Does the Rise of Property Rights Theory Defeat Copyright's First Sale Doctrine?

Abstract

Traditionally, two distinct markets have existed for the supply of information through books, discs and tapes – the retail market for new copies, and the secondary resale market, which often lives on long after the initial distribution of a new work. Copyright law has facilitated that secondary market through the recognition of the “first sale” doctrine which permits resales of a copyrighted work to occur freely, without the authorization of the copyright owner. This clear demarcation between markets is threatened in the internet age, where books, film and music are increasingly distributed electronically. At the forefront of changing distribution practices is the software industry. Rather than selling a physical copy of the software outright, software producers have structured the initial distribution as a limited right of use – in effect, as a software license limited to the immediate buyer. This practice draws into question whether consumers can sell, donate or otherwise dispose of their digital copies, as they could with physical copies. Judicial decisions have generally upheld the licenses’ validity, effectively removing traditional first sale rights from consumers in these digital products. This article argues that the software decisions, whether they favor or disfavor the software producer on the first sale doctrine issue, are best explained through the prism of the underlying theory for copyright. On the one hand, the pro-software producer decisions, following the “property rights” theory of copyright grounded in natural law and economic theory, support a very narrow construction of the first sale doctrine, perhaps no first sale doctrine at all. On the other hand, the decisions that favor the “traditional incentives” model discern limits on the ability of the copyright owner to control the distribution of its creative works, and support a broader construction of the first sale doctrine. This article argues that the original principles of the first sale doctrine are consistent with the “traditional incentives” approach of limiting the control of the copyright holder on the distribution of its creative works, and forms the best fit with the progenitor first sale decision by the Supreme Court, Bobbs-Merrill v. Straus. Finally this article suggests a new model of “constructive ownership” to recalibrate judicial doctrine with the principles of Bobbs-Merrill which value the balance between protection and access to copyrighted works in society.