Is the sky falling on library lending?

“The sky is falling,” Chicken Little cried.  I don’t want to emulate that panicky poultry too closely, but recent events have raised some concern in my mind over the continued viability of copyright’s “first sale” doctrine, upon which so much library practice depends.

First sale is the rule that once a lawful copy of a work is sold, the exclusive right to control distribution of that copy is “exhausted.”  Therefore libraries can lend books, consumers can resell CDs and NetFlix can rent DVDs through the mail.  First sale is not a necessary or automatic part of a copyright law; many countries have different provisions on what is sometimes called “exhaustion,” such as a statutory fee for each library loan of an item.  Most importantly, first sale does not apply when a work is licensed rather than sold.  Many of the current threats to first sale are controversies over where the boundary between a sale and a licensing transaction really is.

Here is a catalog, quite long I’m afraid, of some of these controversies and, I think, threats to library lending.

First there is the new lawsuit against UCLA over streamed digital video.  Part of that suit argues that what seemed like purchases of DVD by UCLA were really licensing situations because terms of use were printed on the purchase orders.  The plaintiffs use this claim to argue that UCLA cannot make a fair use argument in defense of their practice, but it is easy to see how such a claim could also restrict practices under first sale.  There have been many attempts to use one-sided terms of use to prevent or control resale; the Supreme Court rejected an early attempt to prevent second-hand resale at a lower price in Bobbs-Merrill v Straus back in 1908.  If a claim based on terms of use in a purchase order is successful in limiting fair use rights under copyright, it is easy to see how such terms will multiply to restrict library lending under first sale.

By the way, it will be interesting to see if these terms can survive analysis under the Uniform Commercial Code.  Article 2 of the UCC governs sales of goods, and its provision about conflicting terms of sale (the “battle of the forms”) might seem to support these terms of use.  But two questions occur.  First, if the PO terms turn a sale into a licensing transaction, does Article 2 even still apply, since it governs sales?  Second, do the terms so materially alter the transaction that they cannot simply be presented on a purchase order and enforced against the purchaser based solely on payment of that invoice?

My second concern comes from the news that a law firm has been sending cease and desist letters to academic libraries demanding that they stop filling ILL requests for scholars and institutions outside of the US.  I have not seen a copy of this letter, but the reports suggest that its legal arguments are quite confused.  For lending of articles these days, most ILL is governed by the contractual terms under which a database of journals is licensed.  If the license permits ILL without territorial restriction, there is no reason to stop following those terms.  If the license does not permit such lending, the demand is superfluous.  For the lending of physical items, first sale would seem to permit the purchasing library to lend to whomever it wants. But since the lawyer is representing a large group of STM publishers, this letter does remind us that there is a strong desire in the content community to place new and radical limits on long-accepted library practice.

Other threats to first sale do not directly involve libraries, but clearly have potential impact on them.  In Vernor v. Autodesk the Ninth Circuit Court of Appeals upheld the claim that a piece of software was not really sold but only licensed, such that the purchaser could not resell the physical discs he had bought in reliance on first sale.  Here again, there are obvious implications for library practice if much of what we think we are buying turns out to have only been licensed.

Finally, there is the non-decision reached this week by the Supreme Court in the case of Costco v. Omega.  That case involved not libraries, by a discount retailer and the claim by Omega Watches that first sale did not apply to copyrighted items (the symbol embossed on the back of watches) that are neither manufactured nor sold in the US.  The 9th Circuit (again) held that first sale did not apply and the watches could not be resold in the US without authorization.  The Supreme Court agreed to hear the case, and the Library Copyright Alliance filed a superb brief encouraging reversal.  But the Court split evenly, with Justice Kagan recusing herself.  That result leaves the troubling decision from the 9th Circuit in place, at least in Western quarter of the US.

The problem with the status quo in Costco is that it poses a threat both to some library lending and to the secondary market for used textbooks that is so important for students.  The LCA brief makes clear that affirming the lower court in Costco would leave academic libraries especially in great uncertainty, since they obtain quite a bit of material from overseas.  The case involves a technical issue about the so-called manufacturing clauses in the Copyright Act (sections 601-603) because that clause influences what is considered a copy “lawfully made under this title” for purposes of first sale (section 109).  Section 602 contains an exception to its restrictions on imports that allows libraries to purchase both books and videos from abroad for their collections, but the language about audiovisual works, which is different from that regarding books, seems to deliberately exclude lending of foreign-made videos.  So at the very least, academic libraries in the 9th Circuit must have doubts about whether they can lend foreign films purchased overseas.

Another potential problem created by Costco is for the used textbook market.  As this news story indicates, textbook publishers urged the Supreme Court to affirm the 9th Circuit decision in Costco precisely because it opens the possibility of moving textbook publishing offshore and then relying on the decision to close down resale of used books.

Perhaps the sky is not falling, at least not yet, on the first sale doctrine.  Kenneth Crews of Columbia suggests in this blog post that the Costco case, at least, does not give us cause to panic yet.  But I think it is pretty clear that the doctrine is besieged from several different angles.  Uncertainty about its scope and contours may translate, unfortunately, into less robust library services.  The unfortunate scenario is that, just as libraries are being really creative in rethinking our traditional role as “book warehouses,” content providers, sometimes intentionally and sometimes not, seem to be pushing us back into that limited space.  The reason, of course, is that the more first sale is restricted, for libraries and for consumers in general, the easier it will be to define the digital realm as a “pay-per-use” environment.

2 thoughts on “Is the sky falling on library lending?”

  1. These are all very disturbing for a number of reasons. However, I was just reading your later, excellent post about the Salinger case, and it occurred to me to wonder whether the legality of importation of a copy of the book published abroad would have changed because of Costco. Supposing the book is legally published abroad, and as such is under copyright in the U.K., and a librarian in the U.K. branch of an American university ships a copy to her colleagues in the states for accession to their library. Prior to Costco, wouldn’t this have been legal under §109, since it has a valid copyright abroad? Could Costco be used to enforce prior restraints on libraries? This is an angle I don’t believe I’ve seen discussed anywhere else, but it seems to me could potentially be the most chilling (in all metaphorical senses of the term) effect of the non-ruling.

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