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"First Sale" Doctrine Should Not Become Pretext for Virtual Piracy

Harold Furchtgott-Roth

On June 2, the Subcommittee on Courts, Intellectual Property and the Internet of the House Judiciary Committee held a hearing in New York City on the “First Sale” Doctrine. That century-old doctrine is an exception to the control of copyright-holders on the distribution of copyrighted works. Under the “First Sale” Doctrine, the purchaser of a physical copy of a book or record may resell it as used.

Some observers would like to see Congress expand by statute the “First Sale” exception from just physical copies to include online copies as well. To address those and other issues, the House Judiciary Committee held the June 2 hearing.

As anyone who has ever purchased a used physical book knows, the “First Sale” doctrine works well for physical products. Secondary used book markets benefit both buyers and sellers without eroding the rights of copyright holders. The used book is noticeably different and not as good as a new book. Ownership of the book does not convey with it ownership and control over the intellectual content of the book. A book owner cannot copy and sell the pages or even images and excerpts of the book at will. Control and benefit of the intellectual property remain with the copyright holder.

Books and other copyright works are increasingly conveyed through digital media over the Internet. The “First Sale” doctrine is easy to describe with physical products that contain copyrighted material. Markets for intellectual property have worked reasonably efficiently with the “First Sale” doctrine for physical products.

It is far less clear how the “First Sale” doctrine would work online. As but one example of countless potential problems, the courts might have to revisit peer-to-peer file sharing arrangements such as Napster and Grokster under scenarios where all copyrighted works fall under the “First Sale” doctrine. The very concept of online piracy seems to be diminished if not disappear entirely if the pirate can demonstrate that the original copy was purchased or licensed legitimately.

None of the witnesses at the Judiciary Committee hearing was an advocate for piracy. Lawlessness, theft of property, and economic anarchy were not the themes at the hearing.

Instead, the comments of both Members and witnesses focused on myriad economic issues surrounding the First Sale doctrine as it might apply to online copyrighted works. In his opening statement, Chairman Bob Goodlatte emphasized the importance of “consumer expectations.” Many of the witnesses, both those favoring and opposing expansion of the “First Sale” doctrine to online content, spoke of the importance of “property rights.” Supporters of expansion focused on the rights of using intellectual property as the purchaser sees fit. Opponents of expansion focused on preserving the rights of the intellectual property owner.

Witnesses cited several court cases that they saw as helpful or detrimental to their advocacy positions. But none of the court cases directly addressed the core of the issue lurking behind the hearing: online “first sale” rights. Most court cases addressed physical, not virtual, property. None of the advocates of modifying “First Sale” for online application addressed the situations of Napster or Grokster or even Aereo.

The unanswered questions of an online version of the “First Sale” doctrine are limitless. If I purchase a digital version of a book, music, software, or other copyrighted work online, can I turn around and lawfully resell it? Does the “First Sale” Doctrine apply to the countless examples of “free” digital content that one obtains online or in a broadcast form in exchange for advertising or access to consumer information? Can I make copies of digital content under a “First Sale” doctrine (because “I own it”) and resell those copies? Can I “share” the copyrighted work limitlessly under a “First Sale” doctrine, with or without reselling the underlying work? If I purchase a copyrighted work under resale, or simply share it from another user, am I bound by the copyright restrictions from a copyright holder under the initial sale to which I never consented? Ultimately, does the copyright holder retain the full control and benefit of the copyright if the “First Sale” doctrine were expanded to digital and online media?

Some of the witnesses claimed to have simple, straightforward answers to some of these questions. I am not persuaded.

Intellectual property, its protection, and its enforcement are economic issues. Intellectual property has flourished in America, to the benefit of both consumers and businesses, in large part because it is protected and enforced. The “First Sale” doctrine has worked well for copyrighted works in physical forms. Whether it would work equally well for digital and online works is doubtful. Legislated expansion of the “First Sale” doctrine could unintentionally become a pretext for various forms of virtual piracy. After the first copy of a copyrighted work is sold, it would become available free of charge or any limitation on the Internet. Legitimate licensing of copyrighted works might no longer have a “First Sale” doctrine as much as a “Last Sale” effect.

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