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Great news for libraries: SCOTUS rules in favor of Kirtsaeng in Kirtsaeng v. Wiley & Sons, Inc.
6-3 in favor of first sale.
- Opinion (pdf full text)
Degree of Control Determines Ownership - read this if you try to limit what people can do with items you sell or send them.
Universal Music Group(“UMG” - the world’s largest record company controlling over 40% of the US market) lost a case recently in the Court of Appeal in California. They had tried to stop Tony Augusto reselling restricted use promo CDs on Ebay. Tony had acquired them from the numerous people at radio stations, people in the press, people who work in the record companies and others to whom these get sent often by the hundred.
In summary it was held that the manner in which Universal distributed these CDs amounted to a transfer of ownership. The First Sale doctrine therefor applied and Tony was free to sell away. Had the distribution by UMG been held to be a license (therefor UMG still owning the CD) UMG might have been able to control what the first recipient and then Tony could do with the CDs.
This case has applicability to anyone who sends out any item they attempt to assert control over after the item leaves their possession. If a transfer of ownership is factually held to have taken place then any control/post transfer rights you think you may have could be illusory.
First Sale doctrine? - This concept was first seen in a case against Macy’s at the start of the 20th century where they were found to be able to sell books below the price stipulated by the publisher. The doctrine can be summarized as a restriction on the rights of copyright owners such that after they sell an item they cannot control certain non-derogatory post first-sale actions, such as below cost reselling and renting of copies with “no rental” stickering. This is sometimes referred to as an “exhaustion of rights”.
Whether a transfer of ownership or a license with the original owner still having rights has taken place requires an analysis of the facts. The courts display some willingness to look at the nature of what is going on and not at simply the wording used by the transferring party (in this case UMG’s sticker).
A sample promo product sticker appears below.
What factors can affect a determination of continued ownership and therefor a license rather than a transfer of ownership. In the UMG case a number fo factors appear to have been considered?
- Is there any sort of prior arrangement between the parties (Universal often just sent these CDs out to their lists);
- Did the recipient actually agree to the terms proposed (mere receipt not being enough)
- Is there any sort of tracking/numbering/post transfer monitoring (indicating that the party transferring actually cares about the item and what happens to it);
- lastly and not determinatively, the label/description the parties apply to the relationship. (In the UMG case, the wording on the sticker didn’t even use the word license!)
Universal’s fate compares poorly with many software companies who operate on shrink-wrap or click-wrap licenses where you are held bound to terms by clicking on the “I Agree” button or in unwrapping a sealed product.
A recent California Court of Appeal case Vernor v Autodesk (about software license terms and resale) is a good read if you have an interest in controlling a product after it leaves your control.
One of the most aggressive companies currently active in the “I am only selling you a license business”? Rosetta Stone. You pay $600 for a language course and their terms means you cannot sell it on when you are done with it. They are very aggressive in trying to enforce this and I bet someone is going to take them on in class action lawsuit at some point to prove that ownership has been transferred whatever their terms say.
I will write about Rosetta Stone’s other many activities in aggressive trademark protection activities in upcoming entries.
Read the UMG appeal judgment here:
Read here for a good intro to First Sale:
Read here for the Rosetta Stone license which in is so restrictive so as to be at the other end of the spectrum to UMG’s woefully inadequate sticker.
Read the Autodesk judgment here:
“The law gives libraries no leverage against publishers in this situation. Furthermore, libraries are now facing competition from the private sector: for example, Amazon’s Kindle Owners Lending Library (KOLL) allows Amazon Prime members to “borrow” one e-book at a time at no charge. Availability of e-books through public libraries is likely to deteriorate further into both chaos and irrelevance if nothing is done. To break the impasse, libraries are pushing for Digital First Sale rights in the law. Libraries recently joined together with other, better-heeled entities in a lobbying group called the Owners’ Rights Initiative (ORI). The ORI, which launched back in October, is a “strange bedfellows” coalition of library trade associations, companies such as Chegg (used textbooks) and Redbox (DVD/Blu-ray kiosks) that could expand into resale of digital content, several companies that sell used IT equipment, and last but not least, eBay. The ORI’s slogan is “You bought it, you own it.” Digital music resale and library e-book lending are just two of what will undoubtedly be many digital content distribution models that will touch on the issue of Digital First Sale – a law that, like other aspects of copyright, seems increasingly irrelevant as content moves from physical products to formless bits. As the controversies and lawsuits grow, the inadequacy of the status quo will be increasingly clear.”—The right to resell: a ticking time bomb over digital goods — paidContent
“In the case of John Wiley & Sons, Inc. v. Supap Kirtsaeng, the court has held that the “First Sale” doctrine in copyright law – which allows libraries to lend books and consumers to resell the books they buy – applies only to works that were manufactured in the United States. In an earlier case (Costco v. Omega, which was affirmed by an evenly divided Supreme Court) the Ninth Circuit had ruled that first sale did not apply if a work was manufactured and sold abroad, but the Second Circuit went much further. In last week’s ruling they decided that first sale did not apply even when the work manufactured abroad was sold in the U.S. with the authorization of the copyright holder. Thus they have created the anomalous situation where a rights holder enjoys the full protection of U.S. law, but consumers who buy the work do not have the advantage of a basic rule for their protection.”—Getting first sale wrong | Kevin Smith, Scholarly Communications Officer at Duke University
Supreme Court upheld 1st Sale Doctrine
First sale doctrine is when you buy a copyrighted item, music, movie, textbook. You can then sell it to someone else when you’re done with it.
Selling your college textbooks, having a yard sale, selling things on eBay and Craigslist, etc.
Without that provision if you wanted to sell something you bought, like a DVD of The Dark Knight, you would have to contact the copyright owners and ask their permission to sell it. If they said no then you are stuck with that item forever.
In 2008 a student had his family and friends in Thailand to buy his textbooks, they cost a lot less there. They bought them, shipped them to him, he used them, then sold them here in the US.
The textbook publisher had a fit and sued him, saying he was basically trying to become a distributor and was infringing on their copyright and their rights.
That was 5 years ago. They fought and fought, went from court to court until it was brought before the Supreme Court.
They just decided today.
First Sale Doctrine held. You can sell stuff you bought without getting permission from the manufacturer.
Imagine if it had not held. Can’t sell anything without getting permission. They would all say ‘Um…no…..No…..If they want to buy it they can but it from us at retail cost, you keep your used copy forever.”
Get this Dean…..Museums would have to get permission from the artist to display works of art (or the copyright owner since most of the artists are long since dead) since they charge admission. It would’ve affected everything, everywhere.
Score one for common sense.