Testing The Right To Resell Downloaded Music

David Gerard writes "A man has bought a song from Apple iTunes and has put it up for sale on eBay. "I only spent $0.99 on it but I bought the song just as legally as I would a CD, so I should be able to sell it used just as legally, right?" Does the Right of First Sale still exist?" The seller says he's seeking attention, but not to himself. Rather, he calls this "an experiment in property rights in the digital age," and promises not to keep a copy once the sale is done.

Article text (already slow to subscribers)

Does the Right of First Sale Still Exist?

I just posted an eBay auction [ebay.com] for a song I bought from the iTunes music store [applemusic.com]. It should be interesting to see how this works out. I only spent $0.99 on it but I bought the song just as legally as I would a CD, so I should be able to sell it used just as legally right?

[Update 09-03-2003 10:08 AM] Right now I've come up with a couple ways that the transfer of ownership could take place. One is to call up Apple and ask them to do it for me, which would be an interesting call. The other way would be to give my account to the winning bidder, which doesn't seem like a bid deal considering that I've only purchased one song. Still, I'd have to make sure that my credit card info was completely disassociated with the account. Or I could just create a new account and repurchase the song on that account.

[Update 09-03-2003 11:25 AM] I'd like to respond to a few points made by people: 1. It's true that I'm seeking attention, but not for me personally. This is an experiment in property rights in the digital age, something that's gotten surprisingly little attention. 2. I've read the iTunes agreements and found nothing denying transferability. This isn't any more a commercial venture than selling CDs at the local music store, I'm not incorporated or even DBA. Furthermore, in case anyone thinks this is a cheap way to make a buck I will be donating all proceeds to the EFF [eff.org]. 3. When the song is successfully transferred, I will not be keeping a copy of the song. If I don't own it I shouldn't have a copy.

[Update 09-03-2003 11:25 AM] A very excellent comment below by Piggly Wiggly asks if I will convert the format for delivery. My answer right now is "no" because I don't want to cloud the issue of the sale by changing the format. Also, I'd like to thank all the people posting supportive comments who realize that this is about more than a $0.99 song being over-valued on eBay.

Huge profit

The high bid is currently $20.50. I'm sure that a few lawyers who want to get involved in the case will pump this bid sky high. It may be worth $20,000 to some lawyer trying to get famous. It's just speculation now, lets see what happens.

Re:Huge profit

It's up to a whopping $300 now!

I wish I had thought of this...

Re:Huge profit

According to the RIAA, the song is at least worst $150,000.

Donate the proceeds to the EFF? Hah!

More likely the EFF will have to come save him when his proceeds don't nearly cover the legal bills associated with defending the lawsuit some scared industry association throws at him.

Re:Article text (already slow to subscribers)

Right now I've come up with a couple ways that the transfer of ownership could take place.

It's simple. I've already moved an iTunes purchase to a second computer. You just have to enter your Apple ID and password on the second Mac to authorize it. Now, here's the fun part: once somebody has your Apple ID and password, he can go hog-wild at the Apple Store online, buy anything he wants, and it will be charged to your credit card. This includes hardware and software purchases too, not just iTunes music. So, in addition to deleting the original file from his computer, the seller will first have to:

1. De-authorize his computer from iTunes (so that the song will have its full, legal ability to be authorized on three machines)
2. Copy the file to whatever media he's using for transfer
3. Delete the original
4. Cancel the credit card used to purchase the song
5. Send the song, the Apple ID and password to the buyer

Simple!

Re:Article text (already slow to subscribers)

It also forces you to re-encode an already encoded file, both times lossy. Which isn't a very good idea, since it causes bad artifacts. (Unless AAC has some means to get around this - I guess it's conceivable, but I doubt it.)

Re:Copyright Law Forbids This

No it doesn't. Do a google search for the term "Right of First Sale". The copyright law and Supreme Court decisions indicate that the copyright holder gives up all rights to control subsequent sales after the first sale. There are also special exemptions for Libraries, etc.

The copyright law prohibits someone from selling reproductions, but Right of First Sale dictates the disposition of the object afterwards.

The question here will be how Right of First Sale applies to a digital recording that was never originally distributed on any kind of media.

This decision might also affect the validity of other digital recording "licenses" like computer software, etc.

Re:Article text (already slow to subscribers)

This is likely to cause a rather serious problem for our fair hero. Excerpted from http://www.info.apple.com/usen/musicstore/policies .html CONTENT USAGE RULES Your use of the Products is conditioned upon your prior acceptance of the terms of this Agreement. You shall be authorized to use the Product only for personal, non-commercial use. You shall be authorized to use the Product on three Apple authorized computers. You shall be entitled to burn and export Products solely for personal, non-commercial use. Any burning or exporting capabilities are solely an accommodation to you and shall not constitute a grant or waiver (or other limitation or implication) of any rights of the copyright owners of any content, sound recording, underlying musical composition or artwork embodied in any Product. You agree that you will not attempt to, or encourage or assist any other person to, circumvent or modify any software required for use of the Service or any of the Usage Rules. The delivery of a Product does not transfer to you any commercial or promotional use rights in the Product. Refer to Terms of Sale for more detailed information on Usage Rules.

Re:Article text (already slow to subscribers)

I don't see anything in there forbidding transfer of the license; it seems to be more concerned with unauthorized duplication and commercial use. Of course, now that this is getting attention, I'm sure the terms will quietly be amended to explicitly state that the user is purchasing a nontransferable license, but there seems to be some wiggle room in there at present.

Re:Article text (already slow to subscribers)

IANAL, but it's not a problem. Sale of a personal property is not a commercial usage because how can one use something that he is parting with? As another example, CDs are also authorized to be used non-commercially, but it is legal to sell a used CD.

Commercial usage would occur if you, for example, play the song in your bar, or broadcast it through your own radio station. None of that applies here.

Re:Article text (already slow to subscribers)

Who cares what the EULA says? If Ford decides to disallow reselling cars to prop up new car sales, would anybody obey them? Just because the seller desires something doesn't make it so.

Re:What is legally happening here?

the relevant question is not what he considers to be copying, but what the law does.

A very good observation. I believe it is illegal (ie, against copyright law) to reproduce a work through any type of copying. This would be similar to photocopying a book, burning the original, and selling the copy to someone. It's the very act of copying the work that is illegal because you were not given the right to reproduce the work. Here's the relevant section of the code [copyright.gov]:

106. Exclusive rights in copyrighted works

Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:

(1) to reproduce the copyrighted work in copies or phonorecords;
...

(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;

So, since only the original author has the right to reproduce the work it would be illegal to reproduce it. If the iTunes music store specifically gave you the right to reproduce the work then you could make a million copies. However, you would then run into section 3 of the code quoted above, which says that only the owner of the copyright can transfer ownership of a copy of the work.

A very thorough and much more involved look at the First Sale Doctrine can be found at the Duke Law & Technology Review article: "THE FIRST SALE DOCTRINE AND DIGITAL PHONORECORDS" [duke.edu]

Re:What is legally happening here?

The courts have ruled that mere possession of the physical medium does not imply license to use, as does the possession of a book or musical recording, because to make use of the digital data it must be copied into memory first and that copying is covered under copyright law as restricted. Thus you need a license to copy that which you have already purchased for use.

Bull-hockey. The courts have ruled no such thing. In fact, the copyright law specifically allows for this sort of "copying" the data into memory in the case of computer software or other cases where such "copying" is a necessary part of using the copyrighted work.

RTFM [copyright.gov]:

117. Limitations on exclusive rights: Computer programs

(a) Making of Additional Copy or Adaptation by Owner of Copy. -- Notwithstanding the provisions of section 106, it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided:

(1) that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner, or

(2) that such new copy or adaptation is for archival purposes only and that all archival copies are destroyed in the event that continued possession of the computer program should cease to be rightful.

Re:Apple usage policy

Jesus, read past the damn headline... He already said there isn't anything in the agreement with respect to transfer.

Re:Apple usage policy

Whilst a new EULA would apply to new downloads (I believe the EULA says the terms can change at any time) it wouldn't apply to past downloads.(IANAL.)

Anyone have a copy of the EULA?

Sounds reasonable

This is hilarious. I'd like to see how the RIAA spins this. After all, they haven't ever whined about used CDs being sold.

Re:Sounds reasonable

Um, they've complained since day one about used CD stores. Numerous attempts were made to shut them down, and to make them illegal. Sure, it was ten plus years ago when most of /. was riding bigwheels in their parents driveways, but they most certainly DID do precisely that.

Re:Sounds reasonable

Actually here's an older slashdot story about record companies demanding royalties for used CD sales. They have always been SOBs and always will be: http://slashdot.org/articles/02/06/14/2111220.shtm l?tid=141

Son of a bitch.

I sold that song yesterday for $0.25. If I'd only known that I could post it to slashdot.

Slashdot, News for Nerds and eBay listings.

How much will he get for it?

Having seen Palm Pilots that went for $199 in stores go for $289 on e-Bay, it'll be interesting to see how high the price for a $0.99 song goes.

And, no, I haven't RTFA yet, I'm going to do that now...

Re:How much will he get for it?

Having seen Palm Pilots that went for $199 in stores go for $289 on e-Bay, it'll be interesting to see how high the price for a $0.99 song goes.

Let's just say that the profit margin seems to be a little bit higher on resold digital music.

Wait till all the venture capitalists find out!

DRM Restriction

Isn't it assumed that the DRM included in iTunes would disallow something like this even though it should be completely within the right of the purchaser/owner? I think this is another major problem with DRM technologies. They assume that the purchaser will desire to keep the media indefinately rather then sell it. Then again with the music industry already attacking used CD sales from cutting into their profit I highly doubt they'd want it any other way. What's better then forcing new copies of songs/albums to be purchased rather then continue the ability for it to exchange hands via a 3rd party at a possibly lower rate then the Music Companies would be willing to discount it to?

Re:DRM Restriction

That's only true if those terms and conditions don't violate existing law. My landlord can't, for example, enforce a clause in the lease saying that part of my deposit is automatically forfeit for carpet cleaning when I move out, even if the carpet is spotless.

She can TRY if she wants, and the clause can be there, but it's an illegal clause and thus is unenforcable, and I can take her to court in this state and get my money back.

There are some rights one cannot sign away, no matter what the TOS might say. The question here really is whether right of first sale is one of them.

Re:DRM Restriction

Sounds like some high-collection-rate loan outfits I've heard of. They don't bother with the signatures though...

Have you ever heard of the phrase "inalienable rights"? To allow people to give up their rights is just opening up the door for those with power to give folks an offer they can't refuse. Suppose all credit cards came with an indentured servitude clause?

Legal principles like first sale should take precedence over any contract made after the principle is upheld by a court. Since first sale was upheld a long time ago, that would include any contract dealing with digital media.

Every industry would love to get rid of the 2nd-hand market - it depresses prices. Gosh, if music fell under first sale you'd have cooperatives where everybody donates 10 songs to get access to the whole collection - as long as only one copy is checked out at a time it would be legal. Publishers would love to get rid of libraries as well - but that doesn't mean they're illegal.

Re:DRM Restriction

Suppose all credit cards came with an indentured servitude clause?

You mean yours don't ? Damn I'll have to get some new ones.

Re:DRM Restriction

That is incorrect, although a popular idea among business attorneys.

MANY rights can not be given up, no matter what you sign.

For example, slavery is illegal no matter what you sign.

Parental rights also are sometimes considered valid, even if you signed them away (as in surrogate parents).

The question is, is it possible to give away your right to sell an object and still be considered the legal owner of it. And that is very much up in the air. The right to sell is considered by many to be inherent to ownership.

Consider a bankruptcy case. Assume someone went was rich and had a huge collection of purchased songs, say 50,000 at $1. each. Would a judge be able to legally order those songs sold for? Or could the rich man say, no I can't sell them according to the TOS.

I think the TOS would be thrown out and the songs sold.

Unless in TOS, and maybe even then, you own it.

I think it's always been clear that virtual information, such as computer software, data and images that is copyrighted by an author is licensed to a user and not owned by a user.

If you go down to the shop and buy a DVD, you own it. Just as you own your copy of the book you bought. However, the copyright to the movie or the book text is not owned by you. That is the way it always has been since the dawn of copyright.

However, now that data (the text) can be separated from the medium (the book), they are trying push legally dubious ToS or EULAs to fool people into thinking just as you do - that you do not own your own copy.

You own a copy of the data - you have every right to sell that copy, even if it is no longer confined to the pages of a book or the surface of a disc. However, you do *not* have the authority to make copies and sell them. Or to sell the original and keep a copy.

Kjella

Re:DRM Restriction

The question is, is it possible to give away your right to sell an object and still be considered the legal owner of it. And that is very much up in the air. The right to sell is considered by many to be inherent to ownership.

That's the position I'm in with my left kidney and my right eye. It's my understanding that I own them, but here in the US I can't sell either. (especially not on eBay.)

Re:DRM Restriction

By clicking this you agree to ship us your first born postmarked within 48 hours (business days only). Click here for packing instructions.

Just because it's in a contract doesn't mean it's legal. Much less enforcable, moral, or in a sane alignment to the natural doctrines of the free market and capitalism. It just means another lawyer is off the bread line.

Re:DRM Restriction

I would have to say that, thanks to DRM, Apple doesn't give a shit what this guy does with the SONG FILE. They'll let him sell it for a penny or $400, or whatever he wants.

Because the file iteself is useless without the iTunes account that set it up. That's how this DRM works. The account is what unlocks the file and makes it play music. And I'm sure that accounts are non-transferrable, except among computers you yourself own -- and you wouldn't want them to be otherwise, since the account is connected with your credit card, and can be used to purchase more songs. That's the real protection, the thing really preventing people from spreading their iTunes files all over the net...the threat of misuse of their account. Shit, I don't even leave my iTunes sessions open anymore, because my wife once bought a bunch of Nick Drake CDs on my account(It's the same credit card, I know...I just don't want anybody thinking I listen to that crap).

So there's an issue here most people aren't seeing. There's a good and a service involved in this sale. The good is the file itself. The service is Apple's unlocking of the DRM.

When I got my house painted, I paid for two things: the paint (a good), and the painter's work (a service). When he was done, i got to keep the leftover paint. I didn't get to keep him, I don't have any control over what he does from now on. I can sell you the extra paint, but if you want to get it on your house you'll have to pay the painter. You can try and convince him that I paid for his unlimited service based on the paint he sold me, but he will probably just laugh at you...even if I promise to scrap all the blue off the house myself, and transfer it to you.

Isn't that what's going on here? The only confusion is over what the consumer's rights are, and what the medium is. Apple gave him a file and promised their services to unlock it an unlimited number of times to play it on his computers. If he gives it to somebody else, that's his own accord. The file is his to give. But the buyer shouldn't expect Apple to do anything for them. After all, they don't have a contract with Apple. Apple doesn't know the buyer from Adam, and if they don't want to perform a service for the buyer, they shouldn't have to.

That's the point of DRM

DRM is used to keep people from "abusing" the digital format and duplicating it all over the place, right? So you could argue that if DRM is there, it puts a set of rules in place, and if you're not breaking them, then it's okay.

Forget about what should or should not be legal. It's like the law -- how do you know if it's not okay to do something? It's against the law. Can I wear a fish on my head? Sure, it's not against the law. Can I shoot someone? No -- it's illegal.

By the same token: can I copy this file onto 4 computers? No, the DRM won't let you. Can I sell it to someone else? Well, if the DRM lets you, obviously it's okay.

Resell ?

An interesting point to consider is that,
Currently Apple doesn't allow download outside US, so if he is infact legally allowed to sale his bought music, then
Can he sell it outside US, at a higher price and make profit ?

Transfer?

My main question is how would the ownership of the file be transferred?

At the moment, the Apple Store lets you "authorize" music files. So for this person, after the file had been "sold", he would have to deauthorize the up to 3 other computers that had been allowed to play the song, give a copy of the file to the buyer, then provide them with his Apple iTunes Store username/password so they could authorize it on their machine.

As he mentions, he could call up Apple and ask them to switch his authorization of the song to another user.

Either way, it does raise an interesting question, and as someone who has been using the iTunes Music Store, I've never thought about it: Suppose that years from now, I want to sell all my downloaded music files to someone else. Is there a way to transfer the license? What if I left them in a will to my children later on - could Apple be required to ensure that they could use the files later?

Or he's about to run into a massive "legal agreement" which will negate his First Sale ability - we'll just have to see what happens, neh?

Re:Possible?

...Of course, legally if this is possible (which I believe it would be), he would be transferring ownership of the rights to that song making the iTunes copy he still has in his posession illegal...

I don't believe you are correct. His rights are assigned and associated to the iTunes file, not an ill-gotten MP3 he downloaded. Even if you buy a CD, according to copyright laws you are allowed to make one backup copy for archival purposes. That's why the RIAA has a leg to stand on in court. Even if you own the CD's, legal you can not download the MP3 from someone else. You rights are associated to your media, not someone elses media. Now if you rip the songs off of your media, and do not share them, then you are ok. As soon as you share them, or download someone elses, then you have violated copyright law, because the content you are using is not associated to your purchased media.

So if you sell the iTunes file, and then give the person the MP3, not only did he reneg on the iTunes sale (because the rights are associated to the iTunes file, not the MP3 you downloaded), but you just sold a pirated MP3.