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.
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