Confused, frustrated, and exhausted: solving the U.S. digital first sale doctrine problem through the international lens.

• Author: Brassel, Alandis Kyle

ABSTRACT

Users worldwide enjoy digital goods such as music and e-books on a daily basis. They have become a major part of people's lives, with uses ranging from lighthearted entertainment to serious educational pursuits. In many cases, convenience and affordability make digital goods more preferable than their analog counterparts. However, users often cannot use digital goods as freely as they would analog goods. Courts, legislation, and businesses prohibit those users, accustomed to reselling unwanted hard-copy books or vinyl records, from reselling digital books and music. This confuses users as to what they can actually do with their digital goods. This Note proposes that the United States adopts a digital first sale doctrine based on normative principles pulled from E.U. and Canadian copyright law.

TABLE OF CONTENTS I. INTRODUCTION II. THE EVOLUTION OF DIGITAL CONFUSION: THE UNITED STATES MUSIC MARKET AS AN EXAMPLE A. Physical Expectation: The Balance of Rights in the Music Industry B. Digital Confusion: The Balance of Rights Shifts III. INTERNATIONAL EXHAUSTION: DISSONANCE AMONG THE NATIONS A. The Text of the WIPO Internet Treaties and the TRIPS Agreement B. The United States Regime: No Digital Resale Allowed C. The European Union: Digital Resale Possibly Allowed D. Canada: The Possible Tipping Point IV. Solving the U.S. Digital First Sale Problem Through the International Lens: Why Going Digital Makes Sense V. Conclusion I. INTRODUCTION

Now more than ever, consumers can enjoy copyrighted works in digital form. Smartphones and e-readers allow users to download music and books at the click of a button. Millions of vinyl records and compact discs now fit on a single hard drive the size of a book. The digital revolution has brought with it a level of convenience and affordability unimagined by previous generations of consumers.

Harsh use restrictions, however, cripple consumer enjoyment of the digital revolution. (1) Users are often prohibited from using digital products as they expect. (2) For example, a user is often forced to repurchase digital files if she wants to put the same song on multiple devices. (3) Digital confusion results from this disconnect between a given user's expectation of their scope of enjoyment of digital goods and its legal reality. As a result, a three-way legal tug-of-war is occurring between governments, copyright stakeholders (such as artists), and users to determine how to manage the digital revolution.

Since copyright's inception, governments around the world have had difficulty making copyright laws that keep pace with technology's ever-increasing ability to make works available to the public. (4) Just as the Guttenberg printing press made printed books more accessible, modern innovations--high-speed Internet, high-capacity media storage, and high-fidelity media file formats, for example--have made it easy for authors to disseminate copyrighted works in digital format globally. The mechanics of digital media, however, bring various questions to light that do not apply to physical media. These questions revolve around what legal rights attach to the act of purchase and resale: whether the purchase of digital media produces ownership or a license and whether the resale of a digital good across the Internet technically involves infringement. (5) In particular, because users of digital music and books generally expect to use their digital goods in the same manner as physical equivalents, digital confusion abounds. (6) Disputes arise around fair use, copying, and exhaustion. (7)

Digital confusion is heightened by the fact that a split exists in how different countries, different political unions, and different economic unions resolve these disputes. This is largely because the international intellectual property community has dealt with digital copyright issues inconsistently. (8) For instance, treaties sponsored by the World Intellectual Property Organization (WIPO) have tackled, with a fairly heavy hand, circumvention of technology meant to prevent unauthorized copying by requiring that countries provide a high level of protection to copyright owners. (9) Meanwhile, the World Trade Organization's (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs Agreement) recognizes exhaustion as a principle but has largely left the implementation of the exhaustion doctrine to signatory countries. (10)

Exhaustion, known in the United States as the "first sale doctrine," limits the ability of the copyright holder to control a work of art once it has been legally sold. (11) The United States does not recognize exhaustion in digital goods. (12) However, the European Union allows users to resell digital software distributed through a physical format (such as a DVD) as long as the original owner no longer has access to the product after it is sold. (13)

This Note suggests that to facilitate the dissemination of intellectual property in a global culture, it is imperative that countries eliminate digital confusion by coming to a consensus on the topic of digital exhaustion. (14) Doing so will align international copyright laws, facilitate a global distribution of cultural goods, allow authors to be fairly compensated for their work, leave room for technology to advance, and, most importantly, provide the public with certainty in their usage of digital goods, allowing them to enjoy culture and take advantage of secondary markets.

Part II will define and explore the problem of digital confusion through a case study of the interplay between copyright laws and the changing formats of the U.S. music industry from the 1970s to the present. Part III will explore how the exhaustion doctrine has been addressed internationally, looking first at WIPO and WTO agreements, then at how the United States, the European Union, and Canada have implemented the exhaustion principle through statutes. Part IV examines the norms found in each regime. Finally, Part V suggests that the United States adopt a digital first sale doctrine in light of national and international norms and user expectations.

2. THE EVOLUTION OF DIGITAL CONFUSION: THE UNITED STATES MUSIC MARKET AS AN EXAMPLE

   Digital confusion stems from overregulation of nascent technologies. (15) Overregulation occurs when a legislature passes regulatory laws before it fully understands the impact regulations will have on a technology's development. (16) When prospective users experience digital confusion in relation to a technology, this confusion can stunt innovation, economic growth, and the dissemination of that technology.

   This concept of digital confusion, as well as its harmful effect, is best illustrated through a history of wrestling matches between music consumers, record labels, and technology entities. (17) Author's rights in the United States (18) seem to have expanded with each innovation and subsequent change in the Copyright Act. Meanwhile, user rights have diminished. Today, user expectations are not aligned with what users can actually do with a copyrighted piece of digital media. (19)

   1. Physical Expectation: The Balance of Rights in the Music Industry

      Until the 1980s, record labels generally controlled how users interacted with music purchases through label-produced vinyl records and cassette tapes. (20) When purchasing a new vinyl or cassette, users had no choice in song order and generally could not preview an entire album before purchasing it. (21)

      Despite the music industry's control, a balance of rights existed under the fair use and fair sale doctrines. The fair use doctrine allowed users to make copies of music they owned as long as it was a personal use copy and not a copy meant for resale. (22) The first sale doctrine--the United States' version of copyright exhaustion--prevented a copyright owner from controlling the resale of the copies it put onto the market. (23) Though playlists were fixed on vinyl records and cassette tapes, the fair use doctrine allowed users to rearrange the order of songs and make compilations of their favorite albums by recording music from an original source to another cassette. (24) Audio quality, however, degraded significantly with each recording. (25) Additionally, users were not totally at a loss if they did not like or grew tired of an album: under the first sale doctrine, users could sell their records and cassettes, often to used record stores for cash or store credit, at a discounted price. (26)

      Digital audio formats initially caused little disruption to the balance on both sides in the late 1980s and early 1990s. The record industry adopted the compact disc (CD), which provided listeners with pristine copies of sound recordings. (27) Users were initially slow to cross over to the format because doing so required them to first purchase an expensive CD player. (28) However, customers soon realized the CD's benefit when record labels started rereleasing popular catalog albums in digital format. (29) Listeners eventually shifted to the new format because CDs were more convenient and durable than cassettes. (30) However, users were still locked into low quality cassette reproductions if they wanted to rearrange the order of songs or make mix-tapes. (31)

      After the introduction of the digital audio tape (DAT) and MiniDisc read and write formats, which allowed users to make perfect digital recordings of purchased CDs, record labels became concerned about lost sales and lobbied Congress for protection. (32) This lobby produced the Audio Home Recording Act of 1992 (AHRA). (33) The AHRA was landmark legislation because it introduced digital copy protection and anti-circumvention measures into U.S. copyright law. (34) Specifically, the AHRA required digital audio recording devices to have a serial copy management system to prevent the devices from making copies of an already copied digital recording. (35)

      While the AHRA did not dramatically affect user expectations...