Internet Killed the First Sale Doctrine

Recently, consumers who bought digital copies of George Orwell’s 1984 for their Amazon Kindles woke up to an unpleasant surprise: every digital copy stored on an internet-connected Kindle was deleted. Apparently, the publisher that authorized the books to be sold for the Kindle never owned the rights to the book in the first place. Amazon found out about this, and decided to delete the books from customers’ devices, to avoid being sued. Customers who paid for the book received a refund.

Besides relishing in the irony of seemingly Orwellian tactics being applied to a George Orwell book, publications that specialize in law, technology, and literature have all speculated about what this means for the future of copyright law, “cloud computing,” and literature itself.

Of particular interest in this fiasco is the doctrine of first sale. Essentially, it is an important aspect of copyright law which allows the owners of particular (lawfully obtained) copies of a work to do whatever they like with the physical object in which it embodies, such as giving it to a friend, or selling it to a used bookstore, from which it can be re-sold. Note that it does not allow someone to make unauthorized copies of a work they have purchased. It only concerns the physical object, not the content.

But what happens when media is bought, sold, and consumed without ever being embodied in any physical form, such as digital media? Can the first sale doctrine be updated to accommodate digital media, or is it destined to become as irrelevant as physical media itself?

Some may be willing to give up the personal property rights that go with owning a physical copy of a work, in exchange for the convenience of being able to obtain the work immediately, and often at a lower price than a physical copy. Admittedly, I have bought digital copies of some of my favorite albums.

While there is certainly nothing wrong with digital media, and it may well be a positive good, on balance, the same cannot be said for the demise of the first sale doctrine.

The first sale doctrine allows for significant price competition in the retail market – it allows copyright owners to dictate the price of copies only when they are first sold – usually by publishers to wholesalers. Once that sale is complete, they have no control over the retail price. This means that more efficient sellers, who are able to keep their costs low, are able to sell copies at lower prices than their competitors, which provides the basis for a competitive marketplace.

Furthermore, it promotes the widespread availability of copyrighted works, even when the copyright owner has stopped selling them. Disney is notorious for this practice; they often stop selling their classic movies for several years at a time, and then re-release it as a special edition. This creates demand through artificial scarcity. Because of the first sale doctrine, it is pretty much assured that you can find a copy of any Disney movie you like, even if it is temporarily out of print. While nobody is questioning a copyright holder’s right to stop selling its products for any reason they see fit, the importance of copies already in existence being freely disseminated can also not be denied.