The Unintended Consequences of Modifying Copyright Law

On June 2, John Villasenor testified before the House Subcommittee on Courts, Intellectual Property, and the Internet. In his statement, he argued that there are a number of unintended consequences that would arise if U.S. copyright law was modified to introduce a “digital first sale” doctrine.

First Sale Doctrine

First sale doctrine as it exists today can most easily be understood in the context of books. Suppose someone walks into a bookstore and buys a brand new paperback book. After she reads the book, she could decide to lend it to a friend who lives down the street or donate it to the local library. Under the first sale doctrine, these actions are legal because she is the owner of that particular copy.

This proves difficult with digital versions of creative works. No longer are copyrighted works like CDs or books transferred physically from person to person. The transfers are occurring electronically and a new copy of the work is created at the destination of the transfer.

A person who purchases a book from a bookstore or CD from a music store has more flexibility than a person who purchases an electronic book or digital copy of a song online. The first sale doctrine does not allow the digital purchaser to electronically transfer their files to someone else pursuant to a loan or sale. Villasenor states that if this first sale doctrine was changed to include digital works, the change would be exploited and would open up a Pandora’s Box of unintended consequences.

Unintended Consequences of a Digital First Sale Doctrine

• Short duration loans of digital works could be facilitated by web-based services that would match listeners and owners whose copies of requested songs were sitting unused on hard drives. In this situation, the recording artist would only sell a small number of copies to the web-based services as opposed to selling copies to every listener. This would dramatically reduce the market for digital music sales.
   
• Normally, used printed books, CDs, and DVDs are less valuable than their brand new counterparts. On the other hand, a digital representation of a work can be transferred countless times and stay exactly the same with no wear-and-tear. “Used” digital copies never become less valuable and this would cause the market to behave differently.

Licensing-Based Content Distribution

Villasenor argues that to introduce a digital first sale doctrine into U.S. copyright law would be a mistake. Instead, he proposes to look towards the increasingly relevant licensing-based content distribution. Due to this shift, consumers of digital content are more likely to be licensees than owners. When using Internet-based music streaming and movie streaming services, most consumers are aware that they do not own a copy of this product. However, customers who “buy” copies of digital works are often subject to terms of use agreements specifying that they are licensees, not owners. Very few consumers take the time to read the full agreements. When consumers are considering acquiring content that they will be prohibited from loaning, selling, giving as a gift, or bequeathing to an heir, that information should be presented in easy-to-understand language before the “purchase” is complete.

Villasenor argues that these uses should not be addressed through changes to copyright law or judicial decisions. Instead, consumers who license copyrighted works should have access to clear, up-front descriptions regarding the permitted and prohibited uses of the content. A more balanced approach would be to allow the market to experiment with a diversity of solutions which could permit licensees to engage in dispositions of digital content similar to those that have long been available to owners of tangible copies of works.

Find the full testimony here. 

Portions of the testimony were adapted from an article John Villasenor published last year in Competition Policy International Antitrust Chronicle.