The last two days have delivered significant victories for the first sale doctrine. On June 9th, a unanimous Supreme Court, per Justice Thomas, decided Quanta Computer, Inc. v. LG Electronics, Inc., No. 06-937. The case has no direct application to copyright, and turned on two issues: does first sale apply to method patents, and did the license in question prohibit the combination of a licensed patent with non-licensed material? Reversing the Federal Circuit (yet again), the Court answered these questions, respectively, yes, and no. The significance of the opinion to copyright lays in the philosophy expressed in the opening of the final paragraph of the opinion:
The authorized sale of an article that substantially embodies a patent exhausts the patent holder's rights and prevents the patent holder from invoking patent law to control postsale use of the article.
Yesterday, Judge Otero of the Central District of California granted summary judgment in the a promo CD case, UMG Recordings, Inc. v. Troy Augusto, No. CV 07-03106. (SJO). Bravo to EFF and HT to Fred von Lohmann. Mr. Augusto acquired promo copies of CDs that Universal had given to "music insiders." The promos had this language on them:
This CD is the property of the record company and is licensed to the intended receipient for personal use only. Acceptance of this CD shall constitute an agreement to comply with the terms of the license. Resale or transfer of possession is not allowed and may be punishable under federal and state laws.
Mr. Augusto put his copies up for sale on eBay. UMG complained through eBay's Verified Rights Program and had Augusto's auctions suspended, although they were later reinstated. Augusto asserted that his sale was privileged under the first sale doctrine, were a gift under 39 USC 3009, and that UMG had abandoned its rights. The court ruled for Augusto on the first two arguments.
On the first sale point, Judge Otero, following Microsoft Corp. v. DAK Industries, 66 F.3d 1091, 1095 (9th Cir. 1995), analyzed whether a sale or a license occurred by examining the economic realities of the transaction and not whether it was labeled a license. Under those realities, it was significant that UMG gave away the promos without any expectation that they would be returned and with no effort to have them returned. Nor did UMG receive any recurring benefit after it had mailed the promos. The only possible benefit was a prohibited one, an attempt to restrain transfer of the object, something the court noted "had been rejected 100 years ago by the Supreme Court." Accordingly, the transaction was deemed to be a sale not a license, UMG was deemed to have transferred title to the copy, and first sale applied.
The first sale ruling is correct all on fronts. The only question is why are such suits brought? With the record industry's relationship with consumers in tatters, and the economic value of stopping the sale of promos infinitesimal, why further alienate consumers, play into people's worst depictions of the industry, and waste so much money on attorney's fees and costs of monitoring eBay? Why not spend that money developing new acts?
Showing posts with label first sale. Show all posts
Showing posts with label first sale. Show all posts
Wednesday, June 11, 2008
Thursday, May 22, 2008
First Sale Victory in Vernor
On Tuesday, Judge Richard Jones of the U.S. District Court in Seattle handed down an opinion in Timothy Vernor v. Autodesk, Inc., handing Vernor victory in an important exposition of the first sale doctrine. (H.T. and congrats to Greg Beck). The case also illustrates why notice and notice is a better system for safe harbor regimes than the U.S. notice and take down approach USTR is trying to force on other countries.
The first sale doctrine (called "exhaustion" outside the U.S.) permits those who own a lawful copy of a work to sell or otherwise dispose of that copy by distribution. In the U.S., the doctrine was first developed by case law, then codified by statute in the 1909 Copyright Act, and is now found in Section 109 of title 17. While the first sale doctrine also applies to copies that are given away, what constitutes a sale is generally a question of state, not federal copyright law, and in recognition of this, many software companies have taken the position that they can convey the copy to the customer in an over-the-counter transaction for a one-time payment, but describe that transaction as a license; as a license, the first sale doctrine doesn't apply, meaning copyright owners can prevent further distribution of the copy. That is an absurd position to me, and in such cases, federal courts should take a common sense view of the transaction in order to avoid abolition of the first sale doctrine. Having made a sale at full value, there is no reason to let copyright owners preclude a rightful possessor of a copy from disposing of that copy, and no reason to force the rest of us to buy only new copies. Efforts to do so are yet another reason copyright has gotten a bad name.
The facts in Vernor are significant for safe harbor regimes too: Vernor makes his living selling lawfully purchased copies on eBay. In 2005, Vernor bought a copy of an AutoCAD package at a garage sale and put it up for sale on eBay. Autodesk sent a DMCA notice, and eBay suspended the auction. Vernor sent a counter-notice claiming his sale was lawful under Section 109. Autodesk failed to respond so the auction was reinstated by eBay. In 2007, Vernor bought 4 copies of an AutoCAD package from an architectural firm and sold three copies on eBay, but each time he put a package up for sale, Autodesk sent DMCA notices to eBay, which suspended the auction. Vernor promptly sent a counter-notice, and the auction was reinstated. When Vernor tried to sell the fourth package, Autodesk sent another DMCA notice, but this time eBay suspended Vernor's account for a month for alleged repeat infringement. Vernor then brought a declaratory judgment. If the first sale doctrine applied to the copies Vernor had purchased, then Vernor's actions were completely legal and he wasn't an infringer, much less a repeat infringer.
And Judge Jones found that the transactions were legal. To do so, he had to wade through a thicket of court of appeals' opinions, ultimately siding with a 1977 opinion, United States v. Wise, 550 F.2d 1180, over more recent opinions such as MAI Systems Corp. v. Peak Computer Inc., 991 F.2d 511 (9th Cir. 1993), which had touched on the issue briefly in a different context, the Section 117 archival and back-up copy privilege. I think Judge Roberts correct on all counts, and admire greatly his willingness to engage in a close reading of cases while keeping the commonsense nature of the issue foremost. This gets me back to the notice and notice versus notice and take down issue: the consumer won on the merits of his position, but went through hell and high water to vindicate his rights: he had repeated DMCA notices sent, auctions suspended, and then his account suspended. He had to obtain a lawyer (Public Citizen took the case on) and duke out the issue in court, and was blessed to have drawn an extremely thoughtful judge. Few consumers have the dedication to go through with a court case, and even fewer have the good luck to have dedicated consumer interest lawyers take up their cause; the vast majority of consumers, faced with similar notices, would have given up, and with that have been denied a rightful livelihood. Nor should eBay have been placed in the position of having to decide who was correct on an issue of law that has divided courts and commentator for well over a decade.
Under a notice and notice regime, eBay would not have to make judgments it has no ability to make, and Vernor's auctions would have gone forward because Autodesk was not, seemingly going to sue: recall that Vernor brought a declaratory relief action. Notice and take down, however, gave Autodesk the very relief it was denied by the court.
I conclude with a beautiful little post by Peter Brantley yesterday on first sale, which wasn't prompted by the Autodesk opinion (which I doubt he was aware of), but which shows why the principles of first sale are important to all of us. Thanks to Peter for letting me post it. Here it is:
On Owning Books
For various reasons, in the last month I have been filled with "life-nostalgia". My daughter recently turned 7, her celebration prompting like shadow puppets faint memories of my own childhood; my mother's birthday recently passed, but then, so had she a few years ago, so she was not around to enjoy it; and I've watched the news reports on Edward Kennedy's cancer with profound sadness; a loved family member had his own brush with a glioma a decade ago. It all makes one pause.
The delights of growing old: taking enjoyment from many small things. For me, one tenacious root of happiness is a shared enjoyment of reading with my father. It is to him that I must give credit for a love of books; as a professor of contemporary American literature for years, his book suggestions turned to Barthelme, Barth, and Pynchon when I was still in middle school. And for my father now, reading is something for him to hold onto; a love that only failing eyesight might stand to disperse -- and then there will be audiobooks.
I speak with my father weekly, and we reserve time to compare what is being read, how we heard about it, how it relates to other things we have enjoyed. And no doubt in part as a result of growing up in house filled with books, we've discovered that the walls of our house now bridge whole sections of the continent, for we mail books to each other regularly.
My father will mail me a copy of Willie Morris' North Toward Home and a few Durrells; I will mail him the hilarious and poignant A Thousand Shall Fall, and an old edition of Grimble's We Chose the Islands. And we argue over whom first heard about Andy Adam's The Log of a Cowboy; then we realize we both have editions in our homes.
Here is the thing: it's hard to say who owns these books. They are ours, collectively; they fling back and forth between Texas and California, and either household is only a temporary resting place. These books are shared, because they are appreciated; loved, because they are enjoyed with others.
Ultimately, I do not much care whether these books are paper or made of some other less organic substance, whether substrates and electrons, or plastic polymers. Instead what matters is that we are able to share books with each other; in return for the gift of spreading delight, a wait of days and the cost of media rate shipping are very modest penalties.
Whatever digital (ebook) books look like in the future, if they do not embody the right to share, in an unrestricted and platform independent manner, they will be poorer things.
This is called the first sale doctrine. It's part of why people love books -- a love built from sharing. It's what makes libraries possible. A world where content is licensed, and sold with restrictions on use, is a world less full of enthusiastic readers; less full of love.
To any publisher who sees the wisdom of DRM: don't.
The first sale doctrine (called "exhaustion" outside the U.S.) permits those who own a lawful copy of a work to sell or otherwise dispose of that copy by distribution. In the U.S., the doctrine was first developed by case law, then codified by statute in the 1909 Copyright Act, and is now found in Section 109 of title 17. While the first sale doctrine also applies to copies that are given away, what constitutes a sale is generally a question of state, not federal copyright law, and in recognition of this, many software companies have taken the position that they can convey the copy to the customer in an over-the-counter transaction for a one-time payment, but describe that transaction as a license; as a license, the first sale doctrine doesn't apply, meaning copyright owners can prevent further distribution of the copy. That is an absurd position to me, and in such cases, federal courts should take a common sense view of the transaction in order to avoid abolition of the first sale doctrine. Having made a sale at full value, there is no reason to let copyright owners preclude a rightful possessor of a copy from disposing of that copy, and no reason to force the rest of us to buy only new copies. Efforts to do so are yet another reason copyright has gotten a bad name.
The facts in Vernor are significant for safe harbor regimes too: Vernor makes his living selling lawfully purchased copies on eBay. In 2005, Vernor bought a copy of an AutoCAD package at a garage sale and put it up for sale on eBay. Autodesk sent a DMCA notice, and eBay suspended the auction. Vernor sent a counter-notice claiming his sale was lawful under Section 109. Autodesk failed to respond so the auction was reinstated by eBay. In 2007, Vernor bought 4 copies of an AutoCAD package from an architectural firm and sold three copies on eBay, but each time he put a package up for sale, Autodesk sent DMCA notices to eBay, which suspended the auction. Vernor promptly sent a counter-notice, and the auction was reinstated. When Vernor tried to sell the fourth package, Autodesk sent another DMCA notice, but this time eBay suspended Vernor's account for a month for alleged repeat infringement. Vernor then brought a declaratory judgment. If the first sale doctrine applied to the copies Vernor had purchased, then Vernor's actions were completely legal and he wasn't an infringer, much less a repeat infringer.
And Judge Jones found that the transactions were legal. To do so, he had to wade through a thicket of court of appeals' opinions, ultimately siding with a 1977 opinion, United States v. Wise, 550 F.2d 1180, over more recent opinions such as MAI Systems Corp. v. Peak Computer Inc., 991 F.2d 511 (9th Cir. 1993), which had touched on the issue briefly in a different context, the Section 117 archival and back-up copy privilege. I think Judge Roberts correct on all counts, and admire greatly his willingness to engage in a close reading of cases while keeping the commonsense nature of the issue foremost. This gets me back to the notice and notice versus notice and take down issue: the consumer won on the merits of his position, but went through hell and high water to vindicate his rights: he had repeated DMCA notices sent, auctions suspended, and then his account suspended. He had to obtain a lawyer (Public Citizen took the case on) and duke out the issue in court, and was blessed to have drawn an extremely thoughtful judge. Few consumers have the dedication to go through with a court case, and even fewer have the good luck to have dedicated consumer interest lawyers take up their cause; the vast majority of consumers, faced with similar notices, would have given up, and with that have been denied a rightful livelihood. Nor should eBay have been placed in the position of having to decide who was correct on an issue of law that has divided courts and commentator for well over a decade.
Under a notice and notice regime, eBay would not have to make judgments it has no ability to make, and Vernor's auctions would have gone forward because Autodesk was not, seemingly going to sue: recall that Vernor brought a declaratory relief action. Notice and take down, however, gave Autodesk the very relief it was denied by the court.
I conclude with a beautiful little post by Peter Brantley yesterday on first sale, which wasn't prompted by the Autodesk opinion (which I doubt he was aware of), but which shows why the principles of first sale are important to all of us. Thanks to Peter for letting me post it. Here it is:
On Owning Books
For various reasons, in the last month I have been filled with "life-nostalgia". My daughter recently turned 7, her celebration prompting like shadow puppets faint memories of my own childhood; my mother's birthday recently passed, but then, so had she a few years ago, so she was not around to enjoy it; and I've watched the news reports on Edward Kennedy's cancer with profound sadness; a loved family member had his own brush with a glioma a decade ago. It all makes one pause.
The delights of growing old: taking enjoyment from many small things. For me, one tenacious root of happiness is a shared enjoyment of reading with my father. It is to him that I must give credit for a love of books; as a professor of contemporary American literature for years, his book suggestions turned to Barthelme, Barth, and Pynchon when I was still in middle school. And for my father now, reading is something for him to hold onto; a love that only failing eyesight might stand to disperse -- and then there will be audiobooks.
I speak with my father weekly, and we reserve time to compare what is being read, how we heard about it, how it relates to other things we have enjoyed. And no doubt in part as a result of growing up in house filled with books, we've discovered that the walls of our house now bridge whole sections of the continent, for we mail books to each other regularly.
My father will mail me a copy of Willie Morris' North Toward Home and a few Durrells; I will mail him the hilarious and poignant A Thousand Shall Fall, and an old edition of Grimble's We Chose the Islands. And we argue over whom first heard about Andy Adam's The Log of a Cowboy; then we realize we both have editions in our homes.
Here is the thing: it's hard to say who owns these books. They are ours, collectively; they fling back and forth between Texas and California, and either household is only a temporary resting place. These books are shared, because they are appreciated; loved, because they are enjoyed with others.
Ultimately, I do not much care whether these books are paper or made of some other less organic substance, whether substrates and electrons, or plastic polymers. Instead what matters is that we are able to share books with each other; in return for the gift of spreading delight, a wait of days and the cost of media rate shipping are very modest penalties.
Whatever digital (ebook) books look like in the future, if they do not embody the right to share, in an unrestricted and platform independent manner, they will be poorer things.
This is called the first sale doctrine. It's part of why people love books -- a love built from sharing. It's what makes libraries possible. A world where content is licensed, and sold with restrictions on use, is a world less full of enthusiastic readers; less full of love.
To any publisher who sees the wisdom of DRM: don't.
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