Last week, the U.S. House of Representatives' Committee on the Judiciary's Subcommittee Intellectual Property held a hearing on the "first sale doctrine" as part of review on copyright laws. The committee heard testimony from a number of businesses and groups on the subject of extending first-right sales to digital items. That extension, however, was a point of contention for the Motion Picture Association of America
Committee Chairman Bob Goodlatte, R-Virgina, outlined the purpose of the hearing before it was opened to testimony. Going back to the first case of "first sale doctrine" in 1908, Chairman Latte explained how integral "first sale" has become to consumers and business practices.
"First sale has been such an integral part of our economy that entire businesses have been built upon it, such as Blockbuster video stores and Netflix by mail," said Goodlatte. "Consumer expectations have also been built upon this doctrine. Laws and consumer expectations are developed independently, but they can help shape each other."
The concept of "first-sale" makes possible the resale, re-use or certain allowable other users of copyrighted products, including library lending, gifting, video rentals and secondary markets for copyrighted works such as buyers trading in old CDs or selling their books after reading them. In trademark law, this same doctrine enables reselling of trademarked products after the trademark holder put the products on the market.
While the hearing was meant to cover different types of digital media, including movies, music, software and books, the MPAA took primary interest in how a "first sale doctrine" that applies to digital items would change the future of Internet media. If consumers were allowed to re-sell digital property, the MPAA claims, it would stop digital innovation from moving forward. Senior Vice President of Government and Regulatory Affairs Neil Fried said the change would "reverse time and drag the creative community -- along with audiences -- back into the pre-Internet era."
In a post on the MPAA blog, Fried highlights a number of issues that might arise if the government changed how current digital models work. A possible danger is that it would alter the system of over 100 legitimate online places to buy or watch media online. Fried says that in 2013, 5.7 billion movies were legally accessed by consumers in the United States.
Fried points out a number of differences between virtual and physical property, after pointing out the doctrine has thus far only applied to physical objects, as a factor in the argument to keep "first-sale doctrine" separate from virtual media. One example is that under the current model, legally-bought digital media can be re-supplied to the buyer multiple times if lost - a position the US Copyright office supports as beneficial for consumers. Models like streaming and license-based services would have no basis for the doctrine, since their services don't explicitly really imply ownership. "Internet video also takes up relatively no space, is easily transmitted and theoretically never decays," says Fried.
The biggest problem is that by forcing resale elements into Internet content, the way of licensing and streaming content over the Internet could mean fewer choices for consumers. It would also reduce incentives for people to create digital media, the MPAA claims. "Used" digital content would be seen as "indistinguishable from the original," though proponents argue that used books are also essentially unaltered from their original form, and first-sale hasn't destroyed the market for new books. Nevertheless, used goods do generally reside in a different and less-expensive market than "new" items, and content producers worry that because digital copies are perfectly identical, it would lower the value of new intellectual property.
"Forcing creators to allow resale of Internet content they license would either require creators to substantially raise prices or discourage them from offering flexible, Internet-based models in the first place," said Fried.
A recording of the hearing that triggered the reaction from the MPAA can be found below via Ustream. The committee is currently in hearings over music licensing as part of the copyright review.
Broadcast live streaming video on Ustream