[Hague-jur-commercial-law] First sale in context of contracts and digital downloads

[love@cptech.org]

Press Release
SOURCE: Video Software Dealers Association
VSDA Praises Copyright Office Recognition of First Sale Rights in
Digital Downloads, But Association Criticizes Failure to Account for
Needs of Consumers

LOS ANGELES--(ENTERTAINMENT WIRE)--Aug. 30, 2001--The Video Software
Dealers Association (VSDA), the international trade association
representing the home video industry, today praised the U.S. Copyright
Office for affirming that the first sale doctrine of copyright law,
which allows retailers to rent and sell videos, video games, and other
copyrighted material without interference by copyright owners, applies
to videos and other entertainment lawfully downloaded from the Internet. 

However, the VSDA criticized the Copyright Office for failing to address
the efforts of copyright owners to defeat first sale rights and limit
consumer use of digital downloads through overly restrictive
technological controls and unilateral contract terms. 

VSDA President Bo Andersen said, ``This report from the Copyright Office
should resolve whatever ambiguity may have existed regarding whether the
first sale doctrine applies to digital downloads. It is time to move
beyond arguments whether an individual or retailer who purchases and
legally downloads a movie from the Internet onto a disk or their hard
drive owns that movie, can use it, sell or rent the disk, or give it
away like they do with traditional packaged products. According to the
Copyright Office, clearly they can.'' 

Andersen commended the Copyright Office for recognizing that access
control technologies that tether digital downloads to a single computer
and non-negotiable ``click-thru'' contracts that attempt to override
copyright law may negatively impact consumer choice and retail
competition. However, he went on to criticize the Copyright Office for
not recognizing that the problems created by tethering and unilateral
contracts need to be addressed now, not at some vague time in the
future. The report makes no mention of new business models being
promoted by copyright owner joint ventures, under which consumers would
be locked out of their own property unless they keep paying the
copyright owner for access. 

Andersen said, ``The restrictions on consumers' abilities to fully use
products they lawfully purchase and download are not speculative. They
are part of business models that are currently being rolled out. Overly
restrictive access control technologies and non-negotiable `click-thru
licenses' are being used today by copyright owners to create a `right'
to restrict consumers' use of digital downloads, a right they do not
have under the Copyright Act.'' 

In light of the Copyright Office's failure to adequately address the
harm to consumers from overly restrictive access control technologies
and unilateral contracts, Andersen called for the entertainment industry
to adopt VSDA's principles regarding digital delivery of movies, which
are designed to ensure consumer choice, prevent piracy, and promote
retail competition. ``We call on copyright owners to sit down now with
retailers, on behalf of consumers, and develop business models to ensure
that consumers continue to have the price competition, product
selection, variety of terms, and customer service that are the hallmark
of video retailing.'' 

VSDA's ``Principles to Facilitate Digital Delivery of Movies'' emphasize
anti-piracy protections, endorsement of the first sale doctrine for
digital products, rejection of exclusive dealing, promotion of consumer
choice, protection of consumer privacy, and limitation of digital rights
management systems to copyright protection and management. 

``Consumers have legitimate concerns over their ability to use products
obtained via digital distribution, copyright owners have legitimate
concerns about unlawful reproduction and distribution of their movies,
and retailers have legitimate concerns about business models that would
suppress or eliminate retail competition,'' Andersen declared. ``VSDA
believes that the consumers, retailers, and copyright owners of motion
pictures would benefit from adoption of our principles and the
clarification they would provide of the copyright issues surrounding
digitally delivered motion pictures.'' 

The report of the Copyright Office, which was issued late yesterday,
states that the first sale doctrine clearly applies to digital downloads
that are fixed in some tangible medium, such as a writable CD or DVD, a
computer diskette, or a hard drive. It rejects the notion that the first
sale doctrine applies to digital transmissions that are not fixed in a
tangible medium. The Copyright Office notes that tethering of downloads
to a single computer and unilateral contract terms that attempt to
override copyright law may be problematic, but concludes that the
problems raised by them are either speculative or premature or beyond
the scope of the report. 

The Copyright Office report, which was authorized by Section 104 of the
Digital Millennium Copyright Act of 1998 (DMCA), examines the impact of
Title 1 of the DMCA and the development of electronic commerce on the
operation of the first sale doctrine and Section 117 of the Copyright
Act, and the relationship between existing and emerging technology and
the operation of the first sale doctrine and Section 117. 

Title I of the DMCA includes prohibitions on: circumvention of
technological measures that control access to copyrighted works;
trafficking in any technology primarily designed or produced, or
marketed, to circumvent such technological measures or any other
technological measure that protects a right of a copyright owner in a
copyrighted work; and intentional alteration of copyright management
information for the purpose of copyright infringement. 

The first sale doctrine, codified at Section 109 of the Copyright Act,
permits the owner of a lawfully made copy or phonorecord of a
copyrighted work to sell or otherwise dispose of possession of that copy
or phonorecord without the authority of the copyright owner,
notwithstanding the copyright owner's exclusive right of distribution
under the Copyright Act. It thus permits the sale and rental of videos
and videogames without the copyright owner's permission. 

Section 117 of the Copyright Act permits the owner of a copy of a
computer program to make a copy or adaptation of the program for
archival purposes or as an essential step in the utilization of the
program in conjunction with a machine. It also permits the owner or
lessee of a machine to make a temporary copy of a computer program if
such copy is made solely by virtue of the activation of a machine that
lawfully contains an authorized copy of the computer program, for
purposes of maintenance or repair of that machine. 

Established in 1981, the Video Software Dealers Association (VSDA) is a
not-for-profit international trade association for the $19 billion home
entertainment industry. VSDA represents over 2,000 companies throughout
the United States, Canada, and 22 other countries. Membership comprises
the full spectrum of video retailers (both independents and large
chains), as well as the home video divisions of all major and
independent motion picture studios, video game and multimedia producers,
and other related businesses that constitute and support the home video
entertainment industry. 


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Contact: 

     Video Software Dealers Association
     Kelli Warren, 818/385-1500 Ext. 223


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