use” as a protected consumer right would be an “expansion” of fair use is logically flawed. I have trouble with statements purporting that a copyright holder is somewhow giving the consumer a right that the consumer already possess. (“I like the current framework that allows copyright owners to rely on copyright for default rules, but allows them to grant more freedoms via licensing.)

    The reality is that the content producers are attempting to expand their control over a product by depriving the consumer of uses that they have historically possessed.

    For example if I buy a book I can read it anytime and anywhere that I want. Technology has “liberated” the content producers to impose unilateral restrictions on content. For example, the use of region encoding for DVDs, or the use of DRM so that music played on a Zune will not play on an iPod.

    Companies have an entitlement to segment the market through price. This can come in the form of hardback versus paperback, a DVD of just the movie itself or a 5 Disc DVD collectors edition. Content producers do not have a right to restrict a consumers rights under the auspices of “granting” something that can’t be given. The consumer has an intrinsic right to use the content. Including “use” under first sale
    is not an expansion of copyright.

  • http://www2.blogger.com/profile/14380731108416527657 Steve R.

    The assertion that including “use” as a protected consumer right would be an “expansion” of fair use is logically flawed. I have trouble with statements purporting that a copyright holder is somewhow giving the consumer a right that the consumer already possess. (“I like the current framework that allows copyright owners to rely on copyright for default rules, but allows them to grant more freedoms via licensing.)

    The reality is that the content producers are attempting to expand their control over a product by depriving the consumer of uses that they have historically possessed.

    For example if I buy a book I can read it anytime and anywhere that I want. Technology has “liberated” the content producers to impose unilateral restrictions on content. For example, the use of region encoding for DVDs, or the use of DRM so that music played on a Zune will not play on an iPod.

    Companies have an entitlement to segment the market through price. This can come in the form of hardback versus paperback, a DVD of just the movie itself or a 5 Disc DVD collectors edition. Content producers do not have a right to restrict a consumers rights under the auspices of “granting” something that can’t be given. The consumer has an intrinsic right to use the content. Including “use” under first sale
    is not an expansion of copyright.

  • Keith Irwin

    I believe your argument that a world with less licenses would result in more contracts, however, I have trouble believing that these contracts would effect ordinary retail consumers. A world in which ordinary retail consumers have to deal with less licenses in exchange for businesses having more contracts sounds like an improvement to me. Currently, a consumer has to have an understanding of copyright law in order to know what they can and cannot do with something they own. Most people are not aware of the restrictions on renting out certain things or public performances. Simplifying the copyright law to allow for any use other than copying would bring the law into balance with most people’s sense of what’s fair and appropriate and allow us to have a law which isn’t routinely violated by well-meaning citizens.

    Now, I should argue why I believe that the contracts generated by a decrease in the restrictions of copyright law would not trickle-down to ordinary consumers. First off, the example of there being a click-wrap license every time a CD is inserted is rather silly. Since the possessor of a CD already has the right to play it, a license to play it is not needed. As such, any contract which purports to grant this right in exchange for certain provisions would actually be granting nothing. A contract which takes rights away from one party and gives them nothing in return is too one-sided to be legally enforceable.

    An ordinary sale of a physical good is not something which media companies are going to be able to easily impose a contract onto. Doing so would require that sellers only sell to customers who agree to certain contracts, and this is something that retailers would not agree to. It is easy to grant additional rights to the possessor of something, but quite difficult to take away the rights granted by law. In truth, expanding the use right makes this more difficult, not less difficult since currently they can claim that only certain uses are permitted and that they are authorizing additional uses in return for prohibiting others, thereby enabling them to present the consumer with contracts which are not one-sided.

    PC software routinely comes with click-wrap or shrink-wrap licenses because there are additional rights which the software can grant the user (permission to make a copy in order to install the software) in order to take away other rights (reverse engineering). If all users were given the right to install any software that they owned, then companies would not have click-wrap or shrink-wrap licenses on the software, thus meaning one less contract in the life of an ordinary user. The obvious example of this are video game consoles whose software does not come with a license because such a license would not be enforceable since playing the video game does not require making an additional fixation of the work. When the consumer has all the rights they need to use something they do not need to enter into a contract, and hence expanding use rights would lead to less contracts in the daily lives of users.

    Issues relating to things which are not for resale are already governed by contract since elsewise the doctrine of first sale would allow for resale. Those are currently not a copyright issue and expanding use rights would not change that.

    Keith Irwin

  • Keith Irwin

    I believe your argument that a world with less licenses would result in more contracts, however, I have trouble believing that these contracts would effect ordinary retail consumers. A world in which ordinary retail consumers have to deal with less licenses in exchange for businesses having more contracts sounds like an improvement to me. Currently, a consumer has to have an understanding of copyright law in order to know what they can and cannot do with something they own. Most people are not aware of the restrictions on renting out certain things or public performances. Simplifying the copyright law to allow for any use other than copying would bring the law into balance with most people’s sense of what’s fair and appropriate and allow us to have a law which isn’t routinely violated by well-meaning citizens.

    Now, I should argue why I believe that the contracts generated by a decrease in the restrictions of copyright law would not trickle-down to ordinary consumers. First off, the example of there being a click-wrap license every time a CD is inserted is rather silly. Since the possessor of a CD already has the right to play it, a license to play it is not needed. As such, any contract which purports to grant this right in exchange for certain provisions would actually be granting nothing. A contract which takes rights away from one party and gives them nothing in return is too one-sided to be legally enforceable.

    An ordinary sale of a physical good is not something which media companies are going to be able to easily impose a contract onto. Doing so would require that sellers only sell to customers who agree to certain contracts, and this is something that retailers would not agree to. It is easy to grant additional rights to the possessor of something, but quite difficult to take away the rights granted by law. In truth, expanding the use right makes this more difficult, not less difficult since currently they can claim that only certain uses are permitted and that they are authorizing additional uses in return for prohibiting others, thereby enabling them to present the consumer with contracts which are not one-sided.

    PC software routinely comes with click-wrap or shrink-wrap licenses because there are additional rights which the software can grant the user (permission to make a copy in order to install the software) in order to take away other rights (reverse engineering). If all users were given the right to install any software that they owned, then companies would not have click-wrap or shrink-wrap licenses on the software, thus meaning one less contract in the life of an ordinary user. The obvious example of this are video game consoles whose software does not come with a license because such a license would not be enforceable since playing the video game does not require making an additional fixation of the work. When the consumer has all the rights they need to use something they do not need to enter into a contract, and hence expanding use rights would lead to less contracts in the daily lives of users.

    Issues relating to things which are not for resale are already governed by contract since elsewise the doctrine of first sale would allow for resale. Those are currently not a copyright issue and expanding use rights would not change that.

    Keith Irwin

  • David

    Here is an interesting aspect of some glaring confusion in the video game industry. Video games are sold, through retail merchants. Yet, video game publishers are attempting to assert an End User License Agreement on the transaction. The merchandising of the games makes not mention of an enclosed licensing (in some cases precluding the ability to sell) agreement. The consumer has not engaged in any contractual relationship regarding the licenses (shrink wrap, click-through, or other soft acknoledgement). The video game publishers sell their products primarily for “at-home” use, and deter other uses through the EULA. However, use is not determined through the EULA, but by “First Sale” and “Fair Use” as identified through copyright law. Recently, a large video game publisher has filed a suit against a company on this particular issue. Activision v FragIsle. The Plaintiff appears to be claiming a licensed relationship with the manufacturer, even though they are purchasing commercially available game software. It will be interesting to see how this plays out.

  • David

    Here is an interesting aspect of some glaring confusion in the video game industry. Video games are sold, through retail merchants. Yet, video game publishers are attempting to assert an End User License Agreement on the transaction. The merchandising of the games makes not mention of an enclosed licensing (in some cases precluding the ability to sell) agreement. The consumer has not engaged in any contractual relationship regarding the licenses (shrink wrap, click-through, or other soft acknoledgement). The video game publishers sell their products primarily for “at-home” use, and deter other uses through the EULA. However, use is not determined through the EULA, but by “First Sale” and “Fair Use” as identified through copyright law. Recently, a large video game publisher has filed a suit against a company on this particular issue. Activision v FragIsle. The Plaintiff appears to be claiming a licensed relationship with the manufacturer, even though they are purchasing commercially available game software. It will be interesting to see how this plays out.

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