Inexhaustible Distribution Rights for Copyright Owners and the Foreclosure of Secondary Markets for Used Software

Abstract

Contractually based software distribution systems used by intellectual property owners seeking to rachet up their exclusive rights have recently been exposed to judicial scrutiny in the higher courts of both the European Union and United States. The main question on both sides of the Atlantic is the extent to which retention of title clauses and restrictive licensing allow owners to sidestep doctrinal obstacles to post first sale restraints on the alienation of tangible items embodying intellectual property. The wildly dissonant answers are due partly to the very different legislative frameworks within which the question arose but also reflect very different judicial responses to economic considerations and developments in digital technology. We consider the vexed issue of if, and when, contracts can displace long accepted restrictions on the reach of copyright’s exclusive right of distribution and thus allow right holders to privately regulate secondary markets for used software products. To this end we explore two fundamental issues: first, whether the answer to the question posed above should vary depending on whether users have acquired software products embodied in tangible items such as CDs, DVDs, chips, manuals, mobile phones and electronic tablets or downloaded them electronically; and, second, the role competition principles can play in resisting the trend towards an inexhaustible right of distribution for software owners.