Congress: Should the First Sale Rule Include Digital Goods?

This week, publishing executives, technology leaders, and public interest groups gave testimony regarding ownership of purchased digital goods. The “first sale” rule currently allows people to resell or lend out physical goods like music and books, while this law does not cover digital goods, such as those sold by Amazon and Apple. Post-testimony, the House Judiciary Committee remained skeptical that property rights of physical goods should extend to the digital world.

news_02_smallSome members of Congress added that companies should be more clear in declaring how customers can use these purchased digital goods.

UCLA Professor John Villasenor testified, “I believe that content providers have at least an ethical obligation — and quite possibly a legal obligation under consumer protection laws — to clearly structure their offerings so that consumers are informed about restrictions accompanying their purchases of digital copies of copyrighted works.”

The “first sale” rule does not apply to digital goods because publishers give customers a license to use this work rather than outright selling it. With a license to use the work, customers cannot sell or lend any digital works.

According to GigaOM, “Several of the witnesses pointed out that requiring first sale for digital media, which is so easy to exchange and reproduce, would likely bring major harm to the primary market for books and music. Others noted that second hand digital files don’t really become ‘used’ or become deteriorated like books and records.”

However, John Ossenmacher, CEO of ReDigi, claimed it should be legal to resell digital works. ReDigi, a company that allows people to sell songs, was ruled liable for copyright infringement last year despite the fact that it checked to make sure that the original owner has not kept a copy of the song he or she sells.

“Market forces may eventually lead companies like Amazon and Apple to compete with one another on the basis of their license terms — with companies trying to stand out by offering simpler and more advantageous offerings,” GigaOM explains. “In practice, this might lead companies to place a ‘lease’ button next to a more expensive ‘buy’ option. In the ‘buy’ scenario case, the company would provide tools to treat the digital good like an ordinary piece of property, letting the consumer resell it or give it away or bequeath it in a will.”