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First sale doctrine

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U.S. copyright law Edit

A fundamental tenet of copyright law, and another limitation on the exclusive rights, is the first sale doctrine, which prevents an owner of copyright in a work from controlling subsequent transfers of copies of that work. Once the copyright owner transfers ownership of a particular copy (a material object) embodying a copyrighted work, the copyright owner's exclusive right to distribute copies of the work is "extinguished" with respect only to that particular copy.[1] The common law roots of the first sale doctrine allowed the owner of a particular copy of a work to dispose of that copy. This judicial doctrine was grounded in the common law principle that restraints on the alienation of tangible property are to be avoided in the absence of clear congressional intent to abrogate this principle.[2]

Section 109(a) of the Copyright Act provides:

Notwithstanding the provisions of section 106(3) (which grants copyright owners the exclusive right to distribute copies or phonorecords of a work), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.[3]

This limitation on the copyright owner's distribution right allows wholesalers who buy books to distribute those copies to retailers and retailers to sell them to consumers and consumers to give them to friends and friends to sell them in garage sales and so on — all without the permission of (or payment to) the copyright owner of the work.

The first sale doctrine does not, however, authorize the owner of a copy to make another copy, and because “transferring” a work electronically entails making a new copy, the first sale doctrine arguably does not apply.[4]

History Edit

The doctrine was first recognized by the U.S. Supreme Court in Bobbs–Merrill Co. v. Straus.[5] At issue in Bobbs–Merrill was the exclusive right of a copyright owner to restrict the resale terms of its copyrighted material. The Supreme Court interpreted the then copyright statute's “sole right to vend” to bar a publisher from restricting future sales of a book by placing a notice on the book's cover that limited resale to $1 or more.[6] Congress codified the first sale doctrine in the 1909 Copyright Act,[7] and then refined the doctrine in the 1976 Copyright Act and its subsequent amendments.[8] As currently constituted, the doctrine exempts subsequent owners who then sell a legitimate copy of a copyrighted work from claims of infringing the original owner's exclusive distribution rights:

Notwithstanding the provisions of Section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.[9]

Thus, once a publisher sells a valuable, vellum-bound volume, for example, it forfeits its exclusive distribution privilege and enables the buyer, the new owner of the volume, to resell the copy to another buyer.[10]

The statute specifically excludes the doctrine's application, however, when the copy is transferred through “rental, lease, loan, or otherwise, without acquiring ownership of it.”[11] Thus, the first sale doctrine does not apply to a licensee.[12]

Exemption for records and computer programs Edit

The first sale doctrine allows the owner of a particular copy of a work to dispose of possession of that copy in any way — for example, by selling it, leasing it, loaning it or giving it away. However, there is an exception to this exemption with respect to two types of works — computer programs and sound recordings. The owner of a particular copy of a computer program or a particular phonorecord of a sound recording may not rent, lease or lend that copy or phonorecord for the purpose of direct or indirect commercial advantage.[13] These exceptions were enacted because of the ease with which reproductions of those works can be made at a lower cost than the original with minimum degradation in quality.[14]

The rationale for these exceptions may apply to other types of works as more types of works become available in digital form and the "nexus" of rental and reproduction of those works "may directly and adversely affect the ability of copyright holders to exercise their reproduction and distribution rights under the Copyright Act."[15]

It is not always clear, however, whether a commercial transaction involving a copyrighted works is legally a sale or a licensing agreement, which can make or break a first sale defense. How the parties characterize the transaction to themselves or others may not be controlling as a matter of law. When a computer user "purchases" a copy of software through a retail channel or other means, the licensing agreement may actually assert that the arrangement is not an outright purchase of a copy but merely a license to use the work. Were these licensing agreements the last word on the subject, Section 109 would not allow the licensee to resell his software. Yet many courts have recharacterized a software publisher's shrinkwrap licensing agreement as a sale when the publisher distributes its software through retail channels.[16] Other courts have taken the opposite position, however, holding that a copy of software obtained through a license is not subject to the first sale doctrine or other benefits of "ownership."[17]

Reproduction right Edit

This provision of the first sale doctrine limits only the copyright owner’s distribution right; it in no way affects the reproduction right. Thus, the first sale doctrine does not allow the transmission of a copy of a work (through a computer network, for instance), because, under current technology the transmitter retains the original copy of the work while the recipient of the transmission obtains a reproduction of the original copy (i.e., a new copy), rather than the copy owned by the transmitter. The language of the Copyright Act, the legislative history and case law make clear that the doctrine is applicable only to those situations where the owner of a particular copy disposes of physical possession of that particular copy.[18]

If the owner of a particular copy transmits that copy to another person without authorization (either from the copyright owner or the law), such a transmission would involve an unlawful reproduction of the work, and the first sale doctrine would not shield the transmitter from liability for the reproduction nor for the distribution. Under the first sale doctrine, the owner of a particular copy of a copyrighted work may distribute it, but may not reproduce it.[19] Therefore, the transmission would constitute infringement of the copyright owner's reproduction right.[20] If the reproduction is unlawful, further distribution of the unlawful reproduction would not be allowed under the first sale doctrine because the copy distributed would not be one "lawfully made" under the Copyright Act, as required by the statute.

The first sale doctrine may be invoked by a defendant only for the distribution of lawfully-made copies. If copies are pirated, the first sale doctrine does not apply.[21] Additionally, a person may not sell or give away his lawful copy while retaining a backup copy, even a backup copy of software that is authorized by 17 U.S.C. §117.[22] An unlawfully retained backup copy can be an infringing reproduction.

The requirement that copies distributed under the doctrine be "lawfully made" under the Copyright Act does not limit the doctrine's application to copies made or authorized by the copyright owner.[23] A copy could be "lawfully made," for example, if the reproduction is lawful under the fair use provision; the distribution of such a copy would be permitted within the limits of the first sale doctrine.

It has also been suggested that the scope of the first sale doctrine be narrowed to exclude copies obtained via transmission. This would mean, for instance, that if a copy of a literary work is legally purchased online and the copy so purchased is downloaded onto the purchaser's disk, the disk could not be resold. Clearly, the first sale doctrine should apply if the particular copy involved is in fact the copy that is further distributed, even if the copy was first obtained by transmission. Further, if the technology utilized allows the transmission of a copy without making an unlawful reproduction — i.e., no copy remains with the original owner — the first sale doctrine would apply and the transmission would not be an infringement.

Some argue that the first sale doctrine should also apply to transmissions, as long as the transmitter destroys or deletes from his or her computer the original copy from which the reproduction in the receiving computer was made. The proponents of this view argue that at the completion of the activity, only one copy would exist between the original owner who transmitted the copy and the person who received it — the same number of copies as at the beginning. However, this zero sum gaming analysis misses the point. The question is not whether there exist the same number of copies at the completion of the transaction or not. The question is whether the transaction when viewed as a whole violates one or more of the exclusive rights, and there is no applicable exception from liability. In this case, without any doubt, a reproduction of the work takes place in the receiving computer. To apply the first sale doctrine in such a case would vitiate the reproduction right.

Public display right Edit

A copyright owner's exclusive right to publicly display copies of a work is also limited by Section 109:

Notwithstanding the provisions of section 106(5) [which grants copyright owners the exclusive right to display publicly copies of a work], the owner of a particular copy lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to display that copy publicly, either directly or by the projection of no more than one image at a time, to viewers present at the place where the copy is located.[24]

Thus, the owner of a particular copy of a video game intended for use in coin-operated equipment may also publicly perform or display that game in that equipment.[25]

This exemption from liability would not apply to the public display of a copy of a work on a website or other computer or communications network, because more than one image would likely be displayed at a time (to different viewers) and viewers would not be "present at the place where the copy is located."

The first sale doctrine allows the owner of a particular, lawfully made copy of a work to dispose of it in any manner, with certain exceptions, without infringing the copyright owner's exclusive right of distribution. It seems clear that the first sale model — in which the copyright owner parts company with a tangible copy — should not apply with respect to distribution by transmission, because transmission by means of current technology involves both the reproduction of the work and the distribution of that reproduction. In the case of transmissions, the owner of a particular copy of a work does not "dispose of the possession of that copy or phonorecord." A copy of the work remains with the first owner and the recipient of the transmission receives another copy of the work.

U.S. patent law Edit

See Exhaustion doctrine.

U.S. trademark law Edit

See First sale exhaustion doctrine.

ReferencesEdit

  1. See T.B. Harms Co. v. Jem Records, Inc., 655 F. Supp. 1575, 1582 (D.N.J. 1987) (full-text); Columbia Pictures Indus., Inc. v. Aveco, Inc., 612 F. Supp. 315, 319-20 (M.D. Pa. 1985) (full-text), aff'd, 800 F.2d 59 (3d Cir. 1986) (full-text).
  2. DMCA Section 104 Report, at vii.
  3. 17 U.S.C. §109(a).
  4. See DMCA Section 104 Report, 78-80 (discussing the inapplicability of the first sale doctrine to digital transmissions that involve making a copy rather than merely transferring an existing physical copy).
  5. 210 U.S. 339 (1908).
  6. Id. at 350.
  7. See 17 U.S.C. §41 (1909).
  8. See 17 U.S.C. §109 (2008).
  9. Id. at §109(a).
  10. See 2 Melville B. Nimmer & David Nimmer, Nimmer On Copyright §8.12[B] [1][d] (rev. ed. 2010).
  11. 17 U.S.C. at §109(d).
  12. See Vernor v. Autodesk, Inc., 621 F.3d 1102, 1107–08 (9th Cir.2010) (“The first sale doctrine does not apply to a person who possesses a copy of the copyrighted work without owning it, such as a licensee.”), petition for cert. filed, 79 U.S.L.W. 3674 (U.S. May 18, 2011).
  13. See 17 U.S.C. §109(b)(1)(A). The prohibition with respect to record rental does not apply to nonprofit libraries or nonprofit educational institutions for nonprofit purposes. Id. In addition, a nonprofit educational institution may transfer possession of a lawfully made copy of a computer program to another nonprofit educational institution or to faculty, staff and students. Id. Nonprofit libraries may also lend a computer program for nonprofit purposes if each copy has a copyright warning affixed to the package. Id. §109(b)(2)(A). The prohibition with respect to computer program rental does not apply to a computer program "which is embodied in a machine or product and which cannot be copied during the ordinary operation or use of the machine or product" or "a computer program embodied in or used in conjunction with a limited purpose computer that is designed for playing video games and may be designed for other purposes." Id. §109(b)(1)(B).
  14. See K. Corsello, The Computer Software Rental Amendments Act of 1990: Another Bend in the First Sale Doctrine, 41 Cath. U.L. Rev. 177, 192 (1991).
  15. See H.R. Rep. No. 98-987, 98th Cong., 2d Sess. 2 (1984), reprinted in 1984 U.S.C.C.A.N. 2898, 2899 (justifying the Record Rental Amendment of 1984).
  16. See Softman Prods. Co. v. Adobe Sys., Inc., 171 F.Supp.2d 1075 (C.D. Cal. 2001); Novell, Inc. v. Network Trade Ctr., Inc., 25 F.Supp.2d 1218, 1230 (D. Utah 1997), vacated in part on other grounds, 187 F.R.D. 657 (D. Utah 1999); ProCD, Inc. v. Zeidenberg, 908 F.Supp. 640 (W.D. Wis. 1996), rev'd on other grounds, 86 F.3d 1447 (7th Cir. 1996); see also Krause v. Titleserv, Inc., 402 F.3d 119 (2d Cir. 2005); Mark Lemley, Intellectual Property and Shrinkwrap Licenses, 68 S. Cal. L. Rev. 1239, 1244 n.23 (1995) (discussing cases).
  17. See Adobe Sys., Inc. v. Stargate Software Inc., 216 F.Supp.2d 1051, 1058 (N.D. Cal. 2002); Adobe Sys. Inc. v. One Stop Micro, Inc., 84 F.Supp.2d 1086, 1089 (N.D. Cal. 2000); Microsoft Corp. v. Software Wholesale Club, Inc., 129 F.Supp.2d 995, 1002 (S.D. Tex. 2000) (citing Microsoft Corp. v. Harmony Computers & Elec., Inc., 846 F.Supp. 208 (E.D.N.Y. 1994)); see also Lemley, 68 S. Cal. L. Rev. at 1244 n.23.
  18. See 17 U.S.C. §109(a) ("the owner of a particular copy or phonorecord . . . is entitled . . . to sell or otherwise dispose of the possession of that copy or phonorecord"); H.R. Rep. No. 1476, 94th Cong., 2d Sess. 55 (1976), at 79, reprinted in 1976 U.S.C.C.A.N. 5693 (hereinafter House Rpt.) (under the first sale doctrine in Section 109 "the copyright owner's exclusive right of public distribution would have no effect upon anyone who owns 'a particular copy or phonorecord lawfully made under this title' and who wishes to transfer it to someone else . . ."). See also Columbia Pictures Indus. v. Redd Horne, Inc., 749 F.2d 154, 159 (3d Cir. 1984) ("first sale doctrine prevents the copyright owner from controlling the future transfer of a particular copy once its material ownership has been transferred").
  19. House Rpt., at 79 (under the first sale doctrine, "the owner of the physical copy or phonorecord cannot reproduce or perform the copyrighted work publicly without the copyright owner's consent").
  20. If the reproduction is lawful under another provision of the Copyright Act, the transmission would likely not be an infringement.
  21. See United States v. Drum, 733 F.2d 1503, 1507 (11th Cir. 1984) (citing Moore, 604 F.2d at 1232); United States v. Powell, 701 F.2d 70, 72 (8th Cir. 1983).
  22. See 17 U.S.C. §117(a)(2) (requiring destruction of archival copies if continued possession of original copy ceases to be rightful); see also 17 U.S.C. §117(b) (allowing transfer of exact archival copies only with a complete transfer of rights in the original copy).
  23. See House Rpt., at 79.
  24. 17 U.S.C. § 109(c).
  25. Section 109(e) reversed the decision in Red Baron-Franklin Park, Inc. v. Taito Corp., 883 F.2d 275 (4th Cir. 1989), cert. denied, 493 U.S. 1058 (1990), which held that video games could not be operated in an arcade without the permission of the copyright owner because such operation entailed violation of the copyright owner's exclusive rights to perform and display the work publicly. Section 109(e), however, does not allow the public display or performance of any other work of authorship embodied in the video game if the copyright owner of the game is not also the copyright owner of the other work. See 17 U.S.C. § 109(e).

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