Law of the Game on Joystiq: RIP Consumer Rights

Each week Mark Methenitis contributes Law of the Game on Joystiq, a column on legal issues as they relate to video games:

Last week, Sean Bersell of the EMA directed me to a lawsuit out of California that had him concerned. Once I had a chance to read over the suit, I didn't just share Sean's concern, I was actually cringing at the potential of this suit to bring about the death of consumer rights as we know them. If you have ever bought a DVD, CD, or video game, then this suit could affect you. I sincerely hope that the courts will, in their wisdom, not side with Universal Music Group's expansive view of the copyright law. But, I'm getting ahead of myself. The suit in question is UMG Recordings Inc. v. Augusto. (The EFF has many of the court documents available at that link, if you would like to read the filings.)

To summarize the lawsuit, UMG puts out early release promo CDs, which go to radio stations and reviewers. Augusto runs an eBay business selling music, and one of his big focuses is re-selling these 'rare' promo CDs. UMG claims that re-selling these CDs is a violation of its copyright, and Augusto obviously doesn't agree. The case turns on interpretation of what is commonly known as the 'first sale doctrine,' even though it isn't as tied to a sale as the name would suggest. To put the gravity of this into perspective: UMG's claim, essentially, is that a copyright owner can control what the consumer can do with a product once it is in the marketplace. In other words, the copyright owner can prevent you from reselling a game you bought, or even throwing it away. That level of control, besides being wholly impractical, should sound as crazy to you as it does to me.

Amazingly, this is UMG's contention: that it control these items in the public perpetually under the license. Simply put, UMG thinks a sticker can negate the entire first sale doctrine in copyright law. Their promo CDs state they are not for distribution, even though UMG makes no attempt to secure return of the CDs or track the owners of the CDs. I've dropped the name a few times now, and since the first sale doctrine is the center of this case, I will do my best to explain it. The first sale doctrine is in the Copyright Act of 1976, our basic copyright law, at 17 U.S.C. § 109. The doctrine is a limitation on what would otherwise be rights allocated to the copyright owner. Specifically, it gives someone who lawfully obtained a legal copy of a copyrighted work the ability to transfer that work without permission from the copyright holder.

Practically, the first sale doctrine means that if you buy a music CD, you can re-sell that CD to someone else without getting permission from the musician. If you buy Halo 3 at a local store, you can sell or give that copy to anyone else without getting permission from Bungie or Microsoft. If you buy a copy of the complete Red vs. Blue series box set, it means you can give away any or all of those DVDs without begging Burnie for permission. It doesn't mean you can make a copy of the CD or game or movie and give it to someone else, only that you have the right to transfer what you bought.

There is, of course, an exception. The first sale doctrine hasn't been completely applied or resolved with respect to computer software. In fact, there isn't even a consistent rule with regard to the software under the first sale doctrine. Some courts have allowed first sale to be applied, others have negated it on the basis of the End User License Agreement. The Supreme Court has yet to resolve the issue in full with respect to computer software and the EULA specifically. (Wikipedia has a slightly more detailed account of the status of first sale doctrine and computer software.)

So, what does this have to do with games? Perusing the used section in GameStop, you may stumble across a game labeled 'not for resale.' Under UMG's theory, these games would be treated exactly as a promo CD would be. While this is a minor point on a small percentage of product in the market, the potential expansion of a ruling for UMG would include the ability to extend this protectionism to all media, given that the proper language appears on the packaging. Imagine a world where you have no right to re-sell a game you purchase without permission from the publisher.

Of course, this is the point of the first sale doctrine, and why I believe the court wouldn't want to negate that concept. The idea that the copyright holder can so closely control something that is in the marketplace is impractical. This also depends on your particular view of 'copyright.' Most people would expect that any right that is extended can be transferred, unless that right is specifically addressed in a contract. UMG is arguing that their language performs that same function, but in general, this is a contractual provision that would have to be explicitly waived in a negotiated, signed agreement. In short, a license agreement can control transfers, but it would be impractical to apply that to all licensed products for sale in the general marketplace. Thus, the first sale doctrine exists.

If UMG is successful, it could have a chilling effect on all industries that work in copyrighted entertainment material. It would certainly set a dangerous precedent that could easily move well past the realm of promotional CDs. And ultimately, I'm not sure there is any harm in allowing the resale of those CDs. The fans love them, and those driven to collect the promos likely already own the material in another form they purchased from the copyright holder, in this case that would generally be the actual retail album. This is certainly a case worth watching, as it could impact all of us.

Mark Methenitis is the Editor in Chief of the Law of the Game blog, which discusses legal issues in video games. Mr. Methenitis is also a licensed attorney in the state of Texas with The Vernon Law Group, PLLC and a member of the Texas Bar Assoc., American Bar Assoc., and the International Game Developers Assoc. Opinions expressed in this column are his own. Reach him at: lawofthegame [AAT] gmail [DAWT] com.

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