Posted by: Bryan Zhao
April 19, 2015
Game of Thrones is one of HBO’s most popular series and a significant driver of income for the company. Recently, the show released its fifth season to viewers, attracting over 8 million viewers. It should have been a resounding success, but that success was dampened by a leak of the four episodes, nearly half of the new season. While the leak will presumably affect its business, HBO likely has a greater interest on a different front: DVD sales and the secondary DVD sale market, which may be in jeopardy soon.
The first sale doctrine generally allows for consumers that purchase a copyrighted work to sell or dispose of the copyrighted work as they see fit. Prior to the increased reliance on digital media, the doctrine was simple to understand. If you buy a book, you’re free to either resell, loan, or give away that book at your own discretion. The first sale doctrine is essentially what allows libraries to loan out books, movies, and sometimes even games to its patrons, as well as the reason why it’s okay to buy used games, books, and CDs at garage sales or online auctions.
When you buy computer software, you may not actually be the owner of that software. Between 2005 and 2007, a man named Timothy Vernor sold several copies of Autodesk, Inc.’s “Release 14” software on eBay. After several disputes between Vernor and Autodesk, the sides turned to the courts to make a ruling on whether Vernor’s sales were permissible in Vernor v. Autodesk, Inc., 621 F.3d 1102 (9th Cir. 2010). Autodesk’s argument primarily relies on the idea of the purchaser of the software being a licensee to use the software rather than the owner of the software. An owner would be permitted to resell the product, but a licensee is only granted a nontransferable license. The court found that even though Vernor purchased a physical copy of the software and he never consented to the fact that he was only a licensee of the software, he still did not actually own the software and was therefore not permitted to resell it on eBay to a third party.
This result is very counterintuitive to the first sale doctrine; even if you physically purchase a box, CD, and product key with software, you may not necessarily be the owner of that particular copy.
Why does this matter for DVD makers?
Although nothing has happened on this front yet, DVDs and Blu-Ray discs may be the next area that targets a policy that stops users from being able to resell copies freely. With software granting only licenses and not ownership and even electronic books being sold as licenses, it seems inevitable that audio and video discs will be the next front on which a purchase may not actually mean ownership. By eliminating the second-hand sale market for the discs, companies such as HBO would presumably be able to make a greater number of sales to interested consumers.
Practicality of enforcement
Enforceability of a license rather than ownership policy is unlikely as long as DVDs and Blu-Rays remain the main platforms for sale. The success of e-Book and computer software companies in upholding their license theory is their ability to enforce it. For example, a publisher that sells only physical books would have an extremely difficult time enforcing any policy of the sort because there is no way to track the books’ use, ownership, or access. Similarly, with DVDs and Blu-Ray discs, it may be extremely difficult to track the use and ownership of those items because not all DVD and Blu-Ray players are connected to the internet.
Additionally, a separate 2011 holding in UMG Recordings, Inc. v. Augusto, 628 F.3d 1175 (9th Cir. 2011) casts some doubt on a company’s ability to unilaterally declare a sale to be merely a license. At the very least, when discs are given to companies for the purpose of previewing those discs, the transfer is treated as a gift because they are given and there is no intent for them to ever be returned. However, with that being said, there should be at least some doubt as to whether games, e-Books, and computer software should be given that same protection. When a consumer purchases a copy of Microsoft Office from a local store, Microsoft never expects for the consumer to return the box and CD – so why is this distinction not made on those fronts as well?
We are likely not done with litigation on whether a consumer can resell copyrighted works. The existing rulings are somewhat incompatible with each other, and for companies with an interest in DVDs, such as HBO, the result could be extremely impactful. However, DVD and CD companies are in a unique position where they only have something to gain. While a ruling in favor of consumers being owners would make no impact on the market as it exists, a ruling in favor of consumers being licensees could help those companies generate additional income.