Brands can’t use copyright to stop resales, court confirms

In 2013, the fate of everything from used bookstores to neighborhood garage sales hung in the balance as the Supreme Court decided whether it was legal for people to sell secondhand goods without the permission of the original owner. Fortunately for resellers, the court said it was and, this week, a new court ruling cleared up the issue once and for all — for physical goods that is. Digital possessions are still a different story.

If you’re unfamiliar, the Supreme Court case was about imported textbooks, but the reason the issue had become a national fuss in the first place was thanks to watch maker Omega, which made a devious decision to stop the retailer Costco from importing its watches.

Omega did this by putting a small picture on the watch, and then pointing to an ambiguous part of the Copyright Act (“lawfully made under this title”) to say that a right to resell works under copyright only applied if the goods were made in the U.S.

Even if Costco had bought the watches fair and square overseas, Omega argued, the small picture meant that the watches were covered by copyright law, and that Costco could not around and sell them in its U.S. stores. To the surprise of many, an appeals court in California bought this argument and, all of a sudden, anyone selling used goods not made in the U.S.A. faced the nasty possibility of having to seek permission from the overseas owner.

The ensuing legal squabble between Costco and Omega actually reached the Supreme Court in 2010, but resulted in a rare 4-4 tie, leaving the situation in further limbo. It wasn’t until the textbook case in 2013, known as Kirtsaeng, that the court finally cleared up the matter, ruling 6-3 that the so-called “first sale” doctrine — which ends the control of copyright owner to limit sales — applied to goods bought anywhere.

And now, in a bit of mop-up work, the California appeals court this week returned to the original Costco-Omega fight, but this time sided resoundingly with Costco.

Project Disco has a good write-up of the decision but, in short, the upshot is that a three-judge panel applied the Supreme Court textbook case to put a stop to Omega’s campaign. And in an interesting twist, one of the judges wanted to go further and uphold a lower court finding that Omega had committed “copyright misuse.”

While the whole affair might seem to be no more than a question of common sense, the issue of “first sale” could become a hot issue in the future as a result of many of our possessions becoming digital. Unlike a book or record on our shelf, we don’t actually own our iTunes songs or Kindle copies — we simply license them at the whim of Apple and Amazon. This situation has led some to argue before Congress, which is currently reviewing the state of copyright law, that there should also be a digital right of resale.

U.S. copyright review expands

The Commerce Department recommendations, which represent the views of the Obama Administration, come as the Judiciary Committee remains very much in fact-finding mode in its review, setting up the potential for conflicting agendas and timetables in what will inevitably be a contentious process of revising current copyright law and policy.

First sale’s big fail

In a nutshell, the court found that any transfer of a digital file from one hard drive or storage device to another inescapably involves making a new copy of the file on the second device. Since that copy is not made under license, it is not a “lawfully made” as required by the first sale doctrine.

Supreme Court ruling puts first sale front and center

By allowing copies of books, movie discs, video games, and CDs purchased in low-cost territories to be resold in the U.S., Tuesday’s Supreme Court ruling puts at risk the long-standing practice of licensing rights on a territory-by-territory basis.

Managing digital resale

Like Amazon, Apple is not asserting that its users have a right independent of their being Apple customers to resell digital goods, as they would with physical goods. It’s describing a service that allows them to transfer digital goods among themselves under Apple’s supervision.

Resale value

The contrast between the ReDigi system and the system described in Amazon’s patent highlights a subtle but potentially crucial question for the future of the used-digital market: On what basis should “used” digital goods be valued relative to their “new” state?

No (first) sale for Amazon

Amazon seems to be envisioning a defined, DRM-controlled ecosystem, with a limited ability to transfer digital files among registered users, managed by Amazon and operating under license from rights owners.