Posted by: Vikram Amritraj
April 17, 2015
John Lennon probably meant something very different in his iconic 1971 classic “Imagine” when he penned the line “imagine no possessions, I wonder if you can.” But a little over forty years later it seems as though we probably don’t need to wonder anymore. We live in a world where digital goods are increasingly replacing physical ones, and licenses to use those goods are the norm rather than traditional sales to own them. What does this mean? In the future, the notion of owning “possessions” might be a thing of the past and companies may be able to tell us what to do with our stuff even after we buy it, but is this necessarily bad for consumers?
In 1908, a publishing company Bobbs Merrill Co. sold copies of the novel The Castaway for the price of one dollar with an express provision that stated “[n]o dealer is licensed to sell it at a less price [or it] will be treated as an infringement of the copyright.” When a retailer purchased the books from a wholesale dealer and resold them for 89¢ each, Bobbs Merrill brought suit for infringement. Ruling for the defendant, the Supreme Court held that a copyright holder cannot restrict future sales of a book, especially when there is no privity of contract.
This ruling sowed the seeds of the first sale doctrine, which is now codified in 17 U.S.C. §109(a). It basically states that an owner of a lawful copy of a work can “sell or otherwise dispose of the possession of that copy” without needing permission from the copyright owner. It sounds full-proof; once you buy something, you can do whatever you want with it. Additionally in today’s legal landscape, the affirmative defense of copyright misuse is supposed to prevent copyright owners from unfairly extending the scope of the rights granted by copyright law. It seems like the law is already equipped to prevent intellectual property owners from telling us what to do with our stuff, but that’s not entirely true.
Don’t get me wrong, the first sale doctrine is still good law and copyright misuse is still an affirmative defense, but the emergence of software in the digital age fundamentally changed the idea of “buying” and “ownership” to the point where courts now must decide when and if the first sale doctrine applies. Case in point: Vernor v. Autodesk, where a 9th Circuit court held that an individual (Vernor) who lawfully purchased a copy of software from a third party and resold it on eBay did not actually receive title to the software because the third party was a licensee of the Autodesk software and bound by its terms not to resell.
Although the facts of the case are very similar to Bobbs Merrill Co., the outcome was very different – any time a EULA (end user license agreement) states that the transaction is a license and not a sale, the purchaser is not an “owner” of the software and does not get the benefits of the first sale doctrine (because there was no sale). In fact, the purchaser does not get the benefits of any rights in the copyright law (“owners” of copies get these rights), only those afforded by the license agreement under contract law. This means that EULAs can restrict what software users can do with the product after they buy it, which could be a restriction on just about anything.
While it is important to note that this line of reasoning is binding only in the 9th circuit, Vernor is an especially key ruling because some of the largest, wealthiest intellectual property holders call California and the 9th Circuit home. Because of this, chances are those EULAs you agreed to in all your software have an arbitration or choice of forum/law clause that leads you to California and the 9th Circuit. Practically what does this mean for the consumer? In most situations all I want to do is use the software once I buy it; so if the license agreement lets me do that then why do I care about the license vs. sale distinction?
For one, there is the death of the resale market. Anyone who has saved a ton of money by buying used stuff rather than its brand new, overpriced counterpart knows what I’m talking about. The first sale doctrine is directly responsible for that, and the licensing model is directly responsible for destroying that. Allow me to let you in on a not-so-secret secret, a lot of companies despise the resale market because it kills their ability to control the overall market for their product as well as newer versions of that product that now have an alternative due to downstream sales of the older version. For example, I bought a 2009 Apple Macbook for half the price Apple was selling its 2010 version. If there was no resale market for the 2009 Macbook, I would have had to buy the 2010 version from Apple. Therefore, Apple lost out on my business.
Another reason we should care about the license vs. sale distinction is the right to modify the things we buy. A fundamental right of ownership is that we are free to change, alter or transform a product in any way we see fit in order to use it the way we want. However, modification of software enabled devices requires access to the code in those devices, which is generally protected by EULAs. If we are bound by the terms of the EULA and the EULA makes modification a breach, then we are no more allowed to modify a program than we are to resell it.
Alright, so we know that software companies can slap a EULA on their product, sell it to us, call it a license and tell us what to do with it, but I know what you’re thinking; this all only applies to software and not everything else so what’s the big deal? Well, I hate to break it to you but software is not only replacing physical things we used to own, but it is also becoming embedded in the physical things we will own. Remember when you could buy a CD or a DVD, play it on whatever CD or DVD player you wanted, take it wherever you wanted to go, loan it to a friend, or even sell it when you were done with it? If you’re an iTunes person (and a lawful media consumer), when was the last time you were able to loan a friend some music or the latest film release? When was the last time you could play that song or movie on a device that wasn’t running iTunes or an Apple OS? Unless you breached the terms of your license agreement, I’m almost 100% sure the answer is never.
From music and movies to the impending “internet of things” the licensing model could continually shrink our ownership in the everyday things we use, and thus shrink the rights we have in those things. However, here is where things get interesting. If you thought the internet of things is as intrusive as the licensing model could get, think again. The increasing developments in 3D printing may eventually create a world where we don’t buy things, we buy software code that creates things.
Try and imagine a world where you don’t go to the shoe store and buy your shoes, but you license access to a software code that allows you (or a third party printing service) to “print” the shoes. Will you have the same ownership over those shoes as you did before; or will you simply have a license to use them as per the EULA you will have agreed to in obtaining access to the code? This is the question we may have to ask ourselves with regards to any conceivable consumer good that can be 3D printed – clothing, furniture, electronics, even human tissue and organs; the potential invasiveness of the licensing model is staggering.
As of now, the answers to whether the software license agreements can even extend this far remains to be seen, however the questions are worth asking and we should be prepared for a world in which software merges with everything. Like I said, I don’t think this is what John Lennon had in mind when he wrote Imagine, but a world without possessions just doesn’t sound as good as when he originally said it.