Lawful Resale of Goods – Tricky When They Are Digital

A few recent court cases have moved toward clarifying whether you can resell copyrighted goods.  In one instance, Costco was sued by a Swiss watch company for buying Swatches overseas and reselling them in the U.S.  An importer can often scoop up goods such as Swatches at prices far below those charged in the US and share those savings with U.S. consumers.  The Swiss company contended that its logo is on the watch and that prevented Costco from bypassing the Swatch distributor chain.

In another instance, an enterprising student imported and resold textbooks that his relatives bought abroad.  The textbook maker sued him for violating their distribution rights and initially won, but that verdict was overturned by the Supreme Court.   The Supreme Court decided that for a copyright holder, the right to control distribution of a lawfully made copy disappears when the first sale is made.  This is the so-called “first sale doctrine” and will tend to lower prices for consumers.

A few weeks later in New York, a copyright case involving digital goods instead of paper textbooks went in the opposite direction.  The judge held that ReDigi violated the copyright owner’s reproduction right when it made a digital copy to transfer to the buyer.  Here, “first sale” did not apply since ReDigi had no lawful copy to transfer.

This ruling could favor Apple which recently filed a patent application that allows “users to sell or give e-books, music, movies and software to each other by transferring files rather than reproducing them.”  Apple addresses the nuance that the judge focused on in the ReDigi case.  Amazon applied for a similar patent for an exchange that avoids making a copy of the book, music or movie, yet allows participants to trade those digital files.

Apple and Amazon embrace the right sentiment in their patents, but as a technical matter, it is very difficult to move a digital file without making a copy of it for a few milliseconds as part of the transfer process.  We hope common sense will prevail as these promising marketplaces pass through the inevitable challenges.

Alan Daley is a retired businessman who lives in Florida and who writes for The American Consumer Institute Center for Citizen Research

 

 

 

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