The legal environment impacts the
success of businesses very significantly. It determines the level of protection
of property and the obligations of businesses and the level of revenues
realisable. One of the main elements of the legal environment is the copyright
provisions. Copyright is the legal right over intellectual property restricting
sale, redistribution, reproduction and other forms of uses (Feiler, 2012). The owner
of the copyright is protected and this plays an important role in preserving
their performance. However, there have been developments in the copyright law
referred to as the first sale doctrine. This doctrine allows the consumers of
products the right to resell or redistribute materials purchased (Long, 2006).
This is by virtue of the fact that the owner’s rights to an item diminish the
moment the products are sold out. This paper explores the challenges of the
first sale doctrine and recommendations that can be applied to overcome them.
Copyright laws have undergone some
changes with many persons decrying the apparent level of legal protection
offered. In the Copyright Act 1976, the US Congress redefined the law whence it
dropped reference to ‘all writings of an author’ and replaced it with ‘original
works of an author’ (Torremans, 2009). The law further restricted the
application of the law to exclude procedures, ideas, procedure and method of
operation (Torremans, 2009). Under the copyright law, three requirements must
be fulfilled with the impact being the need to ensure that there is
originality. It therefore imposes a duty on the copyright holders to also
ensure that they only seek protection for what is justifiable. Nevertheless, in
applying what qualifies to be original in reference to authorship, requirement
for originality is not stringent and in most cases the authors would only need
to prove that they were independent in the process of compiling and arranging
the materials or facts (Stim, 2000). This legal provision creates a progressive
industry which does not restrict competitors from publishing further works of
literature. The courts have indeed been proven to adopt legal interpretations
that pave way for creativity and technological developments in their
application of the copyright laws. This was the case in the Betamax case where
the impact of the ruling was the facilitation of technological developments
across the world.
According to Porter (2013) strict
adherence to copyright laws is limited by the first sale doctrine. The
development of the first sale doctrine has revolutionised the business
environment and can be said to be detrimental to many businesses. This doctrine
can be described as the limitation of the seller’s rights after the first sale.
According to this doctrine, the consumer is at liberty to resell or reproduce
materials that have been legally purchased from the original owner. According
to McGrail and McGrail (2009), copyright has provided protection for authors
and publishers for centuries. They however decry the fact that the law has been
slow in the development of the law to conform to market trends in relation to
the digital revolution. The situation
has been complicated even more by the entrenchment of the first sale doctrine.
This is the provision that has been
brought out by Porter (2013) in a case that almost dealt a blow to
technological developments starting with Betamax. In this case, Betamax was
accused of being an accessory to crime by making it possible for consumers to
copy their favourite TV shows in order to watch them later. In effect, it
facilitated reproduction of content and possible remission of the same to
friends and even for sale. In another development, the congress declined to
forbid the resale of video tapes. In evoking the doctrine of first sale, the
congress stressed the fact that the customers owned the products immediately
they purchased them and therefore had the right to resell them (Porter, 2013).
In a similar case in 2013, there was
also a ruling entrenching the doctrine of first sale involving resale of Thai
books in the USA (Porter, 2013). In this case, Supap Kirtsaeng, a Thai math
student would receive books from his friends and relatives in Thailand and resell
them within the USA. This enabled him to generate profits as the US students
were relatively wealthier and could pay more for the books. The publisher John
Wiley & Sons had argued that Supap Kirtsaeng infringed on their copyright
by importing the products without permission. The court held that even though
Kirtsaeng was not allowed to reproduce or sell products, this restriction was
not applicable where the first sale had been made legally. This effectively
meant that he could legally sell second hand materials.
While this rule has been applicable
since 1908 when the first ruling was made, its real impact has been felt most
in the digital age (Newman, 2010). The ability of consumers to reproduce
content over the digitally has become more acute with the increase in the
popularity of the internet. In the non-digitised era, reproduction and
redistribution could be controlled through the existence of cost barriers.
However, the internet creates a readily accessible market for second hand
products which are similarly easy to sell through the existence of online
transaction infrastructure. This is even
easier for digital content where no actual shipping needs to be done for
customers distributed over long distances. Long (2006) elaborates this point
through an evaluation of the challenges that are faced by organisations in
relation to the enforcement of copyright laws over the internet. The first sale
doctrine makes this even more acute where third parties can legally acquire
products without having any part of the income remitted to the original order.
The mode of acquisition may be varied
with the underlying cap being that it ought to be legal. Under normal
circumstances, acquisition by sale is one of the most acceptable forms of
acquisition (Newman, 2010). However, other acquisition methods are recognised.
These include receiving of contents as gifts and others. The underlying theme
is that the doctrine of first sale applies the moment this transfer of title is
legally implemented. The doctrine of
first sale has been widely criticised for its capacity to erode copyright
privileges. This is in addition to challenges of enforcing copyright in the
digital age. The implication of copyright limitations such as the First Sale
Doctrine and remedies for the same are as highlighted below.
Overcoming
loopholes in copyright laws
The main beneficiary of the first sale
doctrine is the consumer. By allowing the legal sale of second hand products,
the consumers are able to access products at reasonable prices. In many of the
cases, these second hand sellers tend to access markets that are unable to
access the original products for one reason or another (Ilan et al., 2013). For
instance, where the manufacturers charge exorbitant prices, the second hand
seller who is no longer in need of the products may be willing to receive a
lower price hence making the products much cheaper. Similarly, accessibility
could be related to the question of distance. For instance, in the case of
Kirtsaeng (Porter, 2013), the student was able to obtain books all the way from
Thailand and avail them to the students in the USA. This solved the problem of
accessibility. The doctrine is therefore good for the consumer.
On the other hand, this doctrine harms
the companies in a number of ways. Firstly, scarcity of products leads to an
improvement of the price. In the absence of second hand sellers, the companies
can tap into this scarcity to realise greater profits (Rotstein, Evitt and
Williams, 2010). Besides, these second hand sellers diminish the prospect of
expansion to untapped markets as the same are already catered for through the
resale market. This makes it necessary for pragmatic business people to come up
with operative provisions that can enable them overcome the limitations posed
by the first sale doctrine.
One of the approaches used is through
the exploitation of the licensing approaches. Under licensing, the consumer is
granted the right to use a product but the ownership of the same is retained by
the seller (Newman, 2010). This means that they cannot legally transfer the
ownership of such products to other users as they are mere possessors and not
owners of the products. They can therefore be sued for breach of the licensing
terms in the event that they opt to resell the products. These provisions
effectively help to overcome the limitations imposed by the first sale
doctrine.
In regards to intellectual properties
such as music, videos and applications, it is possible to take measures to stop
users from reselling or sharing products (Porter, 2013). Technological
advancements make it possible to restrict the use of products. For instance,
restriction can be based on regions where a product can only be usable in a
certain country or region. Similarly, restriction can be based on the specific
computers and IP addresses. This means that the users could be disallowed from
using an application or product from different locations. This could
effectively step their tendency to resell the products. This proviso is in
addition to the designing of products in a manner that makes the products’
usability to fade with time. This can be done such that by the time the first
purchaser exhausts the usability of the same, it is no longer usable for
purposes of resale.
The existence of the first sale doctrine
could actually be a good incentive for companies to embrace more profitable
business models. The uniformity with which the rule is applied across most
jurisdictions gives businesses the same incentive to want to enhance their
profitability. In many cases, the licensing option tends to be cheaper than the
actual sale of products where ownership is transferred (Newman, 2010). However,
it tends to be more profitable by eliminating the possibility of resale.
Besides, this challenge prompts organisations to come up with applications that
restrict applications’ usability. This can in turn be very relevant for
purposes of stopping piracy with regular modifications that are difficult to
replicate by counterfeiters.
The doctrine of first sale is described
as a legal provision that gives the consumers the right to resell or
redistribute products that they have purchased. The only restriction is that
such products ought to have been acquired legally through sale, gifting, or any
other legally accepted means. The impact of this provision on consumers is that
it makes products more accessible and sometimes affordable. On the other hand,
it has the capacity to restrict the probability of the original owners
especially in the digital age where resale can be done with greater ease.
Nevertheless, there are sufficient remedies for the same. For instance,
companies can refrain from sale of products where ownership is passed to the
buyer and instead opt for licensing where they retain ownership. Technological advancements
can also be utilised to restrict usage to certain regions or computers. The
doctrine of first sale does not have to be an impediment for profitability in
business: it can be the incentive that propels businesses into adopting models
that could be more profitable.
For more theory and case studies on: http://expertresearchers.blogspot.com/
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