Why Ownership Rights Matter
The assurance that if you bought it, you own it is a fundamental right that is critical to commerce. Small businesses, major retailers, consumers, internet companies and libraries alike rely on the guarantee that they own the goods they purchase and are thus able to resell, give away and use the goods they buy in any lawful manner. Without this right, any product produced overseas could be subject to resale restrictions. That means museums could be prohibited from hanging foreign-made paintings, libraries may be unable to lend books, individuals could be restricted from donating certain goods to charities, and businesses could face new liabilities for selling some goods that were manufactured overseas.
First Sale and Kirstaeng v. Wiley Supreme Court Case
This case centers on a graduate student named Supap Kirtsaeng and represents the foundation for the existence of ORI. Kirtsaeng bought authentic textbooks through friends and family in Thailand and sold them online to buyers in the United States. Kirtsaeng was sued by the book publisher, John Wiley & Sons Inc., who claimed that copyright law barred his unauthorized sales of those textbooks. Kirstaeng asserts that he had the right to sell the books because he lawfully purchased them in Thailand.
For over 100 years in the United States, if you bought something, you could resell it, a right protected by a statute in the Copyright Act referred to as the ‘first sale doctrine.’ Specifically the Copyright Act allows the owner of a particular copy “lawfully made under this title” to sell or otherwise dispose of the possession of that copy without the authority of the copyright owner.
The lower courts ruled against Kirtsaeng, holding that because the books were manufactured abroad, he was in violation of U.S. copyright law for being an unauthorized seller. The case was appealed to the Supreme Court. The high court heard arguments in the case on October 29, 2012 and a decision will be made during the court’s 2013 term. In a landmark decision the Supreme Court ruled that regardless of where a good is manufactured, that once the good has gone through a legitimate first sale, the new owner may do with it as they please.
Read more about the legal history of ownership rights.
Free Trade for Small Businesses and Consumers
The Internet not only opened access to information for people around the world but it enabled any person, anywhere, to participate in global trade. If you’ve ever sold an iPod or a handbag from to someone in Europe, you are a participant in the global markets. Unfortunately the laws that promote free trade have failed to keep pace with the ability of individuals to transact in goods. In the United States, the Kirtsaeng decision enabled owners’ to trade in imported goods free in the knowledge that their ownership rights are secure. This is called the doctrine of worldwide exhaustion. Once a good, that has gone through a first sale, has crossed the US border, the copyright holders’ rights are extinguished and they have no claim to the good. Unfortunately the same doctrine does not exist when goods are imported into Europe. If you try to sell a good with a copyright or trademark into Europe you will need the copyright holders permission. Ironically, if you want to sell these goods between EU Member Countries, it’s not a problem (this is called regional exhaustion). Copyright holders might say that they’re not interested in stopping small sellers or businesses but remember, Supap Kirtsaeng was a college graduate student when they sued him in the United States.
ORI is working diligently to promote the free flow of trademarked goods around the world. We believe that US small businesses and sellers are disadvantaged when they cannot sell these goods into the EU, but EU businesses can sell into the US. Likewise, we believe this disadvantages EU consumers by forcing them to buy domestic goods at potentially higher prices. Therefore, we’re engaging policymakers in the US and EU to open up the free exchange of trademarked goods. We believe that the doctrine of regional exhaustion, whereby you can sell trademarked goods between EU Member States, should be extended to goods sold from the US to the EU. The EU and US are engaged in a trade negotiation also referred to as the Transatlantic Trade and Investment Partnership (TTIP). Including a provision in the TTIP to include open borders for trademarked goods is a high priority for ORI.
Physical Goods with Essential Software
As more and more goods require software for functionality, ORI and its’ members are concerned that manufacturers are limiting the free transfer of this software when reselling the physical product. Even though the consumers buy the physical products, ranging from high-end servers to toasters, the manufacturers often claim that they are just licensing the software essential to the products’ operation. These licenses can contain a variety of restrictive terms that interfere with resale of the products, thereby harming the consumers that want to sell equipment they no longer want and the secondary market consumers that want to buy that used equipment. ORI believes that manufacturers should not be permitted to use software licenses to interfere with the resale of products.
The legal fiction on which these restrictive practices is based is that the essential software is licensed, not sold, to the purchaser of the hardware in which the software is installed. The manufacturers argue that because the purchaser is merely a licensee of the copy of the software, it does not have rights that normally accrue to the owner of a copy, such as the first sale doctrine or the right to make temporary internal copies necessary for the operation of a computer. We believe this is a fiction that violates the first sale doctrine and the common sense rights that owners’ believe they have when they purchase a physical good with a software component. ORI strongly endorses legislation introduced by Congressman Blake Farenthold (R-TX) to fix this problem. We will be working diligently to increase support and awareness for the You Own Devices Act (YODA). ORI Members and supporters are encouraged to call their Congressman and ask them to cosponsor this important piece of legislation.
Digital First Sale
Given the importance of the first sale doctrine, we support the ongoing examination by the US Congress, the Department of Commerce and others of how the doctrine could be applied to digital goods. While we understand the need to assess carefully the nuances involving digital goods, we believe that the concept of ownership should apply in a technology neutral manner and that stakeholders ultimately should work towards a solution that enshrines the first sale principle in the context of digital goods because of consumer expectations about the goods they purchase.