[*PG577]THE FIRST SALE DOCTRINE IN THE ERA OF DIGITAL NETWORKS
Abstract: The first sale doctrine has been essential to the balance in copyright law between authors’ rights and public access to works. The growth of digital technology, however, has drastically changed the means of disseminating many types of works and, as a result, has undermined the first sale doctrine. This Article considers the long-term impact of technological change on the first sale doctrine. The Article focuses on the affordability and availability effects of the doctrine, reviewing the traditional causes and benefits of these effects, as well as the ways in which electronic commerce has weakened and could continue to weaken them. The Article concludes that it is still too early to determine the ultimate impact of digital technology on affordability and availability but suggests means of preserving these effects even as the first sale doctrine itself faces increasing technological challenge.
For at least ninety-five years, the first sale doctrine in U.S. copyright law has allowed those who buy copies of a copyrighted work to resell, rent, or lend those copies. Copyright law is often viewed as a balance of providing authors with sufficient incentives to create their works and maximizing public access to those works.1 And the first sale doctrine has been a major bulwark in providing public access by facilitating the existence of used book and record stores, video rental stores, and, perhaps most significantly, public libraries.
[*PG578] Technology, however, has begun to change dramatically the environment in which the first sale doctrine operates. The development of widespread computer networks such as the Internet has made it increasingly common for copyrighted works to be disseminated not by the distribution of physical copies but by transitory transmissions over digital networks, which end-users see or hear but do not retain.2 And when copyright owners do choose to distribute digital copies of their works, they are increasingly distributing copies that are encrypted or otherwise protected by technological measures that restrict the copy owner’s ability to access the work.
In 2001, the U.S. Copyright Office reported to Congress on the impact of electronic commerce and technological protection measures on the first sale doctrine. The report largely concluded that it was too soon to say what the effects of e-commerce and encryption would be on the doctrine, and, rather than recommending any legislative response to technological developments, counseled a “wait and see” approach.
This Article suggests that the “wait and see” approach will work best if we know what we are looking for. To best evaluate the impact of technological changes on the operation of the first sale doctrine in the coming years, we need a better idea of how the first sale doctrine has traditionally functioned. To that end, Part II considers what effects the first sale doctrine has produced in traditional copyright markets where copyright owners exploit their rights by distributing copies to the public. Part II discusses two principal effects of the doctrine: making access to copyrighted works more affordable to the public (“affordability”), and helping to ensure that works of authorship remain available to the public over time (“availability”). The impact on these affordability and availability effects should be a primary focus as we monitor how technological change affects the operation of the first sale doctrine.
Having identified these effects, the Article in Part III considers how electronic commerce and technological protection measures may [*PG579]change the existing dissemination patterns for copyrighted works, and suggests that the end result may be that fewer copies of many works will be distributed to fewer owners, and the copies that are distributed will be more difficult to transfer. This possible result highlights the fact that the effects of the first sale doctrine have been the effects of a particular legal rule operating in markets in which copyrightable works have been disseminated in large part by the distribution of freely-transferable physical copies. As e-commerce and encryption technology expand, the operation of the first sale doctrine will likely change largely because of changes in dissemination patterns. The first sale doctrine may remain on the books, authorizing copy owners to resell, rent, or lend their copies, but if few or no copies of copyrighted works exist, then the doctrine will essentially be a dead letter.
Part IV then undertakes a more speculative consideration of how this decrease in the circulation of usable, transferable copies might change the affordability and availability effects of the first sale doctrine. I draw the very tentative conclusion that while in some circumstances the new technological landscape may make access to copyrighted works more affordable and available, in many circumstances digital transmission and encryption might combine to reduce the affordability and availability of copyrighted works, as compared to the traditional model of wide distribution of copies subject to the first sale doctrine. If that happens, Congress may need to revise copyright law to preserve some of the affordability or availability effects of the doctrine. Congress has not ignored the impact that the growth of digital technology has had on the statutory rights of copyright owners, and has adjusted those rights as technology has changed.3 The impact of digital technology on the statutory limitations on copyright owners’ rights may require similar changes.
In short, this Article seeks to determine what the benefits have been of a system in which copyrighted works are distributed in tangible copies that are freely alienable without the consent of the copy[*PG580]right owner. That system has produced benefits to the public, and it seems appropriate to consider whether those benefits—or other compensating benefits—will accrue to the public when works are disseminated by electronic transmission, or by encrypted digital copy, rather than in traditional copy form. If a shift away from the distribution of tangible, freely alienable copies threatens to eliminate desirable effects of the first sale doctrine, then we will need to consider amending the Copyright Act to preserve those benefits.
Since the first U.S. copyright act in 1790, copyright owners have had the exclusive right to “vend” copies of their works.4 But since at least 1908, copyright law has expressly recognized, first by court decision,5 and later by statutory provision,6 that the copyright owner’s right to control the sale of a particular copy of a work ends after the owner’s first transfer of that copy.7 This first sale doctrine has generally been viewed as a recognition in copyright of the law’s historic disfavor of restraints on the alienation of personal property.
Current copyright law gives owners the exclusive right to distribute copies of their works to the public “by sale or other transfer of ownership, or by rental, lease, or lending.”8 As in the past, however, the copyright owner’s control over subsequent distribution is limited. Section 109(a) of the Copyright Act provides, “Notwithstanding the provisions of section 106(3) [granting the exclusive right of distribution], the owner of a particular copy or phonorecord lawfully made under this title . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.”9 As a result, one who owns a lawful copy of a copy[*PG581]righted work may resell that copy or may rent it (in most cases),10 lend it, or give it away. Used bookstores, used compact disc (CD) stores, public libraries, and video rental stores all flourish in the shelter of the first sale doctrine.
The advent of computer networks, especially the Internet, has raised questions about whether and how the doctrine will operate in the digitally networked environment. In 1995, a presidential task force considered whether the first sale doctrine would allow someone who acquired a copy of a copyrighted work by receiving a digital transmission, for example by receiving an e-mail or downloading from a Web page, to then retransmit that work to another person, thus allowing the recipient of that second transmission to acquire a copy of the work.11 The task force concluded in its “White Paper” that such transmissions were not protected by section 109(a).12 This conclusion prompted much discussion about the need for a “digital first sale doctrine,”13 including the introduction of a bill in Congress to amend copyright law to allow users to “forward and delete” copies of works they received by transmission,14 a proposal that has been included in subsequent bills.15
In 1998, Congress enacted the Digital Millennium Copyright Act (DMCA),16 making major changes to U.S. copyright law, including providing legal support for technological protection measures, such as encryption, used by copyright owners to restrict access to their works.17 The DMCA outlaws the manufacture of and trafficking in devices or technologies that circumvent access or copy control measures [*PG582]used by copyright owners, and in some cases prohibits the act of circumventing such controls. Section 104 of the DMCA directed the Register of Copyrights and the Department of Commerce to report to Congress on the effect of the DMCA’s technological protection provisions and “the development of electronic commerce and associated technology” on the operation of copyright law’s first sale doctrine.18
In August 2001, the Copyright Office issued its DMCA Section 104 Report.19 For the most part, the Copyright Office recommended no changes to the first sale doctrine for the moment. With respect to the effect of the DMCA’s provisions, the report essentially concluded that the use of technological protection measures either had not yet become widespread enough to have any measurable impact on the first sale doctrine or, where such measures were in widespread use, the possibility of reduction or elimination of a resale market for copies did not constitute interference with the operation of the first sale doctrine.20 As for the impact of electronic commerce and associated technology on the first sale doctrine, the report focused on the scenario raised in 1995 in the White Paper, and rejected proposals to amend the law expressly to allow the owner of a lawfully made copy of a copyrighted work to transmit the work to another person, as long as the transmitting owner destroyed her own copy once the transmission was complete.21
[*PG583] In several places, the Copyright Office’s report did note that future developments might have “serious consequences for the operation of the first sale doctrine” that might require legislative attention at some later date.22 In short, the Copyright Office recommended a “wait and see” approach to the question of whether changes are required to the first sale doctrine in light of the use of technological protection measures or developments in electronic commerce. The Department of Commerce report took a similar position.23
Taking seriously the Register’s suggestion to wait and see whether electronic commerce will warrant changes to the first sale doctrine requires identifying what we might be looking for as we are waiting and watching. What effects has the first sale doctrine had on the copyright system in the past century, prior to the widespread deployment of digital networks? Understanding the doctrine’s impact in the era when copyrighted works have been disseminated in very large part by distributing tangible and transferable objects will help us to know what we are looking for as we observe the impact of electronic commerce and the DMCA’s anticircumvention provisions on the copyright marketplace. In turn, this will help us consider whether to amend copyright law to secure the first sale doctrine’s benefits in the changed copyright market.
For much of the twentieth century, many types of copyrightable works that were made available to the public were disseminated largely by the distribution of easily transferable tangible material objects.24 Literary works were distributed in books, magazines, and [*PG584]newspapers, as well as on audio cassettes. Musical works were distributed in sheet music, on vinyl record albums, on magnetic cassettes, and on digital compact discs. Although motion pictures for many years were not widely distributed in the form of tangible copies, but instead disseminated largely by public performance in theaters and over television, in the last twenty-five years the development and availability of home videocassette players resulted in a dramatic shift to substantial distribution of motion pictures in tangible copies.25 All of these copies were generally easily transferable: the owner of a book, record, videocassette, or other copy could easily lend, give, or sell that copy to another person who could then use the copy to obtain access to the work. In some cases, as with a record, CD, or videocassette, the party receiving the copy would need to have equipment to access the work stored on the object, but such equipment was generally available and in many instances widely owned by the public.
This system of distributing copyrighted works in tangible copies that are freely alienable under the first sale doctrine has had three primary beneficial effects on public access to those works. First, the system appears to have increased the overall affordability of access to copyrighted works. Second, the system has in many cases helped ensure the continued availability of such works to the public. Third, the system has allowed users to gain access to such works while maintaining their privacy or anonymity from the copyright owner. Given the space limitations of this Article, and because the impact of the first sale doctrine on consumer privacy has already been the subject of academic discussion, this Article will focus on the doctrine’s affordability and availability effects.26
The most obvious way in which distribution in the form of legally alienable copies increases access to copyrighted works is by making copies of those works available to many consumers at a lower cost than the retail price charged by the copyright owner (or her licensees) for the purchase of a copy. The most direct way that the first sale doctrine has this effect is by allowing retail price competition where copyright owners sell through multiple retailers. This was the result of Bobbs-Merrill Co. v. Straus,27 the U.S. Supreme Court case that is credited with originating the first sale doctrine. Once a copyright owner sells copies of a work at a wholesale price to a retailer, the retailer is free as a matter of copyright law to resell the copies to the public at whatever price she chooses. As a result, the copyright owner can set only her own price for a copy of the work, but cannot directly set the retail price that others charge for the work.28
The public may also benefit from competition among retailers. More efficient retailers, with lower overhead costs, may be able to sell copies at a lower mark-up than less efficient retailers or retailers who wish to maintain a higher price-point for marketing reasons. Different retailers may offer different discounts on different works. In sum, retailers, for a variety of reasons, may offer copies at different prices, and consumers can benefit from this price competition, which exists in part because the copyrighted work is distributed in tangible copies by multiple retailers and because the first sale doctrine keeps the copyright owner who has sold copies to retailers from asserting control over those retailers’ subsequent sale prices.29
The first sale doctrine also provides many consumers the chance to purchase a copy of the work at a price lower than that charged by the copyright owner or by the initial retailer, who generally passes along the copyright owner’s price as well as the retailer’s mark-up. It does so by allowing the development of secondary markets for the sale of copies. Because the copies sold in these secondary markets are previously owned, rather than new, they usually sell at a lower price than that charged originally for a new copy of the work.30 And because a single copy of a work can usually be sold repeatedly on the secondary market (perhaps at decreasing prices as the copy becomes more worn), each copy may allow several consumers to enjoy the lower price generally charged for a used copy. Used bookstores and used record stores are two primary examples of secondary markets for copyrighted works. Experience and evidence suggest that such secondary sales markets are significant, though I have been unable to find comprehensive statistics.31 By way of example, used books accounted for fifteen percent of Amazon’s book sales in the second half of 2002,32 and in the third quarter of 2001, seventeen percent of all goods sold on Amazon.com were used goods.33 Similarly, those responding to an annual survey by the National Association of Recording Merchandisers reported that in 2000 they sold about $285 million worth of used CD albums, about 2.7% of the total dollar volume of sales of audio recordings by responding merchants.34
[*PG587] These secondary markets may lower the cost of access to copyrighted works in two ways. First, consumers who can afford (or are willing) to pay the used price but not the new price may be able to buy a used copy and thus gain access to the work that they would not have if only new copies were available. Second, some consumers may be more willing to buy new copies because the first sale doctrine lowers their effective price. Because a consumer can resell her copy once she has used it and no longer wishes to retain it, the total price she will have paid will be the price charged for the copy less the amount she receives for the resale of the copy that the first sale doctrine enables.35
The first sale doctrine, in markets in which works are distributed in tangible copies, also increases access to works by enabling the creation of rental markets for those who wish to have access to a work but are unwilling or unable to pay the price charged to acquire ownership of a copy, either new or used.36 Today, motion pictures are the principal category of works widely disseminated by rental.37 Rental stores buy digital versatile discs (DVDs) and videocassettes sold by the copyright owner and exercise their first sale rights to rent the copies to the public.38 A consumer who does not want to pay the price of buying a [*PG588]video of the film—or perhaps even the price of admission to a cinema to see a screening of the film—can usually pay a lower price to rent a copy of the film for a short time in order to view it.39 Although motion pictures are the main types of works distributed by rental today, other types, such as literary works, have been distributed by rental in the past.40
Public lending is a final way in which the first sale doctrine reduces the cost of access to copyrighted works. The doctrine allows libraries to acquire ownership of copies and phonorecords of copyrighted works and then lend those copies to patrons at no charge.41 A consumer who is not willing or able to pay the purchase or rental price for a copy of a work may be able to borrow a copy from a library at no direct charge.42
[*PG589] Many library patrons are, of course, paying for their access either directly, through a membership fee or borrowing charge, or indirectly, through a tuition charge or tax payments. In the case of tax-supported public libraries, though, some patrons—perhaps including those least able or willing to pay directly for access to copyrighted works—may pay little or no tax to support libraries, thus paying little or nothing even indirectly for their access to library copies. Even for those who do pay taxes or other fees to support libraries, libraries lower the cost of access to copyrighted works by acting as a cost-spreading mechanism. Libraries spread the cost of acquiring and maintaining copies of a large number and variety of works over a large population. By paying a certain dollar amount for library support, a patron may get access to far more works than if the patron used the same amount of money to purchase, or even rent, copies. And while, in the absence of libraries, individuals could perhaps themselves pool their funds to purchase copies that they would own jointly, libraries reduce many of the transaction costs involved in locating other individuals interested in sharing the purchase and ownership of copies of particular copyrighted works and of administering the shared ownership and joint use of the purchased copies and phonorecords.
In addition, libraries reduce the cost of access to works that consumers wish to consult but not to own. Consider an encyclopedia. I might want to read an encyclopedia entry on Iceland if I need to know about that country, but I may be unlikely to pay the cost to buy a full set of encyclopedias (or even the “I” volume if sold separately) just to read that single entry. If my only option is to buy a copy, then I am likely to forego my desired access to the work. A library, however, offers a lower-priced alternative to the purchase of the encyclopedia—borrowing or consulting the encyclopedia to read the desired entry.43 Libraries thus provide more affordable access to copyrighted works where a consumer simply does not wish to pay to buy a copy of the work and where no rental market exists. This affordable access is pos[*PG590]sible because of the first sale doctrine, which allows libraries to lend the copies they own without the need to obtain a distribution license from the copyright owner.44
The first sale doctrine might make access to copyrighted works less affordable by undermining a copyright owner’s ability to directly capture revenue from resales, rentals, and loans of her work.45 Without the first sale doctrine, the copyright owner might charge a lower initial sale price, because she would be able to control subsequent sales, rentals, or loans of the copy and could charge directly for those uses (though presumably at a lower price than for the initial sale). The copyright owner could spread her desired return on each copy over the entire range of transfers expected over the life of the copy.
Given the existence of the first sale doctrine, though, a rational copyright owner will take into account her ability to control only the first sale of a new copy and the fact that after that sale, the copy will exist and may compete in the market against her other new copies.46 [*PG591]So she will presumably wish to set the price for a new copy at a level that will compensate at least in part for the future sales of new copies that she will lose to resales, rentals, or loans of the sold copy. She might therefore try to charge a price for the first sale (the only transfer she can control) that reflects not only the value of the copy to the initial purchaser but also some of the value of subsequent uses of the copy.47 This higher first sale price could decrease the affordability of the work in the form of new copies.
The first sale doctrine itself, though, appears to limit this potential negative impact on affordability in at least two ways. First, although copyright owners faced with the first sale doctrine may charge a higher price for the first sale of a copy, the buyer is getting more for that price. Specifically, the buyer gets the right to resell, rent, or lend that copy, and as noted above, even if the price paid for a new copy is higher, the potential effective price is lower, because the buyer can recoup some of the purchase price by reselling the copy when she no longer wants it. Second, in a system with the first sale doctrine, the copyright owner’s ability to charge a higher sale price will be limited by the fact that at some point after she begins to make the work available, she will face some degree of price competition for access to the work from others offering copies for resale, rental, or lending. Presumably, the more the copyright owner charges for new copies, the more attractive used or rental copies will become for many buyers. The copyright owner might thus be able to charge a higher sale price when the work is first released, because those who want a copy of the work will have no alternative suppliers. Later, though, that higher price may drive potential customers away from the copyright owner to resellers, renters, or lenders. Indeed, current copyright industries often seek to segment their markets chronologically, charging higher prices early on (e.g., for hardback book sales and first-run cinema tickets) and lower prices later (e.g., for paperback or remaindered book sales and for airplane, cable, and television movie showings).48
[*PG592] Additionally, giving copyright owners control over all distributions of every copy of their works seems unlikely to increase the affordability of access to their works overall, even if they might set a lower price for the initial sale of a copy. Most importantly, the transaction costs that copyright owners would incur in exercising control over all subsequent distributions—by sale, rental, or lending—would seem substantial. If every used bookstore, video rental store, and library in the United States had to locate and negotiate with the copyright owner of every title they wished to resell, rent, or lend, and had to remit compensation to the copyright owner for each resale, rental, or loan, many fewer such transactions would likely take place, and the prices charged in those transactions that did occur would be higher than under the first sale doctrine to offset the transaction costs.
In addition to fostering public access to copyrighted works at a variety of prices, the first sale doctrine also assures that works remain available to the public over time, without regard to price. This availability effect has two dimensions. The first involves situations in which a copyright owner stops making a work available during the copyright term, either permanently or temporarily. Owners might do so for a variety of reasons, both economic and noneconomic. If the work in question was disseminated by the copyright owner through the distribution of copies, that distribution makes it possible for someone other than the copyright owner to supply copies of the work once the copyright owner decides not to do so. The first sale doctrine makes it legal for those third parties to do so. Second, the first sale doctrine helps ensure access by contributing to the preservation and survival of works over time.
Copies of a work most often become unavailable from the copyright owner because the owner allows the work to go “out of print.”49 Copyright owners discontinue the sale of copies of significant num[*PG593]bers of copyrighted books and sound recordings each year. With respect to sound recordings, one estimate is that sixty percent of all titles are out of print.50 As for books, “[i]n 1999, some ninety thousand books—many worthless, many others valuable—went out of print, according to the rueful vice-chairman of Barnes & Noble . . . .”51 Another source suggests that about 120,000 book titles may go out of print each year.52 This is a substantial number, as somewhere between 70,000 and 120,000 new titles are published annually.53 No doubt the decision to allow a work to go out of print is generally an economically rational one for the publisher, who presumably perceives insufficient demand for copies of the work to justify the expenses involved in creating, storing, transporting, and marketing copies in the quantity needed to make a profit.54
Of course, the fact that demand is insufficient to make it economical for a particular publisher to keep the work in print does not mean that the demand for copies is nonexistent, or even necessarily negligible.55 Some works may go out of print due to changes in media [*PG594]formats, such as the current transition from videocassettes to DVDs, as a copyright owner discontinues a work in an older format long before making it available in a new format.56 In some instances, the structure of the industry may simply dictate that it is not profitable to produce and sell copies in limited numbers.57 “Older books . . . are . . . put out of print if they do not sell an ever stricter minimum amount of copies, often as few as 2,000 a year. As a result, many classics are no longer available.”58 And the existence of secondary markets for books and recordings, as well as services that will search for used copies of out-of-print works, indicates that demand exists for access to many out-of-print works. The first sale doctrine, in copyright markets in which works are widely disseminated by the sale of copies to the public, helps provide access to out-of-print works. Those who wish to read, watch, or listen to a work that is out of print might be able to acquire a used copy of the work, or to rent or borrow a copy.59 The first sale doctrine thus helps ensure that even when demand for a work falls below the point at which it is profitable for the copyright owner to continue to sell copies of the work, the work may remain available to the public.
Copies of a work may also become unavailable because the copyright owner refuses to supply them, rather than merely allowing the work to go out of print. Copyright owners may actively suppress a work for a number of reasons.60 The author of a work may become dissatisfied with it, perhaps believing that it is of inferior quality in comparison to her other works, or that it represents views that have substantially changed. After the silent-film era, for example, actress Mary Pickford withheld her films from television and cinemas and threatened to burn them, afraid that future viewers would laugh at her.61 The story of the recording of the Cat Stevens song Peace Train by the band 10,000 Maniacs offers another example. The band included its recording of the song on its multi-platinum 1987 album In My Tribe. In 1989, when songwriter Stevens was reported as supporting the fatwa against author Salman Rushdie, 10,000 Maniacs removed their version of Peace Train from future pressings of the album and stopped performing it.62 Copies of the band’s version of the song were thus no longer available from the copyright owner.
In some cases, an author’s heirs, as successors to her copyright, may seek to suppress a work. Lord Macaulay pointed out that James Boswell’s son felt that Boswell’s Life of Johnson portrayed Boswell “in a ludicrous and degrading light” and that had the son succeeded to the father’s copyright he would likely have suppressed the work.63 In general, if an author (or her heir) owns the copyright in a work, she may refuse to allow any further exploitation of the work, whether by sale of copies or by performance or display. In effect, the author seeks to use [*PG596]the copyright in the way an author could use the right of withdrawal in some countries that recognize moral rights.64
In many cases, of course, a dissatisfied author will have transferred the copyright to a publisher in order to benefit from the publisher’s superior resources for exploiting the work. In the United States, where moral rights are generally not recognized, such a dissatisfied author-transferor would not be able to use an inalienable moral right of withdrawal to discontinue exploitation of the work. Instead, absent any contractual arrangement to the contrary between the author-transferor and the publisher-transferee, the publisher will be free to disregard the author’s (or her heir’s) wishes and continue to make the work available to the public.65 But even in these circumstances, the author or her heirs may at some point be able to implement the desire to withdraw the work. United States copyright law gives authors (or their designated statutory successors) an inalienable and unwaivable power to terminate their transfers of copyright, generally during a five-year period starting thirty-five years after the transfer is signed.66 Thus, a dissatisfied author may be able to terminate the publisher’s copyright interest, reclaim her ownership of the work’s copyright, and prevent further dissemination of the work. Indeed, the Supreme Court has expressly recognized the possibility that the reversion of rights to the author may result in the work being withheld from the public: “[N]othing in the copyright statute would prevent an author from hoarding all of his works during the term of the copyright.”67
[*PG597] Although withdrawing copyright owners might most commonly be dissatisfied human authors, they might also, in some circumstances, be corporate authors or copyright owners.68 For example, companies may decide that their works are no longer appropriate or that disseminating the works will bring public opprobrium.69 In those situations, the company might well discontinue all exploitation of the work.70 Silverman v. CBS Inc. presents an example of this situation.71 CBS owned the copyright in many radio and all television episodes of The Amos ’n’ Andy Show. The TV program originally aired from 1951 to 1953, and continued airing in reruns and syndication thereafter.72 In response to complaints from civil rights organizations that the programs were demeaning, CBS in 1966 decided to take the TV episodes off the air. For at least twenty-one years, CBS did not allow the transmission of any of the radio or TV episodes, and as of 1989 had “no current plans to use the [works] within the foreseeable future.”73 As a result, people who had an interest in viewing or listening to Amos ’n’ Andy episodes could not obtain access to them through the copyright owner.74 Given that works remain under copyright protection for at least seventy years and in some cases perhaps up to 150 years, it may not be unusual for attitudes to change significantly during a work’s copyright term, such that a copyright owner might choose to shelve a work entirely for fear of offending some segment of the public.75 In[*PG598]deed, a recent skirmish over Speedy Gonzales cartoons suggests that the Amos ’n’ Andy incident is not entirely an isolated one.76
Worldwide Church of God v. Philadelphia Church of God, Inc. offers another example of a corporate copyright owner suppressing a work.77 In that case, Herbert Armstrong, the founder and longtime leader of the plaintiff Worldwide Church of God (WCG), wrote a book entitled Mystery of the Ages when he was ninety-two years old. He died shortly after completing the work, and WCG distributed over nine million copies of the work to the public free of charge.78 Within two years, however, WCG decided that the work contained ecclesiastical, historical, doctrinal, and social errors,79 and “conveyed outdated views that were racist in nature.”80 WCG then destroyed nearly all copies of Mystery in its possession and ceased all further dissemination of the work. WCG explained that it “kept [Mystery] out of print based on a ‘Christian duty’ to keep [its] doctrinal errors out of circulation.”81 Although WCG had vague plans to issue an annotated edition of Mystery, it apparently had taken no steps toward such an edition more than a decade after it ceased publishing the work.82
In situations such as these, in which an author or copyright owner decides to withdraw a work from circulation, the first sale doctrine provides the public with an alternative means of access to the work, at least where the work has been distributed in copies. Once the copyright owner places authorized copies in circulation, she will be unable as a matter of copyright law to control the further circulation of those copies.83 Even if the copyright owner refuses to issue a single [*PG599]additional copy during the copyright term, those who want access to the work can still borrow copies that exist in libraries or buy used copies that turn up on the resale market.84 Although such methods of access may be less convenient and affordable than buying a copy of a work that is maintained in print by its publisher, they give the public a much greater opportunity to encounter a work than would exist without the first sale doctrine and the distribution of copies. Indeed, the Silverman and Worldwide Church of God cases offer an instructive contrast. Because episodes of television programs were not generally distributed to the public by the sale of copies prior to 1966, when CBS withdrew Amos ’n’ Andy, that decision apparently was effective in denying the public virtually all access to the series.85 By contrast, WCG had distributed millions of copies of Mystery of the Ages in its two years of publication, so that even after WCG withdrew the work, many individuals owned copies that they could read or resell, and the work remained available in “some libraries and used bookstores.”86
Is this availability effect good or bad? Continued public access to a work, even in the face of a copyright owner’s desire to suppress the work, is generally a salutary effect of the first sale doctrine. Copyright law seeks to encourage the creation and dissemination of works of authorship, and some dissemination is better than none.87 Although the law might not take a strong position on whether an individual consumer who wishes to see an Amos ’n’ Andy episode should be able [*PG600]to do so, it seems better to facilitate access to previously publicly disseminated works where possible.88
Where the copyright owner has already exploited the work to the public, some members of the public may have fairly persuasive arguments in favor of access to particular copyrighted works. Such claims might arise from an individual’s personal connection to a work. Imagine, for example, not being able to reread your favorite novel—not being able to read again a work that may have significant intellectual, emotional, and artistic resonance for you—because the copyright owner believes that the work is not good enough and declines to make further copies available. Or imagine a couple not being able to listen to a recording of “their song”—the soundtrack, as it were, to their meeting and courtship.89 Although such individuals’ claims for access to such works might not be sufficient to justify requiring copyright owners to make works available, their claims do seem strong enough to consider the availability that results from the first sale doctrine as a benefit of the doctrine.
In some situations, reasons for wanting to keep works accessible may be even stronger. Watching episodes of Amos ’n’ Andy might provide a social or cultural historian or drama critic with useful information or important insights that would help shape her own work, and the same could well be true of many works of popular culture, literature, art, and information. Also, availability of the works themselves to a wider public would allow that public to judge for itself the claims made by the historian or critic.
The Worldwide Church of God case presents an example of an extremely strong reason for thinking that preserving access to copyrighted works benefits the public. In that case, WCG’s doctrinal shift away from its founder’s positions led to a schism, and two “defrocked” WCG ministers founded the defendant church to adhere to the doc[*PG601]trine espoused by WCG’s founder. The splinter church viewed Mystery “as a divinely inspired text necessary for proper interpretation of the Bible”90 and as “the core text essential to its members’ religious observance.”91 Indeed, the splinter church made reading the text a requirement for baptism.92 Because the copyright owner had withdrawn the work from further publication, access to previously circulated copies, facilitated by the first sale doctrine, provided the only way for the church and its members to obtain access legally to what they viewed as the central text of their religious experience.
In sum, the first sale doctrine helps ensure some access to copyrighted works even over the objections of copyright owners, at least for works that have been distributed in copies.93 Although copyright owners may well have legitimate and economically rational reasons for withdrawing a work, many members of the public will also have legitimate interests in continuing access to such works. The first sale doctrine mediates between those competing interests, allowing a copyright owner who has distributed copies to limit access to her work by refusing to produce and distribute any further copies, but offering the public an alternative avenue by which some access to the work is possible.94 The doctrine ensures that copyright law protects copyright [*PG602]owners’ rights but does not give them the extreme version of control over information that existed for many years in the Soviet Union, where changes in politics would lead not just to new editions of books, but to previously circulated copies of books being withdrawn or physically altered.95
Even when a copyright owner has no objections to the continued dissemination of her work, copies can become unavailable from the copyright owner because she purposely, though temporarily, withholds the work as part of a marketing strategy. Disney, for example, routinely uses such a strategy in marketing many of its animated films. The company makes a film available to the public for a limited time, both for viewing in theaters and for purchase on videocassette or DVD, and then withdraws the film from the market for a number of years, allowing demand for the film to build up by making access to it artificially scarce.96 This may indeed be a savvy marketing strategy on Disney’s part, and might earn it a greater return on sales of tickets and copies than it would earn if it continually sold copies of its films with no moratoria. But the practice means that a consumer who wishes to see a particular film at a particular time will not be able to obtain access to the film from the copyright owner—either in the form of a copy for rental or purchase or a performance for viewing—[*PG603]at the time that the consumer wants access. Indeed, the consumer might have to wait several years for the copyright owner to offer access to the film.
Here again, the distribution of copies to the public and the operation of the first sale doctrine combine to provide an alternative avenue of access to a work that the copyright owner withholds. The consumer who cannot buy a copy of a Disney film from Disney at any particular time may nonetheless be able to buy the film on a used videocassette or DVD from someone who bought a copy when Disney was selling them. Even if the consumer cannot buy a used copy, she may be able to rent one from a video store or borrow one from a library. Again, this availability may be more than just a convenience. Given that a Disney movie can be unavailable from the copyright owner for years at a time, the first sale doctrine might allow, for example, a parent to share her favorite Disney film from her childhood with her own children when they are at the appropriate age for the film. If the parent must wait to get access to the film on Disney’s schedule, she may find that when Disney re-releases the film her child is too old to enjoy it fully.97 Given the importance of copyrighted works to many people, facilitating individuals’ access to works without waiting for the copyright owners to re-release them seems a beneficial effect of the first sale doctrine.
The distribution of works to the public in the form of copies also plays a role in the preservation of works over time. Preservation raises many issues of access similar to those already considered in this section, but concerns an even wider variety of works and over a much greater period of time. Will a particular work exist at all fifty years after it is created, or 200 years later, when it will likely have entered the public domain?
[*PG604] Distributing works in multiple copies to a variety of owners can help ensure that a work will survive longer into the future. History shows that dispersed ownership of copies contributes to a work’s survival:
The works of authors such as Homer and Virgil survived intact because of their enduring popularity and the multiple copies that were made at different times. But many of the works that we regard as fixtures of our culture (including Plato) were lost for centuries and are known to us only because of a copy or two that turned up in medieval monasteries or in the collections of Arab scholars. Some works of undoubted greatness did not survive at all: Sophocles is known to have written some one hundred and twenty plays, of which we possess only nine.98
The survival effect of the proliferation of copies applies not only to works of literature and philosophy, but also to important historical material. For example, The Book of the Icelanders, a history of Iceland’s first 250 years, was written in the early 1100s. In the seventeenth century, two paper transcripts of the book were made from a vellum manuscript dating from around 1200. Within a few decades, the vellum manuscript was lost and the book is known today only from the two paper copies.99 Contemporary preservationists have learned the historical lesson that disseminating many copies of a work helps the work survive and sometimes use wide distribution of copies as an in[*PG605]tentional strategy for long-term preservation.100 One organization calls this archiving principle “Lots of Copies Keeps Stuff Safe.”101
Why does dispersed ownership of copies contribute to a work’s survival? Copies, like all physical objects, are subject to the ravages of time, use, environmental conditions, and other factors. The more copies of a work that exist, the higher the probability that some copy or copies will survive those ravages.102 As one historian noted, throughout history
[t]he great concentrations of books, usually found in the centres of power, were the main victims of . . . destructive outbreaks, ruinous attacks, sackings and fires. . . . In consequence, what has come down to us is derived not from the great centres but from “marginal” locations, such as convents, and from scattered private copies.103
If a work exists in hundreds or thousands of copies, there is a statistically greater chance that some copy will survive over time than if the work exists only in a single copy or a limited number of copies. Assume, for example, that any single copy of a work has a one in one hundred chance of being destroyed by any cause in any given year. If only one copy of the work exists, then after 200 years the chance that the copy still survives is only 13%.104 On the other hand, if one hundred copies exist in separate places, each facing a one in one hundred [*PG606]chance of being destroyed each year, then after 200 years the chance that at least one copy still survives is 99.9999944%.105
Distribution of copies increases a work’s chances of survival beyond the mere raw probabilistic increase of sheer numbers of copies. If a copyright owner sells copies to a variety of owners, many owners will likely maintain their copies under somewhat different conditions. Some copies may be quickly discarded; others will be retained. Some copies will be heavily used; others will hardly be used at all. Some copies will be kept in locations with low humidity or low temperatures, others at high temperatures or humidity. Some copies will be in locations well protected against fire, others in places not very susceptible to floods. Some copies will be held by institutions, such as libraries and archives, that consciously seek to provide the optimal environment to maximize the life of the copies they own and that have the technical resources to maintain and preserve those copies. Overall, the greater the diversity of environments in which copies of a work exist, the more likely it is that some copies will reside in locations and under conditions that will allow them to survive.
The Dawson City collection of films from the 1920s offers one dramatic example of the preservation impact of diversely situated copy holders.106 Dawson City in the Yukon was the end of a geographic chain of distribution for motion pictures in the 1920s. At the time, motion picture prints were often shown in one town and then sent to the next town in the chain to be shown there, before being sent on yet again. Motion picture copyright owners generally retained ownership in the prints they sent to theaters for exhibition and required those prints to be returned when the movie’s run ended in the final town in the distribution chain. Films that ended up in Dawson City, however, apparently were often allowed to remain there to save the expense of returning the prints to the studios. By 1929, some 500 [*PG607]reels had accumulated and were used to fill in a swimming pool that was being covered over to build an ice rink. In 1978, excavation for a building project uncovered the reels. They were in surprisingly good condition in large part because of the extremely cold climate of the region: low temperature is the only known retardant of the deterioration of the nitrate film on which early motion pictures were printed. The end result of the fortuity that led the film copies to remain in the Yukon is that at least portions of some motion pictures that otherwise do not exist can be seen today.107 Although other copies of those motion pictures had been made when the films were originally shown, those other copies had, in some cases, been lost or destroyed or had deteriorated.108
Copy ownership thus leads to preservation, and distributing copies of a work to the public increases, perhaps significantly, the likelihood that a work will survive into the future. The first sale doctrine plays a key role in this “preservation effect” of diverse copy ownership. Some consumers who acquire copies of a work might be less likely to do so if they could not later resell those copies. Libraries, in particular, would have far less incentive to buy copies, and to pay to store them, if they could not freely lend those copies to their patrons. Furthermore, most libraries would presumably be unable to engage in extensive preservation efforts for copies that will only be able to circulate many, many years in the future, when a copyright eventually expires. In addition, the doctrine allows the free flow of copies to an increased variety of environments. The secondary sale market means that different consumers than those who initially bought copies from the copyright owner can acquire copies, increasing the chances that copies will be held in different places and under different conditions. Finally, the first sale doctrine contributes directly to the survival of copies over time. Many copies would eventually disappear without the first sale doctrine: the consumer who is moving, has run out of shelf [*PG608]space, or simply no longer wants the copy would presumably discard it if she could not sell or donate the used copy to some other owner.
Why is preserving copyrighted works a good thing? Aiding the preservation of works of authorship is entirely consistent with copyright’s goal of enabling access to such works. Most works will no doubt command little or no popular or mass consumer interest 100 or 200 years after their creation, though clearly some classics will remain in demand. But unknown or little-known older works still have value that makes them worth preserving. At the very least, such works have value to historians—not only art historians or literary historians (depending on the nature of the work) but also social and cultural historians, and in the case of informational works such as newspapers or magazines, to historians of every stripe.
With respect to artistic works, survival over time may be of more than just historical interest. Such works might one day find renewed commercial, popular, or critical interest. New markets and technologies may arise that allow wider dissemination and exploitation of older works. For example, few cinemas screened movies from the 1930s and 1940s after the movies’ original runs ended. For many years, that meant that copyright owners of those films had few opportunities to exploit many of their works commercially beyond occasional screenings of blockbuster classics on television. The development of cable television and the home videocassette markets, however, provided new outlets for such works, giving their copyright owners significant new commercial opportunities and giving more people the chance to view the movies. In addition, an older work might occasionally be rediscovered and become popular again—perhaps more popular than when it was first created. Or tastes may change, and a work that found little audience or recognition when created might appeal more strongly to the sensibilities of a later generation. Herman Melville’s Moby-Dick and Kate Chopin’s The Awakening are examples of books that were poorly received by critics and the public when they were first published, and only after many years languishing in obscurity came to be regarded as important works.109 We [*PG609]might be quite dissatisfied if the only nineteenth-century literature available today was that which was considered most popular and commercially or critically successful in its own day.110
The survival of old artistic works may also be important in the creation of new works. Surviving older works may prove fertile sources for contemporary authors, seeking little-known stories and characters to incorporate into their own new creations. Derivative works—such as songs, motion pictures, and modern adaptations—may be based upon works largely forgotten until the derivative work appears. Martin Scorsese’s Oscar-nominated film Gangs of New York offers an example of a work that had faded into obscurity giving rise to a later work. The film derives from Herbert Asbury’s book The Gangs of New York, first published in 1927.111 “For years, [the book] was available only in . . . thrift shops, guest-room night tables and the occasional country cottage bookshelf. That’s where the director Martin Scorsese, then in his 20’s, found it one icy New Year’s Eve, while he was house-sitting on Long Island.”112 Scorsese read the book and became obsessed with the idea of making a film based on the book’s stories. The persistence of copies of the Asbury book long after it had apparently gone out of print provided the opportunity for the later film.
Furthermore, a contemporary author of a derivative work may prove more talented, or more in touch with her audience, than the original author, and a work that generated only limited interest when it was first created might become the basis for a derivative work that is extremely good, or extremely popular, or both. Or a work might prove to be better suited to a medium that did not exist when the work was created; a mediocre film from the 1950s might be the basis for a tremendously popular computer game in the 2000s.
Given the length of the copyright term, copyright owners would seem to have an economic interest in preserving their works, even those that are not currently in high demand, in anticipation of possible future remunerative uses. But the difficulty of predicting whether any particular work will be of future interest, coupled with the poten[*PG610]tial expense of maintaining and preserving copies, might well result in insufficient commercial incentive for copyright owners alone to preserve their works zealously. For example, some film studios for many years saw little value in spending the money necessary to preserve prints of many of their motion pictures because there was little or no market for showing those movies.113 Only later, when cable television and home video markets developed, did those studios that had preserved their works find that new and unforeseen markets offered them commercial opportunities that had not previously existed. And even zealously protective copyright owners are unlikely to maintain as many copies in as many varied environments as would result from public distribution of copies. The owner’s most carefully preserved copies are probably more vulnerable than all of the hundreds, thousands, or millions of copies of a work held by different owners throughout the country.
The affordability and availability effects described in the preceding section result from the operation of the first sale doctrine in an environment in which copyrighted works are distributed in freely transferable copies, as they have been in numerous important copyright fields for many years.114 Today, however, while the first sale doctrine remains in place, the environment in which it operates is changing, as digital networks and technological protections become more widespread. Thinking about the future of the doctrine requires understanding these changes. Unfortunately, many of the changes are just getting underway, and we have no crystal ball to reveal what the copyright environment will look like in fifty, twenty-five, or even ten years. The early years of digital networks have made clear that predicting how such networks will be employed is fraught with dangers, both of being too shortsighted about the truly innovative use of those networks and of being overenthusiastic about how quickly and deeply [*PG611]they will change existing practices.115 Nonetheless, it is already clear that copyrighted works are increasingly being disseminated over digital networks and with technological protection measures, and those trends will almost certainly continue.116 As a result, the era of digital networks will likely lead to fewer works being distributed to the public in the form of copies, or at least in copies that are effectively transferable as a practical or legal matter.117
Some digital content may simply never be distributed in copies at all, but may instead reside in copy form only on a centralized computer server, and be transmitted to individual users when they request it. This is the model by which many Web sites operate today. Works of authorship are posted on the Web site and a consumer can access the works by requesting that the Web site’s computer transmit the works to her. This is, in essence, an on-demand variation of broadcasting as a means of disseminating copyrighted works.118 Like a Web site operator, a broadcaster uses a copy of a TV or radio program to transmit the program to viewers or listeners. In each case, the audience can see or hear the work but does not receive a copy.119 Thus, disseminating a [*PG612]work by transmitting it to users over a digital network such as the Internet will not place a significant number of authorized copies of the work in the public’s hands.
Another model of digital network dissemination of copyrighted works would result in many consumers having copies of those works. In this model, when a work stored on a central computer is transmitted to a consumer, the consumer’s computer would store the received transmission locally in a permanent form. This is essentially what is today called a download—the consumer ends up with a copy of the work at the end of the transmission. Disseminating works by download will result in authorized copies ending up in the hands of individual members of the public.
Consumers, however, may find these copies significantly harder to transfer under the first sale doctrine as compared to traditionally distributed copies. As an initial matter, many downloaded works will be stored on the user’s hard disk. The file stored on the disk will constitute the lawfully made copy that section 109 entitles the user to transfer.120 But transferring that material object—the hard disk—will generally entail removing the disk from the computer (or selling the computer along with the hard disk), and also transferring all of the other data on the hard disk (or removing that data). Under the terms of the first sale doctrine, transferring an album of songs that has been downloaded to a hard disk will be far less convenient than selling a used CD. A consumer could copy the file on her hard disk to a CD or other removable medium, which would be significantly easier to transfer. That copying, however, would be an act of reproduction within the scope of the copyright owner’s exclusive reproduction right, which the first sale doctrine would not excuse. Unless the reproduction onto the CD was allowed by the copyright owner or some provision of copyright law (such as fair use), the CD would not be a “lawfully made” copy that section 109(a) allows to be transferred.121
When a consumer downloads a file, she might store it directly on a removable medium such as a diskette or a CD, rather than on her hard disk, in which case her lawfully made copy, which section 109(a) [*PG613]allows her to transfer, would be far more easily transferable than if it were on a hard disk. But few consumers do this, and in any case technological protection measures may pose other obstacles to the free circulation of the downloaded copy.122 Indeed, these obstacles could hinder circulation of works disseminated digitally not only by transmission, but also by the distribution of digital copies (such as a CD or DVD).
A primary technological obstacle would be the practice of “tethering” individual copies to a particular playback or access device. The file that a consumer downloads might be coded so that it can be viewed or heard only on the computer on which it was originally downloaded.123 Tethered copies are
copies that are encrypted with a key that uses a unique feature of a particular device . . . to ensure that they cannot be used on any other device. Even if a tethered copy is downloaded directly on to a removable medium such as a Zip disk or CD-RW, the content cannot be accessed on any device other than the device on which it was made.124
Although a consumer would be free to transfer the CD or diskette containing the downloaded file, anyone who received the copy would be unable to access the work stored on it. As the Copyright Office noted, “Disposition of the copy becomes a useless exercise, since the recipient will always receive nothing more than a useless piece of plastic.”125
The same effect might also be achieved through technological measures other than tethering. A consumer’s downloaded copy might [*PG614]not be tethered to a particular device, but might be time-limited. For example, a consumer might download onto a CD an e-book that she could only view on her screen for thirty days after downloading. At the end of the thirty days, her e-book reader would be unable to open the file and display the book’s content (though she might be able to contact the copyright owner, pay an additional fee, and have the file activated for an additional period).126 Here again, although the user can easily transfer her downloaded copy, her transferee does not obtain a copy that can be used to access the work, at least not without contacting, and paying, the copyright owner, assuming the owner can be located and is willing to sell further access.
Legal obstacles, rather than technological ones, might also hinder the transferability of digital copies, whether downloaded via transmission or distributed by the physical transfer of tangible media. The copyright owner might disseminate the work pursuant to a license, under which the copyright owner purports to maintain ownership of the copy, mere possession of which is transferred to the licensee. Software vendors today routinely distribute computer programs in tangible media, such as CD-ROMs, but the license agreement that accompanies the disc often indicates that the consumer obtains only possession of the CD-ROM in which the program is stored and a license to make certain uses of the program. If such license provisions are enforceable, then the licensee would not be the “owner” of the copy in her possession, and the first sale doctrine only exempts “owners” of copies from the copyright owner’s distribution right.127 Thus, although a buyer might possess a copy of the work that is technologically accessible on any appropriate device, the buyer would be unable to sell, rent, or lend the copy to the public without infringing on the copyright owner’s distribution right.
Legal restrictions on transfer might be more direct. Traditional retail sales of copies of copyrighted works have involved essentially no express terms and conditions between the buyer and seller, instead being subject to the provisions of copyright law and the general state- [*PG615]law provisions on sales of goods. As works are increasingly disseminated in digital format, it becomes easier for copyright owners to attempt to impose express contractual terms and conditions on the buyer as part of the transaction, often by means of a standard shrinkwrap or clickwrap agreement to which the buyer must agree before obtaining the copy or access to it. Those conditions might include an express agreement by the purchaser not to transfer the copy (by sale, rental, or loan) once she has acquired it. Because such provisions have not been widely used for a significant length of time, their enforceability is not entirely clear, and may be preempted by federal copyright law.128 But if the provisions are enforceable, they could dramatically curtail the transferability of copies obtained by digital transmission.129
The future development of digital networks and technological protections, and the ways in which copyright owners will use them, are hard to predict. Nevertheless, given current trends in dissemination by digital transmission, and in the use of technological protection measures and legal restrictions on transfers, it seems quite possible that in the near future we will have fewer copies of copyrighted works held by fewer owners, and fewer of those copies will be readily transferable.130
In the pre-digital era, the first sale doctrine has benefited the public by helping to make copyrighted works distributed in copies more affordable and more available. Soon we may find that fewer transferable copies of copyrighted works circulate, as works are increasingly disseminated by digital transmission and in encrypted (or otherwise protected) copies. What impact will this have on the beneficial affordability and availability effects of the first sale doctrine?
The expansion of digital technology might well increase the affordability and availability of copyrighted works. Indeed, this has been the promise of such technology: greater access to more works at a lower cost. Should this promise become reality, we need not necessarily worry if few freely circulable copies exist to which the first sale doctrine applies. But the promised benefits of the digital copyright environment may not fully materialize. The impact of a shift from distribution of tangible copies to dissemination by digital transmission will depend on whether copyright owners adopt any or all of the business models discussed in the preceding section, on the prices charged and terms given by copyright owners, as well as on other variables.
Given all this uncertainty about the future of digital technology, this Part only preliminarily explores how the shift to digital dissemination might affect the operation and benefits of the first sale doctrine. The tentative suggestion is that such a shift could eliminate important ways in which copy distribution and the first sale doctrine have enhanced affordability and availability. To some extent, new dissemination patterns may enhance affordability or availability, producing similar, or perhaps greater, effects than the first sale doctrine has. In many other ways, however, digital dissemination may reduce the doctrine’s affordability and availability effects, forcing policymakers and academics to consider whether the copyright system can find other mechanisms to promote affordability and availability.
What impact will the shift from distribution of reusable tangible copies to dissemination by digital transmission have on the first sale doctrine’s affordability effects? The answer seems likely to depend in significant part on the business models and price structures that emerge for copyrighted works or particular subclasses of works. This Section sketches some of the possibilities.
As an initial matter, digital dissemination, especially by transmission, may in many instances increase the affordability of an initial purchase of a copy of a work. Dissemination by transmission—for example, downloading a work from a remote computer—could be much cheaper than the traditional distribution of physical copies. By transmitting the work over a computer network, the copyright owner (or her agent) is spared the costs of producing the individual copies, of transporting and handling those copies, and of maintaining retail operations for the sale of those copies to consumers. Dissemination by transmission is not costless, of course;131 however to the extent that it is cheaper than physical distribution, the cost savings, or some portion of them, could be passed on to the consumer in the form of a lower purchase price.
In addition, in some cases, dissemination by digital transmission may have the potential to replicate, or perhaps extend, the affordability effects that the first sale doctrine has had in tangible-copy markets after initial copy sales. Much will depend on the costs to copyright owners of digital dissemination and on the prices consumers pay for digital access. But at least in theory, digital dissemination, like the first sale doctrine, promises to offer access to copyrighted works at a lower cost than the purchase of a copy to those consumers interested in paying for limited access to works rather than ownership of copies of them.
Markets for purchasing such limited access existed before digital dissemination. Video rental markets, paid library memberships, cable television subscriptions, and pay-per-view television are all examples of existing markets in which a consumer pays for access to, but not ownership of, copies of copyrighted works.132 The price for such limited access is generally lower than the price paid to acquire an unlimited-use copy. In the future, a pay-per-use system over digital networks, or a [*PG618]monthly subscription that allows access to a large catalog of works, seem likely to be good analogs to, and perhaps substitutes for, the existing video rental market or a paid library membership. In each case, the consumer pays a price that allows access to a work (or a catalog of works) for a limited time period, and that price presumably reflects a discount from the cost of purchasing a copy (or copies) that the consumer could access repeatedly. As a general matter, if the price charged for online access to a work is similar to that charged for viewing access or a loan or rental copy, then these consumers might not experience much effect on affordability as a result of the shift away from copy distribution.
This impact of digital transmission may go beyond simply replacing existing video rentals with Internet pay-per-view. Digital networks may allow this model of online dissemination to emerge, for some consumers and some works, for which the pre-digital market essentially offered only the purchase of copies and not the option to purchase limited access to a work at a price lower than the copy price. That is, the shift to online dissemination may create new markets to satisfy currently unserved demand for limited, on-demand access to copyrighted works. Although a rental market exists today for motion pictures and subscription or pay-per-view access exists for television programming, these business models generally do not extend to other kinds of copyrighted works, at least not to those marketed to the general public. It seems plausible, however, that some consumers might prefer paying for access to other kinds of works on a rental or per-use basis, rather than purchasing a copy.133
One example might be periodicals. Some people who buy a copy of a newspaper or magazine may wish only to read that copy themselves and then dispose of it, and not to retain any portion of it, give or lend any part of it to another person, or reread it at a later date. In the pre-digital world, such consumers generally had no option but to buy or borrow a copy of the periodical. With the emergence of digital networks, such a consumer might find that paying a subscription or per-issue access charge for online access to current editions of the work offers the functional equivalent of buying a disposable tangible [*PG619]copy, and the publisher might charge a lower price for such online access than for a copy of the periodical.134
Some of these new markets have already begun to develop. Websites for newspapers such as The New York Times and The Los Angeles Times sell access to individual articles.135 Encyclopedia Britannica offers the full content of its encyclopedia online for an annual or monthly subscription fee, offering a new alternative to previous choices of buying a copy of the encyclopedia, consulting it at a library, or foregoing access altogether.136 Additionally, the major recording labels have launched two online music services, MusicNet and Pressplay, that give users the ability to listen to a limited music catalog on demand for a monthly fee.137
Technological protection measures might also increase the market for time-limited access to copyrighted works, particularly in markets for the rental of sound recordings and computer software. In 1984 and 1990, Congress gave copyright owners control over the rental of sound recordings and computer software, despite the first sale doctrine’s general authorization of rental by the copy owner.138 These changes were prompted by concerns that these rentals contributed to infringement—consumers who rented a music CD or software might make a copy of the music or software for themselves before returning the rented copy. Indeed, at the time of the record rental amendment, Congress heard evidence that many of the two hundred or so record rental establishments in the United States sold blank [*PG620]tapes to renters and engaged in other practices that seemed likely to encourage renters to make copies.139
Congress was particularly concerned about the rental of works in digital format, because of the ease of copying such information, the quality of the resulting copies, and the increased durability of digital copies over analog copies.140 Since the amendments, copyright owners do not appear to have rushed to enter markets for renting sound recordings and computer software, presumably because of the same piracy concerns that motivated Congress. If legally backed technological controls prevent one who possesses a CD from copying the music or software stored on the CD, but allow her to listen, view, or operate the work, copyright owners might be willing to allow digital copies of their works to be rented. Indeed, if copy controls can address the piracy concerns that motivated the amendments restricting the first sale doctrine, those amendments could be repealed, allowing the development of markets for music and software rentals, if there is demand for such rentals.
For consumers who want limited access rather than copy ownership, the shift to digital dissemination may keep works as affordable as they have been under the first sale doctrine, or may make them more affordable. But for consumers who want to acquire their own copies of a copyrighted work, a shift to digital transmission might result in generally higher prices than are charged today in markets in which works are distributed in copies and the first sale doctrine allows those copies to circulate freely.
[*PG621] Consumers may have good reasons for wanting to own a copy rather than to acquire only limited access to copyrighted works. If a consumer is certain to access a work repeatedly, it may be cheaper to pay once for a copy of the work and obtain the right and ability to use the work as much as desired, rather than to pay a per-use charge or an ongoing monthly subscription fee. Buying a copy also offers certainty as to price and availability. A consumer who buys a copy knows up front the price she must pay for unlimited access. A consumer who pays for each use of the same work, or who pays on a monthly basis, must take the risk that the copyright owner will raise the price of access, or reduce the availability of the work. A lawyer who subscribes to Westlaw on a monthly basis to consult West’s case reporters online might someday find Westlaw’s monthly subscription price higher than she can afford to pay, at which point she will not have access to any of the West reporters, old or new. A lawyer who buys copies of West’s reporters each month may also find at some point that the monthly price of new volumes is prohibitive, but that lawyer will still be able to consult the volumes she has already purchased. For these and other reasons, many consumers may prefer to buy copies of copyrighted works rather than merely buying limited access to those works. How will the shift to digital transmission and encrypted copies affect affordability of works for users who want to buy copies?
The impact on those who want to buy an unused copy is unclear. Depending on the business model chosen by the copyright owner, such a copy might not be available at all. Such consumers would find themselves in the position of those who wanted to buy copies of motion pictures or radio and television programming for most of the twentieth century: copies simply were not generally available to the public. The same is true for most Web sites today.141 If copyright owners make their works available solely by digital transmission, those who want to buy copies will simply be out of luck.
If a copyright owner sells both copies and digital access to a work, it is unclear what effect the addition of the digital access market would have on the price of a new copy. That price might increase to account for possibly higher costs of producing fewer copies. Or a copyright owner might charge a higher price per copy in order to limit the quantity sold, because each copy sold could potentially be [*PG622]rented and lent, thus competing with the copyright owner’s own market for providing limited access to the work directly to customers by digital transmission.142 On the other hand, a copyright owner might charge a lower price for a copy in this new environment. After all, the owner herself would be earning income from both the sale of copies and the sale of limited access, whereas in the traditional copy-distribution system the owner generally earned no additional revenue from limited access markets such as copy rentals or loans.143
The shift to digital dissemination might increase the cost of buying a used copy. If a work is disseminated solely by online transmission, there may be few or no used copies to circulate on a secondary market. Even if a work is disseminated both by transmission and by copy distribution, some consumers are likely to substitute digital transmission for the purchase of a copy. Thus, the copyright owner may sell fewer copies and thus fewer copies will be available for resale.144 In addition, the digital copies distributed by the owner may not be transferable for the legal and technological reasons discussed above. These factors would reduce the number of usable copies available on the secondary market. If demand for used copies remains relatively stable, then the price of a used copy can be expected to rise.
The overall effects of a shift to digital dissemination on the market for lending copies—the library market—are also unclear. For works disseminated only by digital transmission, libraries simply will not be able to acquire copies of those works that can be physically lent to patrons. This would significantly curtail the affordable access by public lending that the first sale doctrine has traditionally facilitated. A digitally disseminated work, though, might not be completely unavailable to libraries. The copyright owner might distribute the work in copies, but in “tethered” copies. A library could acquire such a copy and make it available to patrons to consult in the library, on the tethered equipment, though the library could not lend the copy to a patron for use on her own equipment. The inability of patrons to borrow the copy and access it when and where they choose would raise, perhaps substantially, the nonmonetary costs of library access to the work.
Libraries might also be able to provide patrons access to digitally transmitted works, perhaps at a time and place of the patron’s choos[*PG623]ing, by obtaining from the copyright owner a license allowing any of the library’s patrons to access the work. A library might, for example, contract with the provider of an online encyclopedia or dictionary, such that anyone with borrowing privileges from that library would be able, from any computer, to access the work.145 It is unclear as a general matter whether the cost to a library of providing such online access would be higher or lower than the cost of purchasing copies to lend to its patrons. The cost per patron use of online access might easily exceed the cost of a copy of the work, spread across the number of patron uses of that copy. On the other hand, the cost per use might be no more expensive than the cost of buying a copy, or might actually be cheaper.146 Much would depend on the prices charged, how those prices compare with the price of copies, whether the price is charged as a periodic subscription or on a per-use basis, what restrictions are placed on the use of the work by the library and its patrons, and how heavily a work is used. In addition, libraries that provide access in this manner, rather than buying copies to lend, could remain vulnerable to a copyright owner’s pricing decisions, particularly if libraries contract with copyright owners for relatively short terms. Whenever such a contract is up for renewal, a copyright owner might raise the price to the library to a level that the library cannot afford. If the library therefore chooses not to renew, access to the works could [*PG624]become entirely unavailable to the library’s patrons.147 Had the library bought copies of the works instead of paying a recurring fee for mere access, it would, of course, be able to circulate those copies regardless of price hikes by the owner for more copies or for new works.
Finally, the shift to digital dissemination may give copyright owners more control over whether libraries can offer patrons free access to copyrighted works at all. Traditionally, to have the option to make a work available, a library relied on a copyright owner to make only one choice: whether to issue the work in copies. Once the copyright owner did so, the library was free to buy a copy and circulate it. And because selling copies has been a very significant means for copyright owners to exploit their rights in several important fields, including most print publishing, sound recordings, and, increasingly, motion pictures, libraries have generally been able to make most works in those fields available, if they choose. If in the future a copyright owner makes a work available only by means of digital transmission, a library’s ability to give patrons access to such a work will depend entirely upon the copyright owner’s decisions about whether to contract with libraries for such access.148 A copyright owner will have to act affirmatively to permit library access. If the owner declines to license libraries to provide online access, the library will simply be unable to offer the work to its patrons. The lower-cost access that libraries offer as an alternative to buying or renting a copy will not be available. In such an environment, the scope of library collections will increasingly be at the mercy of copyright owners’ business decisions.
Overall, then, a shift to digital dissemination may increase the availability of limited access to copyrighted works at “rental” prices lower than the price of acquiring a copy of a work, but may be more likely to raise the cost of buying a used copy, of providing library access to works, and perhaps of buying a new copy.
One final issue is worth noting, though a full examination of it is beyond the scope of this Article. A shift to digital dissemination may increase copyright owners’ ability to engage in price discrimination—to charge a higher price for access to a work to buyers willing and able to pay the higher price, while charging a lower price to other buyers who are only willing and/or able to pay less.149
As a general matter, in a monopolized market perfect price discrimination may be desirable because the monopolist will expand output beyond the otherwise profit-maximizing level. In the absence of price discrimination, the monopolist will not sell any units to consumers who value the product more than its marginal cost of production but less than the single profit-maximizing price. Price discrimination offers the monopolist the chance to increase her monopoly profits by supplying some of the otherwise unserved consumers. Customers who place a high value on the product (and are able to pay that value) pay more than the single profit-maximizing price, whereas low-valuing consumers pay less. Output is increased so that more people obtain the product, although the high-valuing buyers pay a higher price, resulting in a shift of consumer surplus from them to the monopolist.150 Indeed, with perfect price discrimination, the monopolist can theoretically absorb all consumer surplus.
For copyrighted works, the first sale doctrine has traditionally complicated price discrimination by allowing buyers to resell, rent, or loan the copies they buy, and therefore engage in arbitrage. If a copyright owner tried to price discriminate in the sale of her works, the buyer of a copy could resell access to the work to a second consumer at a price lower than the price the copyright owner would charge the [*PG626]second consumer directly (but higher than the price the copyright owner charged to the first consumer). Dissemination by transmission can reduce or eliminate such arbitrage, facilitating price discrimination.151 A consumer who merely views a transmission of a work and retains no copy of it will not be able to sell access to the work in competition with the copyright owner. Similarly, if a buyer obtains a digital copy that is tethered or time-limited, her opportunities for arbitrage will be quite limited. Digital dissemination might also facilitate differential pricing by making it easier for copyright owners to identify and group customers by willingness to pay and by making it easier to provide different versions of the work at different prices.152 For example, if a work is available only by transmission from the owner on a pay-per-view basis, then those who wish to view the work repeatedly will have to pay each time, while someone who only wants to experience the work once will only pay once.153
Recent years have seen a growing debate over the desirability of increased price discrimination by copyright owners that digital dissemination may facilitate, and I do not propose to enter that debate here.154 Most important for the purposes of evaluating how a shift to digital dissemination would affect affordability is a point Wendy Gordon has made. She points out that the theoretical desirability of [*PG627]perfect price discrimination by a monopolist is in comparison to a monopoly without price discrimination, but that the traditional copyright system has largely not been one in which copyright owners are pure monopolists.155 Instead, it has been a system in which a copyright owner faces some competition in setting her price: competition from “second-hand, library, and rental copies” of the work that the first sale doctrine allows.156 Professor Gordon, therefore, suggests that we should compare the potential for perfect (or at least much improved) price discrimination through digital dissemination not to a single-seller, single-price market but rather to a partially competitive market. As she points out, the presence of such partial competition by means of the first sale doctrine may result in lower price and greater quantity—that is, increased affordability of copyrighted works.
Thus, although a shift to digital dissemination may enhance a copyright owner’s ability to price discriminate, it will do so in part by eliminating competitive suppliers of the owner’s works. Just as a video store charges less for a rental than for a sale of a video, the copyright owner will presumably charge a lower price for the right to view a work for a one-day period than for a lifetime right to view it. But the copyright owner’s price for one day’s access may not be set in competition with other parties offering similar “rental” access to the same work, because digital dissemination may reduce or eliminate the existence of copies in the hands of potential competitors.157 It is thus far from clear that increased price discrimination facilitated by digital dissemination would make copyrighted works more affordable overall.158
This Section considers how a copyright system in which the first sale doctrine does not operate as it traditionally has, because consumers do not acquire freely re-circulable copies, might affect the avail[*PG628]ability of copyrightable works. The possible impact on availability of a shift to digital transmissions seems somewhat easier to anticipate than the impact on affordability, in part because that impact depends less on the pricing and marketing decisions of copyright owners.159 With respect to one situation—the out-of-print work—digital dissemination might help keep works available, as the first sale doctrine has. In most other respects, a shift to digital dissemination seems likely to eliminate much of the beneficial availability effect of the first sale doctrine without necessarily producing any compensating mechanism for ensuring availability.
As discussed above, distribution of copies and the first sale doctrine combine to help make copyrighted works available to the public even when the copyright owner has decided that the returns from producing and selling copies of the work do not justify the expense of doing so.160 When works are out of print and no longer available from the copyright owner, used, rental, and loan copies may still be available. Digital technology, however, has the potential to reduce or eliminate the problem of a work going out of print in the first place. With respect to books, technologies exist that can store copyrighted works digitally and produce copies of those works—printed books “indistinguishable from conventionally manufactured paperbacks”—on demand, for a few dollars each.161 A book publisher might find it too costly to print and store copies of a backlist title that will sell only 100 copies per year and would therefore allow the book to go out of print. But if the publisher need only store a digital file containing the image of the book, and then transmit that file to an on-demand book printer whenever a buyer orders a copy, the money to be made from the sale of 100 copies per year—or perhaps even 10 copies or 1 copy—might well justify the cost of the digital storage and transmis[*PG629]sion.162 As a leading publisher has said, “[n]o book need ever go out of print.”163 Thus, this technology would give 100 people per year access to a work that they otherwise would not have (or would have to get by buying used copies or borrowing copies), while giving the copyright owner revenues from 100 sales that would not otherwise occur. Similar technologies are beginning to be deployed for sound recordings, and presumably the concept could be extended to motion pictures.164 In a world in which I can order a custom-burned DVD of the 1930s Fred Astaire and Ginger Rogers movie Top Hat for delivery the next day, the ability to buy a used copy of the movie, or to rent one from my local video store, becomes much less important in keeping the work accessible.165
Even if technology for creating copies on demand does not become widespread, digital dissemination could still reduce or eliminate the out-of-print problem. If the cost of digitally storing and transmitting a work—whether a literary work, a sound recording, a motion picture, or some other work—is sufficiently low, then copyright owners may choose to store their works digitally and sell transmissions of the works on demand, rather than copies. Copyright owners might sell consumers the right to own their own digital copy of a work by downloading it, or they might sell only limited online access to the work by viewing or listening. Because the costs of storage and transmission seem likely to be much lower than producing, storing, transporting, and marketing physical copies in a sufficient quantity to make a profit, it could well be economical for copyright owners to make available by digital transmission even works for which the de[*PG630]mand is relatively low.166 Indeed, copyright owners might make available every work in their catalog in so-called “celestial jukeboxes.”167 If they materialize, such celestial jukeboxes would help ensure the availability of works that in today’s media environment would be out of print. And in that case, if I can listen to a now-obscure 1970s pop song on demand, either as part of my monthly subscription to a comprehensive online music service or by paying for access to the individual song, then being able to buy a used copy of the song, or borrow one from the library, is no longer essential to maintain the work’s availability (as opposed to affordability).
Although digital networks make possible this increased availability of works that might otherwise go out of print, actual availability of such works will depend on the copyright owners’ continuing willingness to make the works available. Users who access works from the celestial jukebox may purchase nothing more than access, so that if a copyright owner chooses to remove a works from the jukebox, independently owned copies will not exist to circulate. As the next section discusses, digital dissemination may in fact increase a copyright owner’s power to withdraw a work, should she choose to do so.
The first sale doctrine has, as discussed above, traditionally contributed to keeping copyrighted works available not only when they are out of print, but also when copyright owners otherwise withdraw them from circulation, either temporarily or for the term of the copyright.168 In these situations, the availability effect of the first sale doctrine seems likely to be lost in a shift from distribution of copies to digital dissemination.
If a work is disseminated solely by digital transmission, a copyright owner’s decision to discontinue any further transmissions of the work could well be effective to deny all access to the work.169 Many [*PG631]people may have seen—and even paid for—access to the work by receiving the owner’s transmissions, but because the users will have received only transmissions, they will generally not have retained any copy that they can access once the copyright owner withdraws the work.170 These users will similarly be unable to sell, rent, or lend a copy to anyone else who may want access to the work. Indeed, when the copyright in the work expires, there may be no copy available for use by someone who wishes to publish the now-public-domain work. Although some isolated and partial copies of the work may be in the hands of users who printed out or electronically stored the work when they had authorized access to it, those copies may not be “lawfully made” copies that could circulate to others under the first sale doctrine.171 Even if the copies are considered lawful, it is not clear that they will exist in sufficient quantity or quality to meet any significant demand.
Essentially, a shift to dissemination purely by digital transmission would put copyright owners in the position of CBS with respect to Amos ’n Andy television episodes. Because CBS never distributed the episodes in copies, its decision to stop transmitting the episodes effectively denied the public access to them. Many people are no doubt familiar with this effect on the World Wide Web. Most Web sites, of course, are available only by digital transmission; a user can view the site by receiving transmissions from the site, but generally acquires no copy of the site. If the copyright owner decides to remove a site from the Web, the public cannot get access to the site’s content by Web transmission and usually has no other source of access.
Examples of the effective removal of digitally transmitted works abound. For approximately four years, a Web site called “Dysfunctional Family Circus” posted panels of Bil Keane’s daily comic The Family Circus and published user-submitted captions for those panels. In 1999, the site operator, after discussions with Bil Keane, decided to remove the Web site, with its 500 panels and caption lists.172 As a result, little to none of the Web site’s content is now available on the Web, and because copies of the content had not been distributed, [*PG632]copies are not generally available as a substitute for online access. Similarly, The Washington Post last year closed its NewsBytes.com Web site, which had begun in the early 1980s as an online bulletin board of technology news before being acquired by The Washington Post, and which claimed over five million readers. Nearly two decades worth of news reports on technology were apparently no longer available on the Web once the Web site was closed.173
The loss of access to copyrighted works can be seen most easily in comparison with works distributed in copies. If King Features Syndicate, the distributor of The Family Circus, refused to make any additional copies of the comic available or license anyone else to do so, the strips that had previously been published would be widely available in newspaper copies (the strip is syndicated in 1,500 newspapers) and in used copies of the more than sixty published collections.174 Similarly, if The New York Times were, like Newsbytes.com, to cease to exist, no doubt libraries around the country would nonetheless be able to offer patrons access to virtually the entire run of the newspaper.175 The distribution of copies, which can freely circulate under the first sale doctrine, created “back-up” sources from which the public could obtain copies of a work that the copyright owner has withdrawn. Dissemination by digital transmission does not create such back-up sources.
Electronic publishers have already begun withdrawing articles from their databases. Elsevier Science removed from its ScienceDirect database a controversial article from the journal Human Immunology about Palestinian genetics that the company and the journal’s publisher decided offered political and historical opinions inappropriate [*PG633]for a scientific journal.176 LexisNexis and Westlaw deleted an article published in the Denver Journal of International Law and Politics from their databases when the journal’s publisher, the University of Denver, pressed for its withdrawal. The article had criticized Boise Cascade, among other multinational corporations, and the company had “reacted harshly,” although “there was no proof of plagiarism or publishing malfeasance.”177 Elsevier Science has also withdrawn articles from ScienceDirect due to plagiarism or scientific misconduct. Although the number of articles withdrawn amounts to a fraction of the millions of articles in the database, many other electronic publishers maintain problematic articles in their databases and add corrections or warning notices to them. Librarians have criticized expunging works from electronic databases as potentially corrupting the historical record and posing practical problems for current researchers and future historians.178 In the cases of withdrawal so far noted, the articles in question seem to have appeared in print prior to being included in, and then expunged from, electronic databases, so that researchers willing and able to search for the articles in hardcopy can still find them. As more works are published only electronically, however, such alternative sources will not be available when a controversial work is withdrawn.179
Dissemination of a work exclusively by online transmission also creates the possibility of what might be called “withdrawal by revision.” A copyright owner might decide not to withdraw an earlier work entirely but rather to revise the work and transmit only the revised version. When a revised work has been previously distributed in copies, the first sale doctrine helps assure the public access to the earlier, unrevised versions. If, however, the work has been disseminated only by transmission, few if any lawfully made copies of the unrevised versions may exist and those that do will most likely not be systematically accessible. For works of art and entertainment, this may hamper [*PG634]the work of critics and social and cultural historians; for works of reporting or opinion, it may endanger the accuracy of the historical record.180
Even where copyright owners disseminate works digitally in ways that allow users to acquire copies, the first sale doctrine may be of much less help in assuring wide access to withdrawn works than it is today. In some cases, at least those who previously accessed the work may be able to continue to do so. For example, users may have purchased the right to download online works to files on their computer hard disks, and they will be able to access the work using those files even after the copyright owner takes the work offline, assuming that the files are not time-limited. Similarly, if the copyright owner has sold “tethered” copies, the owner of the tethered copy will be able to use that copy so long as she maintains the original tethered equipment. But even in those situations, the existence of such copies will be of little help in providing access to the work to people other than the original copy owner. Copy owners will face practical difficulties in transferring the files downloaded onto their hard drives and legal difficulties if they try to copy the file onto a more transferable medium or disseminate it by transmission. Furthermore, selling, renting, or lending a tethered copy will be useless unless the original tethered equipment is also sold, rented, or lent, which is likely to be cumbersome. Thus, even if many people own digital copies of a transmitted work, technological protection measures and the current language and interpretation of the first sale doctrine mean that those copies are unlikely to provide an effective means of access to a work that a copyright owner has withdrawn.
On the whole, then, with respect to access to withdrawn works, a shift away from copy distribution toward dissemination by digital transmission seems likely to reduce or eliminate the first sale doctrine’s ability to give the public access to such works.
A shift to digital dissemination also seems likely to threaten the first sale doctrine’s contributions to preservation. If a work is distributed only by transmission, then the only copies of the work will generally be copies stored on the copyright owner’s computer server, which transmits the work to the public over the network (as well as any other copies, such as printouts, kept by the copyright owner). Even if the work is seen or heard by millions of consumers, those consumers generally will not have a copy, just as radio listeners and TV viewers today do not generally have copies of the works they hear and see.181 This lack of widely distributed copies means that the copies maintained by the copyright owner must bear all of the risk of damage, loss, disappearance, or destruction. If a fire or flood strikes a print publisher’s warehouse today and consumes all of the inventory of a particular book, copies of the book located elsewhere—in homes, offices, bookstores, and libraries—will survive. If a fire or