(C): First Sale Doctrine

by Howie Cockrill

Last week, a federal district judge in California dismissed a copyright infringement suit brought by Universal Music Group against a man selling Universal’s “promo” CDs on eBay. 

This decision is not a minor blip on the music industry’s radar, and at the case’s heart was something called the “first sale doctrine.” 

So – what is the first sale doctrine, and why should you care?

Excellent questions – let’s see if I can answer them.

INTRO

The First Sale Doctrine simply states that once you legally own a copy of a copyrighted work, you can then turn around and sell, give or sometimes rent out your copy to someone else – without the permission of the copyright owner.   

Remember – copyright owners have 5 exclusive rights to their works.  They have the sole right to:  (DR DAP)

1. Distribute
2. Reproduce
3. Display publicly
4. Alter
5. Perform publicly

Focusing on the first right – copyright owners have the exclusive right to distribute copies of their works to the public by a sale or other ownership transfer, or by a license.

The First Sale Doctrine is thus a limit on the copyright owner’s exclusive distribution right – and the limit is in favor of the public.

Even though the copyright owner has the sole right to distribute copies of their work, this right only goes so far as the first “sale.” 

I put “sale” in quotes because, even though its called the First Sale Doctrine – it applies not just to sales, but to any transfer of ownership – for instance, gifts.

Once the owner has transferred ownership of a copy of their work, they no longer have exclusive distribution rights as to that copy.

Note that the First Sale Doctrine does not give you as a consumer permission to “do whatever you want” with the copy you lawfully received. 

The First Sale Doctrine does not authorize you to make and sell copies of your copy without the copyright owner's permission. 

Making unauthorized copies violates the copyright owner’s exclusive reproduction right, and selling unauthorized copies violates the copyright owner’s exclusive distribution right.

But you can certainly take your old CDs to the used music store and sell them.  And you can certainly go to the used music store and buy someone else’s old CDs. 

The point is – these transactions do not have to go through the original copyright holder, thanks to the First Sale Doctrine.

BOBS-MERRILL v. STRAUS

The First Sale Doctrine first showed up in the U.S. in 1908 in the Supreme Court’s opinion in Bobs-Merrill v. Straus.

In that case, Bobs-Merrill was a book publisher.  In one of their novels, they inserted language just below the copyright symbol that stated: 

The price of this book at retail is $1 net.  No dealer is licensed to sell it at a lower price, and a sale at a lower price will be treated as an infringement of the copyright.

The department store Macy’s bought books at wholesale and resold them at 89 cents each, including the Bobs-Merrill novel.   Bobs-Merrill then sued Macy’s for copyright infringement.

The Supreme Court ruled that copyright law protects an owner’s right to distribute and sell their works, but it does give the owner rights to limit redistribution and resale of the work.

This is not to say that an owner couldn’t get rights over redistribution and resale by way of a contract between themselves and a purchaser or a distributor.

17 U.S.C. 109

After Bobbs-Merrill, the First Sale Doctrine was eventually enacted as federal legislation as Section 109 of the Copyright Act of 1976.

Summed up, Section 109 states that:

A consumer who owns a lawfully made copy of a copyrighted work, or any person authorized by that consumer, is entitled to sell or otherwise dispose of his or her possession of that particular copy, without needing permission from the copyright owner.

EXCEPTIONS

As with everything in law, there are some major exceptions to the First Sale Doctrine – which, as you’ll remember, is itself an exception to the copyright owner’s distribution right.

All of the exceptions in Section 109 apply to either sound recordings, computer programs and video games. 

To keep things simple here, I’m going to focus on the sound recording exceptions.

For example, some older compositions that had fallen into the public domain were restored to copyright protection so that the U.S. could bring its copyright law in line with foreign countries, as required by certain intellectual property treaties.

For copies of these “restored works” that were made before the works were restored, the First Sale Doctrine only applies for 12 months after the works were restored. 

Thereafter, owners of these pre-restoration copies must get permission from the copyright owner of the restored work if they want to sell the copies.

Here’s another exception.  The First Sale Doctrine does not apply to the “rental, lease or lending” for profit of sound recordings.

In other words, a person or company can’t rent or loan out CDs, tapes, vinyl, hard drives or other media embodying sound recordings, without the express permission of the copyright owners – even if the person or company got the recording by buying it.

Ah – but exception to this exception:  Non-profits, like libraries, can rent, lease or lend records. 

Also – the First Sale Doctrine does not apply to anyone who came into possession of their copy of the recording by rental, lease or lending – in other words, anyone who came into possession without acquiring ownership.

Check back with MELON for Part 2 of this article - in which I take a look at a recent California federal district court's ruling on the First Sale Doctrine in Universal Music Group v. Augusto.