We’re not done with First Sale

In the Supreme Court’s Kirtsaeng v. John Wiley decision, libraries caught a big break.  But it was really no more than an affirmation of the status quo — libraries can still lend materials manufactured in other countries, students can still resell their textbooks regardless of where they were printed, and consumers and stores can sell second-hand books, CDs and DVDs.  The “break” for libraries is in the danger we avoided, but the legal result is that the doctrine of first sale was NOT radically reordered to suit the demands of publishers for a “super property” right.  Nevertheless, the effort by the content industries to secure ever-greater control over secondary markets is continuing, and last week a decision about first sale as it applies — or, more accurately, does not apply — in the digital environment has supported that unprecedented level of control.

The case involves the digital music re-sale service ReDigi, through which subscribers can sell their digital music files through a complex process that is designed to ensure that the original owner absolutely cannot keep or access a copy of the music file once it has transferred to another subscriber who has purchased it.  From the trial court’s description of the process, it is very clear that ReDigi was trying to comply with a reasonable interpretation of the doctrine of first sale for the digital age.  Most of their system was intended to enforce a “forward and delete” version of first sale that would seem to embody the spirit of what that doctrine is trying to accomplish.  Unfortunately, Judge Richard Sullivan of the Southern District of New York found that ReDigi had moved too far beyond an obsessively close reading of the letter of the law.

Judge Sullivan’s order is a close analysis of the wording of the doctrine of first sale, found in section 109 of the Copyright Act (Title 17 of the U.S. Code) and a very “physical” understanding of the digital world.  The question he is addressing is “whether a digital music file, lawfully made and purchased, may be resold by its owner through ReDigi under the first sale doctrine.”  The judge answers that question with a resounding no.  His decision is based first, on the conclusion that the reproduction right in copyright is implicated whenever the copyrighted work is embodied in a new “material object” and that each movement of a digital file from one server location to another is a new material object.  “It is simply impossible,” Judge Sullivan writes, “that the same ‘material object’ can be transferred over the Internet.”  Since each movement from server to server, or from one segment of a server to another, is a reproduction, the Judge holds that the files sold over ReDigi are unlawful reproductions.  First sale, furthermore, cannot apply to such copies.  He is very explicit about this: “it is therefore impossible for the user to sell her ‘particular’ phonorecord on ReDigi… the first sale defense is limited to material items, like records, that the copyright owner put into the stream of commerce.”  There is no first sale — none at all — on the Internet, even without licensing restrictions on transfers.

The Judge does address very briefly the argument that this attempt to impose the analysis from the analog world onto the digital environment would have damaging implications for all kinds of consumer digital products, since reproductions are made all the time in ordinary computer maintenance activities and when content is moved from one device to another.  But he dismisses that concern as a “red herring” because “other doctrines or defenses” protect such activities “almost certainly.”  But he does not say which doctrines or defenses, and the fact that he has to resort to this vague reliance on the idea that the obvious negative outcomes from his decision will not come to pass shows that the decision is problematic from a policy perspective.

Indeed, it seems to me that Judge Sullivan is legally correct in his analysis, and thereby demonstrates that legal accuracy is not sufficient for this rapidly changing technological environment.  I think even he recognizes that the ruling he is obligated to make is not satisfactory; in regard to the policy implications of what he is doing, he falls back on that old judicial claim that he is not allowed to legislate from the bench, and that Congress must fix the problem he is creating.

Congress should take up Judge Sullivan’s invitation.  It seems clear, in light of Kirtsaeng, that Congress will be asked to modify first sale this term.  They should resist the publisher’s pressure to “fix” the Supreme Court’s sensible decision to leave consumers in no worse position than they have been in since 1908, but they can still readjust first sale to make it work for consumer sales of digital materials on the Internet.  They should consider Justice Kagan’s suggestion, in her concurrence in Kirtsaeng, that Congress fix the result from the Quality King case that read first sale as a limitation on the importation restrictions in section 602 of the Copyright Act. And they should recognize that the principle of “you bought it, you own it” is foundational to commerce, and in the absence of a negotiated agreement to the contrary, it should apply to the digital world.  So Congress has a chance to look at the very reasonable business model that ReDigi put in place and find ways to authorize it under a modified doctrine of first sale.  Unfortunately such reform, if it were to happen, would come too late for ReDigi and its customers.

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