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Last week, the House Judiciary Intellectual Property (IP) subcommittee held a field hearing in New York City to discuss the “first sale” doctrine. The doctrine was first established in a Supreme Court case in 1908 and later codified in the Copyright Act of 1909. For nearly 100 years the doctrine stood without much challenge, but time and technology kept steadily marching on.
First sale is what allows the owner of a copy of a copyrighted work to resell, destroy or loan the copy. As copyright law gives an artist or inventor the exclusive right to distribution of their copyrighted works, this allowance is substantial.
However, first sale does not give any similar latitude in making copies, only in distribution. So, while a person may transfer a CD (because they own it) they may not copy the content of the CD (because the music is licensed from the artist for the CD owner’s use only) and sell those copies — the copy protected material must stay attached to the medium to be transferred. So, someone owning a CD may sell it online, or give it to a friend without concern. This makes sense. Not only does this arrangement generally confirm to what the public expects, it also avoids a really awkward system where a possessor of a copy of a copyrighted work would have to enter into a negotiation with the copyright owner when they wanted to sell or giveaway their CD. So, it is clear and easily understood that the physical medium “bought” imbued with the protected material that is licensed, can be legally transferred to others.
At the field hearing the committee members sought to hear more about first sale in today’s marketplace. They considered such questions as whether the notion that copy protected material is intimately intertwined with a physical medium is relevant today. And whether first sale should be applied to the relatively new world of digital content, where creations are not connected to a physical medium.
To say that technology has advanced radically over the last 100 years is cliché and trite, yet abundantly observable and painfully obvious. That a legal doctrine which is part of the fabric of innovation would need review after more than five generations can hardly be a surprise. That a doctrine fundamentally founded on the state of technology a century ago might not be applicable to new technology is also unsurprising. Few would we be shocked that an area designated “no parking” for horses because of the “pollution” they produce might later be changed to make the area available for car parking. (True story) Facts matter. Change matters.
Access to content today is easier and more pervasive than ever whether music, movies, books or software. Technology provides constant content access at your fingertips. Pandora, Spotify and iTunes; HBO Go, Ultraviolet, Disney Movies Anywhere, Hulu and TV Everywhere; Nook, Kindle and iBooks; app stores galore, just name a few, offer a variety of ways to access content over various devices that simply did not exist even a handful of years ago. We live in age of unbounded consumer choice.
Also, consumers benefit from the wide variety of business models that offer various price points for access to the same content. For example Disney routinely offers a bundle for those who want a DVD, a Blu-Ray disc and digital access. Other producers’ models allow access for a narrow window of time for a different price. Pandora provides an ad supported service for music with an ability to guide the genres, artists and songs a person hears. The consumer is empowered to choose the price that best fits their budget and lifestyle. Digital models also allow consumers to leave the physical medium behind and be able to access content where they want, when they want, with a device of their choosing.
But some argue that this variety must be limited by clinging to models that have more in common with the year of the introduction of the first Model T (1908) than with the technology, markets and consumer desires of today. They contend that a first sale doctrine must exist for digital goods, despite the overtly obvious and critical differences of digital copies.
Digital goods, obviously, have no similar limitations to IP that has been “fixed” in a medium. For example, when IP is fixed in a medium, when that medium is given away, the original owner of it no longer has access to the included creation. Rather, a digital good could be given away over and over again, one copy made into one million in a blink of an eye. The implications are clear. If one digital copy can be “bought,” but then sent to all who may be interested, particularly because such transfer can be done at little to no cost, then the original market for the product ceases. Basic economics teaches that then content creation will be chilled, raising the price of the first legitimate sale by the content creator will have to recoup all of the costs of the content creation, plus a rational profit. Such a “market” is unsustainable.
This is, in part, why the first sale doctrine never has conveyed or included permission to copy, to take someone’s property without asking. First sale only speaks to the right of distribution. On its face, if having the right to distribution means a right to copy, it would not fit within first sale thinking. Nor does first sale somehow convey a notion that any or every piece of IP must be conveyable after a consumer “buys” it. Rather, first sale defines how IP may be conveyed and under what limitations.
Despite the dramatic and obvious differences there are those stubbornly argue that the government should step in and insist a newly crafted first sale doctrine for digital goods. The result would be to lock in a government protected market, rather than allowing the market to continue to adapt to best serve the needs of the consumers. Those who argue for such a radical expansion of the doctrine stand the notion of “fair use” and first sale on its head. They also must deny the rapid advance of science and technology in the last one hundred years, and the market wrecking nature of their proposal.
Certainly such science, and dismal science, deniers should be denied.
The Copyright Alert System (CAS) has been operating for nearly a year now, and an analysis of its first ten months in action has been released. The CAS is a copyright infringement take down regime that did not require Congressional action, but rather relied on stake holders coming together to address challenges. According to the Center for Copyright Information, which coordinates the System, the “Copyright Alerts are part of a progressive educational system to help subscribers understand the significance of protecting copyright in the digital environment, to advise them about the importance of avoiding inadvertent or intentional online distribution of copyrighted content, and to suggest legal ways to obtain digital content. These alerts will be similar to current credit card fraud alerts.” The system employs a “six strikes” approach, so infringers can receive up to six notifications designed to educate and deter consumers from downloading or posting content that belongs to someone else. This system directly takes on the challenge of how potential copyright infringers should be handled.
Today the Center for Copyright Information released a report discussing the data collected so far, which shows that 1.3 million alerts were sent to 722,820 customer accounts. Over 70% of these alerts were in the initial educational stages. A mere 3%, only 37,000 accounts, of the alerts were the sixth notice.
An even better hallmark of initial success, “…only 265 challenges were filed under an independent review process that is managed by the American Arbitration Association and there was not one single case in which an invalid notice – or false positive – was identified. Indeed there were only 47 successful challenges in 2013, and the vast majority of those were based on an “unauthorized use of account” defense, indicating that the account holder had made a satisfactory case that someone other than the account holder or a known (authorized) person was using the account in question to engage in impermissible P2P filing sharing of copyrighted content.”
The takeaway? The first ten months have provided encouraging data that this system could be a tool to effect change. But to make sweeping declarations would be premature. Over the next many months, as more data is accumulated, more will be learned about the success of the system, not least of which will be whether the educational aspect is making a difference in the broader attitude about piracy.
Whether the solution is perfect or not, this result is better than a years-long legislative battle, which may fail to reach any sort of resolution. No law will ever address every issue, so private stakeholders should be encouraged, and should want, to craft infrastructure that solves the problems they perceive.
The CAS solution was reached because responsible, serious parties voluntarily engaged in dialogue. More success will come as all parties continue understand that they cannot stand on their own, that in fact an economically thriving digital ecosystem requires good faith cooperation, within the bounds of the law, and with an eye towards what is best for the broader ecosystem. In other words, the distributed nature of the Internet is a fundamental part of its design, and no one entity, whether private sector or government, can control it so stakeholder cooperation is imperative for the success of all.
As the CAS system matures strengths and weaknesses will be revealed, where the educational system has achieved successes and where challenges remain will come to light. For now though we can pronounce it a good start.
Recently some “conservative” commentary bereft of law, logic or facts, argued that the Comcast and Time Warner Cable transaction should be subject to “exceptionally rigorous review” and Congressional scrutiny because the Department of Justice, the FTC, and FCC, the agencies charged with review and approval of mergers, are corrupt.
The yellow journalism articles, and circulated letter, argue that the current government is too large and riddled with crony capitalism. But the letter goes much further suggesting that if an entity successfully advocates on its own behalf to keep the crushing power of a corrupt government at bay so that the company can continue operation, then it must only be because of crony capitalism. Or otherwise stated: if one successfully fights off government to gain liberty then one proves their complicity in crony capitalism. If you suddenly think of the witch trial practice of “dunking” then you properly understand the argument. “Dunking,” or ordeal by water, typically involved tying a person to a chair and forcefully dunking them underwater. If they floated it proved they were a witch, if they did not they were proven to not be a witch but were dead. No witches were ever found.
Pursuing tortured logic that sounds as if it came from the Monty Python skit about burning witches, they argue that government is too big, too involved, too powerful and too corrupt so to solve the problem we need more government involved in private transactions. This argument is novel in conservative or libertarian thinking, to say the least.
But worse, the slender reed on which their justification is hung is a vague and generalized argument of crony capitalism. While crony capitalism is an anathema to any market oriented thinker, no evidence other than advocacy and association, protected first amendment rights to redress and association, have been made in this case. The end result is that companies interested in freely transacting business are burdened with the “sins” of government.
Perversely the argument is that the rule of law be abandoned and an additional Congressional review be imposed. Also a curious argument for market oriented or conservative thinkers. If there has been wrongdoing then the proper course is to challenge the wrong doing legally, root it out by punishing the wrong doers. The call for government lead McCarthyism, casting aspersions based on guilt by association, is inappropriate.
The circulated letter specifically asserts that those who have signed on to it are defenders of the free market, but their arguments belie that they only support a “free market” of their own design, where a big government of their liking can do what it wants to interfere with a real free market. Very few would argue for marketplace anarchy, but once freedoms and liberties are established citizens should be free to conduct their business affairs as they see fit.
Further, the letter explicitly argues for a European style “competition law” which focuses on companies and competition, rather than U.S. antitrust law which instead focuses on consumers. This is not a marketplace that most in the U.S. would envision. As Tim H. Lee has written, “If the conservative movement has developed a fondness for activist government imposing a market status quo under some vague “public interest” standard, we must have missed the memo.”
Standing at the ready is a large and powerful antitrust and law enforcement operation if something untoward were to occur. Prophylactic measures, based on fear and ignorance that slow or stop market transactions or which impinge the freedom to assemble, are not appropriate.
Stunningly, they further advance an argument equating the technology and communications marketplace of 1982 to that of 2014, apparently believing that market conditions could hardly have advanced in 32 years. To even raise an argument in opposition seems silly, so suffice to say that the dramatic advance in technology and in the marketplace in the last two generations has been nothing short of breathtaking. To believe that twisted copper lines are the only means to broadband or video, when fiber and wireless are booming, is ludicrous and factually incorrect on its face.
But perhaps most revealing is the emailed “sales pitch” asking groups to sign on the letter. The email urged groups to sign, in part, because the letter “stops short of requesting outright oppression.” Stopping short of requesting outright oppression of citizens by a government they argue is corrupt is somehow positioned as a reason to support this new thinking? Wow.
“Come and see the violence inherent in the system!” That is a Monty Python skit/policy mash up for a different day…
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