Tag: first sale doctrine

Apple Class Action Suit Reprises the “Digital First Sale” Conversation

I asked the question in 2014:  are we confused by the “Buy” button when we purchase digital media? And the issue is raised again in the class action suit against Apple earlier this year, which alleges that consumers are unsure enough about what it means to “buy” digital goods that online retailers should be held responsible for misleading us. The foundation of the lawsuit argues that the word Buy implies irrevocable access to the thing (e.g. a movie or game) being purchased and, therefore, Apple is engaged in deceptive practice when its Terms of Service state that the platform reserves the right to terminate accounts.

More broadly, legal scholars like Professor Aaron Perzanowski of Case Western University School of Law look beyond the possibility of deception by a retailer, arguing that the nature of ownership in the digital age has changed so dramatically that legislative action may be required. In a recent podcast inspired by the Apple litigation, Perzanowski told Sonny Bunch that a “soft” remedy to address confusion would be a requirement that online retailers of digital media provide better transparency about the limitations that may apply to buying digital goods.

But a more robust solution, Perzanowski argues, would be to amend the first sale doctrine of the U.S. Copyright Act; and it will surprise exactly no readers that I could not disagree more. The complaint against Apple provokes some interesting discussion but does not recommend even looking at copyright law, let alone changing it. For one thing, the claim may fail on the facts because purchasers of digital media from Apple are able to download those files and store them on their own devices. Hence, the “account revocation” argument may not hold up very well as the trial proceeds.

Digital First Sale

The first sale doctrine, originating as judge-made law in 1908, holds that once a copy of a work has been legally obtained, the copyright owner’s interest in that copy is extinguished. Thus, you may do what you want with your physical copies of books, movies, etc., except, of course, make other copies. Perznowski and other copyright critics allege, however, that digital purchasing is uncertain for consumers and that one remedy is to broaden the first sale doctrine to apply to digital copies.

Perzanowski and others argue that a “digital first sale” doctrine would be a way of, “Restoring genuine ownership,” and allege that the copyright owners “don’t like it because it creates pressure and competition.” Neither statement is quite true. In answer to the second statement, as the courts held in the ReDigi case, allowing a trade at internet scale in “used” digital works would not create a secondary competitive market but rather an alternative primary market in which used-goods prices are exchanged for material that is “used” in name only. (For a deeper dive, see posts here and here.)

But as to the notion of “restoring genuine ownership,” that may seem rational at first blush, but less so when we take a half a step back and consider precedent that would give meaning to the word restore in that statement.

What Does Buy Mean To Us?

While I understand why Perzanowski and others assert that the word buy implies a sense of permanent retention of the items we purchase, this isn’t always true. In fact, it’s hardly ever true.

Most of what we buy is consumed and replenished, and this includes various forms of media. In my lifetime, innovations just in the mechanics of listening to music have produced at least six major changes, rendering at least two forms of media (cassettes & 8-tracks) obsolete and relegated another two (vinyl and CDs) to niche products. For home viewing of filmed entertainment, the average VHS was trashed years ago, while stacks of DVDs are either gathering dust or have been sold for a few quarters at yard sales. And who knows how many paperbacks have been donated or destroyed in the last half century.

In fact, it is only the physical books on our shelves—especially the well-made clothbound books—that remain both intact and unaffected by technological obsolescence, and none of the changes that have occurred indicate that there was any deceit on the part of producers or retailers when we originally bought those older media. Meanwhile, the need to purchase a great deal of media today is obviated by subscription models that allow both streaming and download of large catalogues.

So, it may be true that digital life is changing the nature of ownership, but not because contemporary technologies have added unprecedented transience to our media products. On the contrary, the means by which we experience most digital media today (i.e. via multiple networked devices, rather than with specialized, individually owned physical objects) actually makes the current era the first in which consumers have good reason to expect indefinite access to their media purchases. What has changed, of course, is the nature of potential obsolescence.

For instance, if we download and store music files now, but those same files won’t play on computer devices in ten years, that would be a lack of continuity rather than a true disruption like the CD, which offered experiential changes compared to the formats it replaced. Hence the safer storage option may be to leave purchased titles in the online retailer’s cloud, which places the burden on Apple et al to maintain continuity of access—and they are presumably motivated to do so. In the other instance in which a 2032 device does not play a 2022 file, nothing in copyright law is going to alleviate that potential concern, though it is worth noting that we are still using many “old” file types like MP3.

No Reason to Expand First Sale Doctrine

Those who advocate expanding the first sale doctrine to encompass digital files often allude to hypothetical scenarios that are either too narrow or too off-topic to justify legislative action. For instance, Perzanowski referred in that podcast to the possibility that a copyright owner might one day try to prevent the inheritance of a computer device containing copies of works that were legally acquired by the benefactor. I would describe this hypothetical as an attempt to conjure a narrative that sounds like new legal territory but really isn’t.

The likelihood that such a claim would be attempted by a rightsholder, let alone succeed, is too speculative and uncommon to warrant prophylactic legislation, especially when the law, as it exists, already seems to answer the question presented. State probate law secures the right to bequeath a computer or hard drive to a beneficiary, and copyright’s first sale doctrine, though it does not explicitly encompass digital files, does state “copy.” Hence the transfer of specific “copies” stored on a device is not so exotic that the courts would be unable to imagine how the transfer would fit within the intent and function of the first sale exception.

Meanwhile, if there is any barrier (and there probably is) to inheriting accounts, perhaps that issue is worth addressing, but copyright is only tangentially implicated in that discussion. If a case can be made that our kids should be allowed to inherit our iTunes or Amazon accounts, or perhaps transfer our purchases to their accounts, that debate can be had, and perhaps some party can show enough potential harm to justify a legislative remedy. But again, any legislative response to that question may be very slow in contrast to market changes in which consumers increasingly don’t click on Buy buttons at all.

I cannot say whether millions of consumers feel instinctively misled by the word Buy in these transactions, but I can say that I have owned some of the digital music files purchased through iTunes for over fifteen years, which is already competitive with both my long-discarded cassettes and my rarely-accessed CDs. And none of that ownership means much because, as subscriber, I can stream or download everything in the catalog. So, I suppose we could ask whether buy is a euphemism for “long-term rental”? Perhaps. But in the grand scheme, that is kind of what it means to “own” most things.

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.