Will copyright go down in flames without more legal protection?

Congress debates whether you can resell digital content

The United States House of Representatives’ Committee on Judiciary held a hearing this week on “digital resales” in their Subcommittee on Intellectual Property and the Internet, which yielded debate that could affect all consumers.

When we say “digital resales,” what we mean is one’s ability (or lack thereof) to sell things that we own only in their digital format. This isn’t an issue that is clearly covered by existing law, which makes selling physical copies of copyrighted works pretty easy. If you buy a DVD, you can sell it to a friend without fear of imprisonment. When you buy a movie from Google Play, however, you have no apparent right to move the ownership to someone else.

When the EU weighed this issue, the record industry was emphatic that the issue of digital resale is quite different than physical resale and that allowing consumers to resell (or donate/gift) their digital copyrighted content would have disastrous effects on the industry.

At the hearing for the US Congress, testimony was heard from various sides of the issue. For example, the Owners’ Rights Initiative, a group representing the interests of consumers, testified to advocate for digital resale rights. ReDigi, a company that lost a court case to Capitol Records a year ago because its site’s main function is to facilitate the resale of legally purchased music files, testified as well in favor of digital resale.

Those who testified against digital resale including BSA | The Software Alliance and Wiley, a prominent publisher. Expert testimony was provided by Dr. John Villasenor, Professor of Electrical Engineering and Public Policy at UCLA.

A key concept here is known as the First Sale Doctrine, a staple of copyright doctrine that gives the purchaser of copyrighted works full ownership of their purchase. This concept was established in 1908 in a Supreme Court case and is one of the most important exceptions to the rights of copyright holders in the United States.

A copyright holder has the right to their work. When Stephen King writes a book, that book is legally his, with the exception of whichever ways he has agreed to give up portions of his ownership to his publisher. King and his publisher have the exclusive right to print the book and sell those copies. If I reprinted those books in their entirety on GeekSided, I would almost certainly be violating their copyright.

Without the First Sale Doctrine, I would have to consult with Stephen King before even throwing it away.

The right of first sale, however, says that if I buy that book legally, I can do almost whatever I want to do with it. I can burn it, deface it, throw it in the trash, and even sell it or give it away to my friends or strangers. This does not grant me the right to photocopy it and then sell it, but the right to the copy I bought is all mine until I want to give it up. Without the First Sale Doctrine, I would have to consult with Stephen King before even throwing it away.

Another way to think about it is this: the copyright owner is by default given the right to reproduction (making copies), distribution (selling it), and adaptation (things like selling a second edition). The First Sale Doctrine affects the right to distribution, saying that once it has been distributed to a customer, the copyright owner cannot enforce their copyright as long as the consumer hasn’t violated their rights to reproduction or adaptation.

But what happens to the right of first sale when my copy isn’t made out of paper and glue? That’s the question at hand.

At the EU’s hearings, the European music industry raised several points about the sharing of MP3s and the differences from sharing physical copies, summarized by TorrentFreak:

  • the quality of these [physical copies] deteriorates with time, and often due to wear and tear or mishandling
  • purchasing an item at a used record store requires traveling to the store and searching for a copy of the phonograph record
  • the resale only concerns the original recording, not copies of that recording

In other words, people shouldn’t be allowed to resell digital music because it’s too convenient, and because the copies don’t lose their quality.

The greater concern, at least among legitimate concerns, seems to be that it is too difficult to prevent unauthorized sharing of digital copies of copyrighted content. Of course, this has been apparent since the advent of Napster and it is unclear whether allowing legal means to resell MP3s could deter piracy and create a secondary market for music and other copyrighted content.

The argument made by BSA regarding software seems more compelling, though is not flawless. Their argument, accessible in its entirety here, stresses the difference between the sale of software and licensing of software. While BSA is fearful of the consequences of digital resale to software makers, they further argue that the current legal structure that relies on licensure rather than sale is better for consumers, too. While the sale of a physical good typically ends with the transaction, they say, most software licenses create a persistent relationship between buyer and seller.

They argue that the current legal structure that relies on licensure rather than sale is better for consumers, too.

This relationship would include the issuance of updates for security or feature enhancement, customer service, the right to download on multiple devices, or to tailor the feature set to the consumer’s desire based on their price preference. The BSA infers that these benefits cannot exist in a system where resale happens; they are apparently dubious whether these can be transferred effectively to successive owners.

Much like the recording industry, the chief concern for BSA is truly that piracy would become more abundant. Despite noting that 20% of all paid software in use today is pirated or otherwise improperly licensed, they argue that allowing digital resale would make illegal distribution of software more prevalent. Specifically, the worry is that digital resale makes it too difficult to police this practice.

The ORI spent a great deal of energy in their testimony talking about a negative ramification of the prohibition on digital resale that could become more widespread should Congress fail to act. When a person buys a physical piece of technology, the manufacturer will often make the claim that the hardware has the rights of first sale, but not the software that makes the hardware run. When the original purchaser sells the hardware, the secondary buyer finds out they have no right to use the software without buying it again.

Think of it this way: part of an Apple computer’s terms of use requires that the software be included with hardware when it is sold. You are supposed to deauthorize the computer from your iTunes account and otherwise install a fresh copy of the operating system onto it. With older Macs, you are expected to include the operating system install disc. Otherwise, you’d be left with two possibilities:

  • The person you sell to will be using the computer as if they were you, which would be fraudulent behavior.
  • The computer would have no operating system, which renders it useless without buying the operating system separately.

What if Apple started telling everyone who bought a used Mac that they had to purchase the operating system all over again because the original owner did not have the right to transfer the operating system, only the machine? There is some chance that this is already legal, Apple just hasn’t chosen to do it this way since they have made it easy enough for people to transfer the ownership of the software as well as the hardware.

The legal classifications of most digital purchases are in fact license agreements. This means your don’t own the digital content.

The expert witness, Professor John Villasenor, explained that there is no First Sale Doctrine when digital goods are not actually sold. He says that the legal classifications of most digital purchases are in fact license agreements. This means you don’t own the digital content when you purchase the license, you have just bought your right to use the digital content in the ways outlined in the license. There is no First License Doctrine.

Both sides make compelling arguments and, at this point, neither the perfects answers nor a legislative decision appears near. Either way, much is at stake: consumers may have their access to useful and affordable digital goods restricted while copyright owners, in the wrong system, could be left without a way to make money off of their original work.

Featured image by Martin Fisch (Flickr).

Tags: Congress Copyright Law Politics Technology

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