A. INTRODUCTION

This edition of CommuniK.™ features the third part of a series about copyright law exceptions that are available to libraries, schools, and archives. The article discusses Section 109(a) of the 1976 Copyright Act, otherwise known as the “first sale” doctrine. Generally, “first sale” allows anyone who rightfully and legal owns a copy of a protected work to resell, rent, or lend that copy to another person or entity. Many businesses — including libraries, used bookstores, used music and video resellers, and video rental stores — are able to conduct their operations legally because of the “first sale” doctrine.

Over the last decade, however, several changes have occurred that threaten first sale’s future viability. First, manufacturers increasingly are distributing content in digital formats, rather than analog formats. Second, digital content is being distributed as sheer content, rather than being wrapped in some media such as a disc or book. Third, digital content typically is not sold to consumers; instead, it is leased to consumers, with a license governing the terms and conditions of content use and access. Often, the copyright owner uses the license to reserve certain critical legal rights, and to curtail privileges that the consumer normally would enjoy under federal copyright law. Together, these changes have rendered “first sale” nearly irrelevant.

Still, it is important to recognize what the “first sale” doctrine says and how it applies. With such knowledge, a savvy information professional can recognize if the doctrine applies and whether a contract or other arrangement eliminates this limitation.

This article analyzes the traditional role of “first sale,” how digital technology and business practices have eroded its viability, and how information professionals can continue to leverage “first sale” to their advantage.

Portions of this article originally appeared in the May/June 2005 edition of Online magazine.

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A committee appointed by the Library of Congress will hold two public roundtables in March 2006—in Los Angeles and in Washington, D.C.— to gather insights and opinions on how to revise copyright exceptions for libraries and archives (Section 108 of the Copyright Act).

The committee consists of independent experts from the commercial and not-for profit sectors. The roundtables, which are free and open to the public, will be held Wednesday, March 8, in Los Angeles and on Thursday, March 16, in Washington, D.C.

The committee, known as the Section 108 Study Group, convened in April 2005 under the sponsorship of the Library of Congress and the U.S. Copyright Office to re-examine the exceptions and limitations applicable to libraries and archives under the Copyright Act, specifically in light of the changes produced by the widespread use of digital technologies since the last significant study in 1988.

U.S. Copyright Office. Study Group to Host Public Roundtables in March 2006 on Copyright Exceptions for Libraries and Archives. (Press Release) Jan 17, 2006.

Editors’ Note: CopyCense executive editor K. Matthew Dames has written about Section 108 recently. Dames’ article, “Copyright Clearances: Library Copying in the Digital Age,” was published in the July/August 2005 edition of Online magazine and is available from the Information Today, Inc. archives. CopyCense will publish an updated version of this article on Tuesday, January 31.

Update:

The Wired Campus Blog. Library Group Argues Before Congress. January 24, 2006.

CopyCense™: K. Matthew Dames on the intersection of business, law and technology. A business venture of Seso Digital LLC.

“Digital music sales tripled last year to $1.1 billion as consumers downloaded 420 million tracks, boosting digital receipts to 6 percent of the music industry’s revenue as it combats an overall sales slump.

“Boosted by the global purchase of 60 million portable digital music players, downloads accounted for 60 percent of 2005 digital sales while ring tones and songs for mobile phones comprised 40 percent, the London-based International Federation of the Phonographic Industry said today in a report. Digital sales totaled $380 million in 2004.”

Bloomberg. Digital Music Sales Tripled in 2005 to $1.1 Billion. Jan. 19, 2006.

See also:

International Federation of the Phonographic Industry. Global Digital Music Sales Triple to US$1.1 billion in 2005 As New Market Takes Shape. (Press Release) Jan. 19, 2006.

International Federation of the Phonographic Industry. The Digital Music Report 2006 - Facts and Figures. Jan. 19, 2006.

International Federation of the Phonographic Industry. IFPI Digital Music Report - Executive Summary. Jan. 19, 2006.

Update:

Laurence Frost. Music Sales Resumed Decline in 2005. Yahoo! News. Jan. 22, 2006.

CopyCense™: K. Matthew Dames on the intersection of business, law and technology. A business venture of Seso Digital LLC.

“Defendant Filipiak ran an online business that sold, among other things, “mod chips” that allowed Sony PlayStation and PlayStation 2 consoles to play copied games. Sony filed suit against Filipiak under the Digital Millennium Copyright Act (”DMCA”), which makes it illegal to sell any device that is primarily designed or produced to circumvent a technological measure that effectively controls access to copyrighted works. 17 U.S.C. §1201(a)(2).

“Filipiak stipulated to liability for selling circumvention devices. The court awarded Sony over $6 million in statutory damages under 17 U.S.C. §1203(c)(3)(A).”

InternetCases.com. Hefty Award to Sony In Action Against Seller of PlayStation 2 ‘Mod Chips.’ Jan. 13, 2006.

See also:

CopyCense. Hackers Bypass PSP Copy Protection. May 7, 2005.

CopyCense™: K. Matthew Dames on the intersection of business, law and technology. A business venture of Seso Digital LLC.

“A tiny Massachusetts company named TVMyPod is selling iPods that come with movies and TV programs already loaded on them, a practice that raises questions of legality as it addresses consumer demand for convenience and portability.

“Customers choose any content currently available on a DVD and which iPod they want. TVMyPod then puts the content on the player and ships the original DVDs along with the iPod restored to its original packaging.”

Reuters. TVMyPod Ventures Into Copyright Gray Area. News.com. Jan. 20, 2006.

See also:

Chris Marlowe. IPods Pre-Loaded With Video Tread Legal Gray Zone. Yahoo! News. Jan 20, 2006.

Update:

Kevin Maney. Preloaded iPods Prompt Legal Ponderings. USA Today. Jan. 24, 2006.

Editor’s Note: CopyCense’s K. Matthew Dames has written a comprehensive article on the first sale doctrine. That article, “First Sale in the Digital Age,” appears in the Monday, Jan. 23 edition of CopyCense.

CopyCense™: K. Matthew Dames on the intersection of business, law and technology. A business venture of Seso Digital LLC.

“Apple Computer’s announcement of new Macs based on processors from Intel raises an interesting question: Since both the Mac and Windows operating systems now run on Intel-based hardware, shouldn’t it be easy to run both on the same computer?

“That simple question deserves a simple answer. But there isn’t one–at least not right now. Reaching the nirvana of running the two most popular desktop operating systems on one machine is a lot harder than you might expect.”

Ina Fried. Will Your Intel-based Mac Run Windows? News.com. Jan. 20, 2006.

CopyCense™: K. Matthew Dames on the intersection of business, law and technology. A business venture of Seso Digital LLC.