Category: Intellectual Property

Are You Confused by the Buy Button?

This week, I sat on a panel at Harvard University as part of on-going series of roundtable discussions hosted by the USPTO about a variety of copyright issues in the digital age. The topic of our conversation was whether first sale doctrine ought to be expanded in the digital age. In case you don’t speak lawyer, first sale doctrine has its roots in the 1908 case Bobbs-Merrill v. Strauss, and in simple terms, it set the precedent that allows you to resell a physical copy of a work protected by copyright. In the original case, the publisher of a novel wished to exert control over the price of copies being sold by the retailer. The court found that once the publisher received its initial compensation (i.e. wholesale price) for the books, that it no longer had a copyright interest in the copies sold and, therefore, the retailer had the right to dispose of the goods as it saw fit. Ever since this decision, you and I have been free buy and sell in a secondary market of used books, record albums, DVDs, etc., and that’s been a good thing for all of us and has never harmed the primary market for these works.

Presently, first sale does not apply to content that we obtain strictly via download (e.g. a song from iTunes), although there are certain interests — some altruistic and others opportunistic — who argue that the doctrine ought to be expanded to include these types of files. There are several topics related to the larger question of expansion, but one that came up in discussion at the panel, I thought was worth writing about here; and that is whether most consumers realize that clicking the “Buy” button for digital downloads of music or filmed entertainment doesn’t quite mean what they think it means. When you click “Buy” and download that new album, what you’re actually paying for is a limited license that gives you the right to store and play those files on a limited number of devices. Admittedly, this is a little different from our usual notion of “buying” something, and some members of the panel discussion asked whether any entity has a responsibility to educate the consumer or perhaps change these buttons to reflect the real nature of the transaction.

Maybe.  But here’s the thing…

When we bought CDs or record albums, we bought limited licenses then, too, but we didn’t really think about it in those terms because the limit of the license was tied to the inherent limitation of the physical objects on which the music was recorded. In other words, buy an LP of TRex’s The Slider, and unless you start mass producing bootleg dubs, you’re pretty well limited to listening to the record, giving it to someone, or selling it in a secondary market transaction like a yard sale or eBay. Moreover, even if you made bootleg dubs using older tech like cassette tapes, these would be inferior in quality to the vinyl original. But in a digital file paradigm like we have now, a copy is a clone and not inferior to the source file, and so the rights holder had to come up with a new structure for offering the customer a similar kind of limited license while still providing flexibility. I don’t think consumers have ever been confused that the retail price of an album did not pay for a license to broadcast or redistribute the music in some other form. In that sense, nothing has changed except a licensing structure that coincides with the absence of physical media in these new transactions.

I would argue that flexibility is greater than it ever was (e.g. you can download one song at a time), the purchase price is remarkably cheap, and that we consumers seem to generally like the idea of having music, movies, books, and TV shows at our disposal without the need to install more shelves in our homes. For $1.29 I can listen to a song anywhere in the home or office, on my phone while cycling, in the car, or even copy it legally onto a CD to make a mix for a party.  And even if we only factor for inflation, that $1.29 in pre-Internet dollars is about $2.35, so we’re getting a pretty good deal in terms of access and pricing compared to the days of content distributed solely on physical media.

Tech-utopians like to wave a banner that says “New Tech! New Models!” with regard to content consumption in the digital age, but this restructured licensing relationship between consumer and producer is a new model that maintains the correct relationship between consumer and producer. We’re buying the rights to enjoy and use the works, not the rights to redistribute those works; and given the nature of the technology, one limitation has to include proscribing resale, partly because there is no such thing as a used digital file.  One of the trade-offs we make for better convenience and flexibility with prices as low as they already are, is that we forego the option to sell these files in a secondary market that would actually threaten the primary market. And because this is consistent with where consumer trends are going anyway, the question of educating folks about the “Buy” button may be moot.

iTunes for music makes a good example for discussion, but even that model is already being supplanted by on-demand streaming services like Spotify. Digital downloads are quickly becoming an obsolete notion as consumers, especially younger ones, demonstrate that their interest in “owning” works is dwindling in favor of streaming services supported either by advertising or subscriptions. Netflix for films is looking bright, and we see new services like Oyster, calling itself “Netflix for books.” Industry and policy efforts should be focused on getting the economics right for these models because the natural progression is for the consumer to use the web as a big jukebox. We just have a few kinks to work out with regard to whose feeding quarters into the machine.

The trend we’re likely to see continue will be a bifurcation of consumer consumption in that we’ll stream the lion’s share of what we watch, read, and listen to, but we might simultaneously rekindle or maintain an interest in high-quality physical media for keeping the things we really love on our shelves. I don’t think, for instance, that it’s just a hipster thing to rediscover vinyl for music. Maybe one of them will want to pay a premium for my copy of The Slider, assuming I’m willing to sell it.

Photo by Moppet
Photo by Moppet

FOOD FOR THOUGHT:  Just as an exercise with regard to the economics of digital resale for the consumer, consider the following:   Imagine you consume on the high end of average and that you’ve legally paid for 100 songs a year from iTunes since it launched in 2003. Now you have about 1,100 downloaded songs and you want to shed as many as half of these, which is a high estimate for music you wanted to buy in the first place.  At an average 29 cents per track from a reselling middle-man like a ReDigi, you’d get back about $160 if you sold all 550 tracks. That’s about $14.50 per year since the day you started buying digital downloads, and that recovery is roughly on par with selling that copy of Fifty Shades of Grey at the next yard sale. Now, was it really about getting a quarter for the used book, or did you just want stuff out of the house?

We Are All Copyright Owners

NOTE:  Apologies in advance for the American-centric post, but what follows can only universally apply in the context of U.S. copyright law.

Certain prominent figures making proposals for more limited copyright protections like to repeat the slogan, “We are all authors/creators now,” meaning now that we have the Internet and social applications designed to facilitate easy sharing of all sorts of content. What these folks neglect to mention is that we were all creators long before the Internet, which also means that we were all also copyright owners — and still are.  And just because most of us will never need or want to enforce copyrights, that doesn’t mean we should be fooled into passively abdicating the right just to make life easier for Internet companies.  One of the ironies I find intriguing about this subject is that so-called copyright reformers will argue that in the digital age, the general public needs to worry less about copyright, while I say the Internet is the reason everyday citizens ought to worry more about copyrights than they ever have. It doesn’t seem rational that in a time when our personal photographs, for instance, migrate from shoeboxes to global, shared networks that this the moment to suddenly care less about what might happen to these assets.

In the kerfuffle over the role of copyrights in the relationship between creators of works and consumers of works, the right itself is too often portrayed as a privilege enjoyed solely by creators. Somewhere in the conversation, we forget that nearly all citizens of the U.S. are copyright owners because the right applies universally and automatically to everyone who owns personal writings, photographs, videos, etc., regardless of the amateur status of these works.  But, if the corporate-interest “reformers” can count on Americans to forget or not care that they are copyright owners, then perhaps Americans won’t notice what would be lost by acting on a proposal to make copyright registration mandatory.  It might seem wise or efficient to suggest that those who consider their works commercially or socially valuable (we’ll call them artists) should be required to declare a desire not to have their works used without permission via a registration and fee process with the Copyright Office.  But if this reform were to become law, it would instantly strip copyright from every citizen who will certainly never bother to register his/her personal, amateur works, and it would strip the right at exactly the time in history when it might actually matter to the average citizen.

Ten years ago, we weren’t uploading images of ourselves, our kids, etc. into a computer network where anyone can duplicate, manipulate, and redistribute them at will.  Granted, if some unknown troll takes one of my personal photos off Facebook, monkeys with it, and redistributes it, copyright doesn’t afford me much protection because the troll is anonymous. But suppose my friends, a Jewish white couple who’ve adopted two children from Africa, post a casual, family snapshot for us to enjoy, and the Society for the Preservation of American Christianity and Whiteness uses their portrait to produce an advertisement calling biracial, Jewish families an “abomination?”  Or maybe Sarah Palin’s political operatives decide my daughter’s picture suits one of their core messages; and instead of civilly suing her organization for copyright infringement, I have to find said political operative and beat the snot out of him.  Personally, I think it’s better to leave intact the civil remedies available, imperfect as they may be.

Remedies aside, though, the most significant loss that might be felt in years to come is the social norm of respect as something of a byproduct of universal copyright, even if that had nothing to do with the intent of the constitutional clause.  On the broadest level, we simply do not erase the rights we have on the grounds that we rarely need to enforce them.  It is narrow-minded (and usually profit-motivated) for someone to suggest that we ever should view any right this way.  For instance, the right not to be discriminated against for race, religion, sexual orientation is codified into law and applies universally, regardless of how frequently or not this right needs to be enforced.  Would we create a system in which, for instance, a gay person should officially register his desire not to be discriminated against, thereby implying that discrimination is okay absent said registration?  Or is it more civilized to say that discrimination is socially intolerable and therefore illegal?

Perhaps most importantly, it is essential that people realize that the American public gains nothing by giving up automatic and universally applied copyright while the rationale for mandatory registration best serves the interests of a handful of Internet companies.  These businesses want to digitize, organize, synthesize, and monetize every bit of data they can without the expense and hassle of dealing with pesky things like the rights of users who share data and content in exchange for the “free” applications being used.  As such, many reforms proposed by academics and Internet activists are insidiously designed to get the public to slowly and voluntarily give up rights (e.g. privacy) that impede what they often call the “free flow of information.”  This is jargon, that translates to mean “what’s yours is ours.”  Mandatory registration of copyrights would instantly disenfranchise nearly all Americans from a right they’ve enjoyed since 1978. Personally, I don’t think we should cede that ground too casually.

There’s no such thing as used digital media.

It’s science.  Deal with it.

We hear an awful lot about how copyrights on creative works “stifle innovation,” preventing new business opportunities from launching or thriving. And the self-serving advocates of these “new” ideas love to describe those of us who question their proposals as anti-technology, anti-progress, stuck in old models, and so on.  But the idea that a digital file of a song, a movie, a book, etc. can ever be called “used” is nothing more than an attempt to transplant a very old model into the soil of a new, technological market.  So, who’s being anachronistic here?

On purely technical grounds, there is literally no such thing as used digital media because “use” does not in anyway degrade a file.  A digital file of a song or a movie plays as pristinely the millionth time it’s played as it does the first time it’s played.  If you worked in video post-production in the days of early digital tape media, you would have seen a new term affixed on the spines of those tapes — clone.  Because that’s what a digital “copy” actually is; it is an exact replica with no generation loss from the original source.

So, if you transfer a file of a song or a movie to someone else, it will not in any sense be “used” simply because you experienced it before someone else did.  The new “owner” of that file will have a brand new experience, the value of which is identical to the original “owner’s” purchase price of the file from the original distributor.  If we’re talking about a movie, for instance, the only thing that differentiates Viewer A from Viewer B is that the former has seen the film and the latter has not.  Yet, the logical argument being made by certain “new model” entrepreneurs is that Viewer B should be entitled to pay less for the identical experience simply because Viewer A has already paid the original price one time.  This is patently absurd. By the same logic, the ticket price for a movie in a theater ought to decrease incrementally after each screening because the film has been “used” by other viewers. (Yeah, somebody in the copyleft crowd just thought, “Hey, that’s a good idea!”)

This notion of “used” digital media is just one way in which technological opportunists can be disingenuous when it comes offering up what sound like market-based theories.  They want the luxury of cherry picking from both the past and the present as suits their purposes.  In reality, though, these ideas don’t come from particularly innovative technologists, but rather from standard-issue middlemen looking to exploit a consumer-serving limitation on copyrights to siphon value from creators and line their own pockets.  In the long run, though, transporting this doctrine into the digital market, which makes no rational sense, would likely drive prices up in what I’ll call first-user experiences in order to offset lost revenue.

Naturally, when a work is distributed on physical media, the notion of “used” remains intact.  First sale doctrine in copyright law says that I can buy a novel and then sell the book as used at my next yard sale, regardless of whether or not I read it to a dogeared pulp or kept it in pristine condition and never cracked it open.  The condition of the book may affect the second-market value in my yard sale, but it has no bearing on my right to sell or otherwise distribute the used copy one time.  Because this transaction involves a physical object, replicating the process even in tens of thousands of yard sales all over the country would never produce a secondary market for novels that clones the primary market and inherently reduces the value of all novels everywhere.

But this is exactly what would happen in an all-digital “used” market in which a middle-man like Amazon, Apple, or Redigi removes a previously purchased file from Consumer A’s computer, sells it to Consumer B for a lower price than the original, and profits from the transaction while kicking a little something back to Consumer A.  Never mind how easy it would be for the selling consumer to cheat that system by storing files any number of ways, the so-called “secondary” market would very rapidly become the primary (i.e. only) market, and therefore just another means by which tech-happy leaches artificially drive the value of creative works below sustainable levels while pocketing millions before the producing entities collapse.  (Anyone who just thought “Good, I can’t wait until the movie studios, record labels, and publishers collapse,” should understand that it will be the independent, small and mid-sized producers who will fail first.)

I find it hard to believe that any legislator or court would be bamboozled by the parlor trick in which a file is moved from one consumer to another through the resale transaction without making a “new copy.” This is an analysis of the state of the technology and its role in the market viewed through a pre-digital lens, semantically bogged down in irrelevant terms like “copy” while ignoring how the technology actually works and what its potential market impact can be for good or bad.  So, if we’re really talking about developing new business models that correspond with new technology, then the language we employ might have to be new as well.  And in the digital world, the word used has outlived its usefulness.