Introduction
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.
First
sale doctrine and the digital age
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.
The concept of first sale doctrine was
first developed in the case of Bobbs–Merrill
Co. v. Straus in 1908 when the courts held that: even though the original
seller has an exclusive right for sale and distribution of products, this right
does not extend to the imposition of price limitations on secondary sales
(Newman, 2010, p. 851). 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.
Application of the first sale doctrine
has been manifested through online applications such as Youtube where the music
files and videos are acquired legally from the content creators. The same are
then redistributed over millions of users across the world that may either
listen live or opt to download the content. In line with the doctrine of first
sale, Youtube is legally entitled to the reproduction and distribution of the
content. This is however within an acceptable framework where Youtube pays a
certain amount to the content creators based on the number of times their
videos are viewed. Nevertheless, the doctrine of first sale applies as is the
case with individual consumers who may opt to be second hand sellers.
The doctrine of first sale has been
widely criticised for its capacity to erode copyright privileges. The fact that
initial buyers can legally resell the products purchased means that the
original owners have no legal recourse (Karmel, 2012). This is in line with the
legal status of purchased products. Where the title of a product has been
transferred, the original owner’s rights are extremely limited with the new owner
entitled to do what he wills; including reselling the same. The doctrine of
first sale is therefore consistent with the common law provisions on ownership
of products and transfer of title. However, the doctrine has far reaching
implications for both the companies and the consumers as discussed below.
Impact
of the doctrine and remedies for companies
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.
Conclusion
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.
References
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