Tag Archives: first sale

Reselling MP3s? RiDigi-lous, Judge Rules

“They took the credit for your second symphony. Rewritten by machine on new technology.” “Video Killed The Radio Star” by The Buggles.

I’ve spent many happy hours browsing through the bins of second-hand record stores. Used LPs and CDs–some rare, some foreign, some familiar, all at bargain prices–what’s not to like? And all made possible by a provision of U.S. Copyright law called the “First Sale Doctrine.” That’s the same First Sale Doctrine that the Supreme Court recently interpreted in Kirtsaeng v. John Wiley & Sons, which was the subject of a post on this very blog. In that case, the High Court applied the First Sale Doctrine to textbooks purchased abroad and shipped to the States for resale here. The First Sale Doctrine also applies to recorded music, or what the Copyright law calls “phonorecords.” Under the doctrine, when you pay for a record, a cassette, or a cd, you have the right to do what you wish with it–play it endlessly, use it as a coaster or doorstop, and sell it to others. And you can do all that without getting permission from the copyright owner. The first sale “exhausts” the copyright, leaving the purchaser free of copyright restrictions if he or she tires of it and wants to sell it. But making more copies is another story– the First Sale Doctrine does not permit that. If it did, we could all go into the record business, copying our Beatles and Mumford and Sons CDs for fun and profit.

But the music business has changed–as we all know from the explosion of iPods, iPhones, Androids, and The Cloud. Today, many, if not most, music consumers get their music digitally, in the form of MP3s. So does the First Sale Doctrine apply in the new digital frontier?

That’s the issue that a Federal Court grappled with in the case of Capitol Records v. ReDigi Inc. As NPR reported today “ReDigi is basically a digital version of a used-record store. You can sell the company your old MP3s, and you can buy “used” MP3s that other people have sold. ReDigi says its technology ensures that the person selling a used MP3 can only sell it once and can’t keep listening it after it’s been sold.” In ReDigi’s view, the First Sale Doctrine should be an equal opportunity provision that protects ReDigi as much as it protects the Record Annex in you local strip mall.

Capitol Records wasn’t buying ReDigi’s tune. In the lawsuit, it argues that MP3’s aren’t the same as records and cds. According to the record company, you can’t transfer an MP3 without making a new copy–and doing that is no different from copying a CD or LP and reselling it–it’s copyright infringement, the label contends.

According to NPR, the case raises such existential questions as:
“Do you really own something if it’s just a bunch of ones and zeroes on your computer? If you take a digital song and you move someplace else, did you actually move it or did you just make a copy and destroy the original?”

To answer these vexing questions, the court boldly went where few courts have gone before, to Star Trek:

THE COURT: I kept thinking about this, but — I’m not a Trekkie, but I kept thinking it’s the difference from Captain Kirk going from the Enterprise to the planet through that transporter thing, where he’s not duplicated, to the cloning where there’s a good and a bad Captain Kirk where they’re both running around. I think one is a copy and the other is — the other was transported and it’s only one Captain Kirk.

MR. MANDEL: Right. And, you know, that’s part of the problem we have at a basic level because it’s not Star Trek here, and I don’t think they’re really saying —

THE COURT: Wouldn’t it be cool if it were?

Ultimately, the Court sided with Capitol Records, ruling the First Sale Doctrine doesn’t apply to ReDigi because the digital music files it handles don’t just change hands like a CD, but are copied.

The judge did not categorically rule out the First Sale Doctrine for digital works; he concluded however, that
the doctrine only protects the sale of that ” ‘particular’ phonorecord, be it a computer hard disk, iPod, or other memory device onto which the file was originally downloaded.” As NPR put it “in other words . . . you can sell your old MP3s — as long as you sell them along with whatever device you used to download the MP3s in the first place.”

ReDigi plans to appeal the ruling. They also say they’ve got the new technology that solves their First Sale problem.

So stay tuned–perhaps there will be a secondary market for MP3s after all. Then, someone will have to invent a way to replicate the joy of browsing through dog-eared LPs while inhaling the musty air of a brick and mortar second-hand record store. That challenge might stump even Mr. Spock.

QUOTE OF THE DAY: “Now Mr. Spock, there’s really something about all this that I don’t understand, so maybe you could explain it to me, logically of course…” James T. Kirk, Star Trek.

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Bring Us Your Tired, Your Poor, Your Textbooks?: First Sale Goes Global

“If you really like it you can have the rights,
It could make a million for you overnight.”  Paperback Writer,
Lennon and McCartney

So you’ve come to the U.S. from Thailand to pursue a degree at an elite American college.  Things are looking up, until you’re hit with that first tuition bill and the accompanying rapid onset of sticker shock.  Financial aid and student loans are options, but you’re not enthralled by the prospect of leaving school a quarter million dollars in debt.  So what do you do?  If you’re Supap Kirtsaeng, a math student at Cornell and a Thai national, you think fast and do some simple arithmetic.  The textbooks for courses at Cornell and other schools can be bought for a fraction of the cost back home.  And the cost of shipping them to the United States barely eats into the prospective profits.   So, as Mr. Kirtsaeng did, it becomes a simple exercise to have relatives back home buy up textbooks for resale here. Kirstaeng reportedly netted over $100,000 through this international used-book program–enough to pay for two Ivy League semesters.

While Mr. Kirtsaeng was sailing through school, a major U.S. book publisher was stewing–and suing. John Wiley & Sons charged Kirtsaeng with infringing its copyrights. Wiley claimed that the law allowed it to “divide and conquer” the world markets, setting different prices for different markets–with the U.S. editions commanding this highest price tags. Wiley recognized that a provision of Copyright law called “the first sale doctrine” allows anyone who buys a copyrighted work, such as a book or cd, to resell it without permission from the copyright owner. But according to Wiley, the protections of the first sale doctrine ended at the U.S border.

The trial court and appeals court agreed with Wiley. Undeterred and showing the pluck that led him to conceive his bookselling strategy, Kirstaeng appealed to the Supreme Court, urging the nine justices to conclude that the law means what it says–that the first sale of a copy lawfully made under the U.S. Copyright law exhausts the copyright, regardless of where that sale takes place.

In a 6-3 ruling, the High Court sided with Kirstaeng, holding that because the books were Real McCoys “lawfully made” by the copyright owner, they were subject to the first sale doctrine.

Reaction to the Court’s ruling divided along predictable lines. Consumer groups praised it as ushering in new freedom for American consumers to shop worldwide for copyrighted materials. As one spokesperson told the New York Times “Americans [will] no longer be the chumps who pay the highest prices in the world . . .”

Others were chagrined, predicting drastic changes in the way content, such as books and software, will be distributed. As the Business Software Alliance wrote in its brief “Software authors will have little incentive to price their programs for foreign markets if they can simply be resold in the United States and thereby undercut the price of the domestic version.”

The Times even pondered whether “the decision might even hasten the near-demise of print–spurring publishers into a digital works where they can license their books rather than sell them . . .”

Two years ago, the Supreme Court could not decide whether the first sale doctrine allowed the importaion for resale of copyright-protected watches intended for foreign markets. Now, with its decision in the Kirstaeng case, the scope and international reach of the first sale doctrine no longer is in doubt. Proving once again that even with global forces aligned against you, sometimes all it takes is the old college try.

QUOTE OF THE DAY: “The love of one’s country is a splendid thing. But why should love stop at the border?” –Pablo Casals

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