Copyright: “First Sale” Doctrine Unsuitable for Digital Goods Print
By Timothy H. Lee
Thursday, June 12 2014
The logic underlying the first sale doctrine as it relates to physical goods like books simply doesn’t extend to digital, non-physical goods.

This month, the House of Representatives Subcommittee on Courts, Intellectual Property and the Internet conducted an important hearing regarding what’s known as the “first sale” doctrine, with particular focus on its application in the current Internet era. 

So what is the first sale doctrine, and why would extending its application to digital works be a bad idea? 

Broadly speaking, copyright law rightfully protects creators’ ability to determine the manner in which their works are distributed.  If you create something, fairness generally dictates that you remain able to choose how it goes out to the world, if at all.  It’s your work, after all. 

An exception, however, was carved out in 1908 by the United States Supreme Court in Bobbs-Merrill Co. v. Straus.  According to that ruling and the first sale doctrine it announced, the original creator cannot control subsequent distribution of a particular copy of the work purchased by that consumer.  As amended, the federal Copyright Act later codified the doctrine: 

“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.” 

To illustrate the first sale doctrine via familiar everyday example, someone who purchases a physical book or compact disc can subsequently resell that particular copy, lease it or give it to someone else.  That seems fair enough, at least so far as individual copies of physical goods are concerned, and most of us have bought or sold used books, records and CDs. 

That said, the first sale doctrine comes with several important caveats in the name of fairness. 

For example, the first sale doctrine does not permit the first owner of a copy to make another copy before selling or transferring the original, which makes obvious sense.  Additionally, the doctrine doesn’t apply to a licensee, meaning someone granted permission to use something, as opposed to a full purchaser.  That also makes perfect sense, as someone who licenses something – typically for a lower price than sale – doesn’t acquire full possession and control for an agreed-upon price in the same manner as a buyer. 

And perhaps most importantly, the doctrine is limited to physical copies.  That, as the U.S. Copyright Office itself has emphasized, is “a defining element of the doctrine and critical to its rationale.”  The logic underlying the first sale doctrine as it relates to physical goods like books simply doesn’t extend to digital, non-physical goods. 

First and foremost, digital “used” copies are generally indistinguishable from new copies, whereas used physical goods like hardcopy books are typically inferior in quality to new copies, due to such things as wear and tear.  That is a primary reason why used copies are typically priced lower than new goods. 

Moreover, physical goods occupy space, can be cumbersome, often deteriorate as they age and sometimes require upkeep.  For those reasons, incentivizing resale of used physical goods serves the public good.  After all, is it not preferable to encourage resale of physical goods like books at a reduced price since they would otherwise be heaped into landfills by owners no longer willing to keep, transport or maintain them?  That logic obviously doesn’t apply to digital goods. 

Physical goods can also become rare with the passage of time, with original copies discarded and lost as years pass.  Accordingly, allowing resale helps sustain antique markets and continuation in the stream of commerce goods that might otherwise disappear permanently.  The same generally cannot be said of digital goods, further undermining application of the first sale doctrine in that regard. 

And importantly, it is difficult or even impossible to ensure that someone who sells a copy of a digital good doesn’t maintain the original for continued use.  That obviously deprives the creator of the right to that sale, and contravenes all concepts of fairness. 

Simply put, physical goods possess inherent limitations that justify the first sale doctrine to copyright law.  Those same limitations generally aren’t applicable to digital goods. 

Despite that clear distinction between physical goods and digital goods, however, some groups advocate extension of the first sale doctrine to digital goods.  In Europe, for instance, courts have curiously extended the doctrine to digital goods, even while admitting the practical difficulties in enforcing laws against selling a digital copy while preserving the original for continued use by the seller.  And here in America, the usual cabal of anti-property activists advocates the same extension despite its obvious illogic. 

Today’s technology has opened avenues for enjoyment of digital content unimaginable even a decade ago.  But attempting to impose concepts like the first sale doctrine onto digital creations where its rationale doesn’t apply only serves to jeopardize innovation and consumer choice, and deprive creators of the rightful fruits of their labor.  So let’s not attempt to shoehorn the doctrine where it doesn’t logically belong.