NB: This post has been updated to reflect the availability of the Drug Emporium exception wherever the Costco rule might be applied. The original version stated mistakenly that the exception was only available in the 9th Circuit.
Today the Library Copyright Alliance released The Impact of the Supreme Court’s Decision in Costco v. Omega on Libraries. Prepared by Jonathan Band, the concise, informative paper examines the much-discussed (at least among library and copyright nerds!) Costco v. Omega non-decision, which left in place a controversial 9th Circuit ruling that could have significant consequences for library lending practices.
The first sale doctrine (codified at §109 of the Copyright Act) lets purchasers of lawful copies of copyrighted works re-sell, donate, lend or otherwise dispose of their copy. If not for first sale, or some other balancing exception, copyright holders could ban purchasers from all of these practices, essentially controlling how you use cultural products that you own.
We’ve posted the factual background of Costco here. For now, suffice it to say that the core issue is whether the wording of Section 109 makes it possible for a rightsholder to evade the first sale doctrine by manufacturing its copies abroad (whether they be books or, as in this case, watches with copyrighted images embossed on them). The 9th Circuit said the law does allow this evasion, and the Supreme Court handed down a non-binding split decision that leaves that ruling intact for the 9th while the other Circuits free to decide the issue for themselves.
In his analysis, Band explains that libraries are still on sound footing in lending foreign-made copies in their collections. He gives a range of alternative justifications for lending that should cover the vast majority of situations that institutions face on a regular basis:
Under the “Drug Emporium Exception,” first sale still applies if a foreign-made copy was sold domestically by an authorized party.
The §602(a)(3)(C) provision for importation by scholarly, educational, and religious orgs should make it possible to lend materials lawfully imported for the purpose of lending.
Implied license and fair use are powerful and flexible doctrines that should capture many library uses.
As well as a handy chart to show which doctrines are useful in which circumstances:
We hope members of the library community find this paper useful as they decide how to react to this complex legal development.
A Rough End-of-Year for Library Lending (and for Users’ Rights)
As Duke University Libraries’ copyright guru Kevin Smith points out in the above-linked blog post, 2010 was a pretty rough year for users’ rights, and perhaps especially so for libraries’ rights. Kevin highlights two legal campaigns now being waged against library lending (the lawsuit against UCLA over its video streaming practices and a series of angry letters being dispatched to libraries regarding their interlibrary loan programs), as well as the 9th Circuit’s Vernor decision and the Supreme Court’s non-decision decision in the Costco case. I would add to his list the recent decision in MDY v. Blizzard, which stripped hundreds of thousands of would-be purchasers of the video game World of Warcraft of what they could be forgiven for believing were their property rights.
I had an outline for my own blog post on this theme sitting on my desk, but I think Kevin has already done a wonderful job describing the general trend evident in these developments. The Georgia State case offered a bright spot last year, and yesterday’s decision about promo CDs charted a brighter course for 2011, but 2010 certainly seemed to have ended on a down note.
(The Costco decision is sufficiently important to merit its own post, and we will be sharing our own guidance on that decision, in particular, in a few days.)
I think it is worth noting that the disturbing trend Kevin describes highlights the disingenuousness of the “property rights” rhetoric of some extreme voices in the copyright policy debates. These commentators like to characterize copyright infringement as “theft,” and like to compare unauthorized copying to robbing a jewelry store. They claim that organizations who advocate for balanced copyright policy are in league with pirates and that we don’t respect property. In reality, these maximalist commentators are the ones upsetting property rights – the rights of users.
Copyright is a very strange kind of property. It augments the “property” rights of authors and distributors by letting them maintain control over their products even after they’ve been sold. This explains why some rightsholders push for ever more protection. What retailer wouldn’t love to “sell” you something but retain rights to charge you for it again depending on how you use it in the future?
This augmentation of sellers’ rights necessarily diminishes the property rights of users. Balancing provisions in the law, such as fair use and the first sale doctrine, aim to restore equilibrium by giving users some rights to use protected material without permission. Without these users’ rights, copyright would be a very one-sided ‘property’ system, one that only works for sellers. Not surprisingly, these provisions are under constant attack from parties hoping to profit from their cultural property in ways that would be impossible with ordinary property.
The first sale doctrine may be the user’s right that most embodies traditional property rights, because it allows a user to treat a lawfully purchased copy of a copyright-protected work the same way she would treat any lawfully purchased product: she can re-sell it, lend it, and so on, without asking permission from the rightsholder. An attack on users’ first sale rights, whether by the use of sneaky pseudo-licenses or by too-clever-by-half readings of the Copyright Act, is an attack on property rights, pure and simple.
Properly balanced copyright policy gives rightsholders fair compensation while also giving users the benefits of real ownership of the copies they buy. By stripping users of their rights based on seemingly arbitrary distinctions (was the book printed abroad? did you read the fine print on your purchase order?), the cases and litigation campaigns Kevin Smith describes highlight and exacerbate the loss to users when the copyright bargain turns sour. And they give lie to the copyright maximalists’ claim to be guardians of property rights.
Photo CC-BY Vince42
LCA Amicus Brief [PDF]
Today the Library Copyright Alliance (whose members are ARL, the American Library Association, and the Association of College and Research Libraries) filed a brief before the Supreme Court in the case of Costco v. Omega. On its face the case is about whether copyright forbids a warehouse retailer from buying wholesale luxury watches abroad. If you dig deeper, though, the case could strike at the heart of what libraries do.
It is worth asking why copyright law is even involved in a dispute between a retailer and a wholesaler where there is no allegation of counterfeit or copying. Copyright enters the picture because Omega attaches a copyrighted logo to its watches, and one of the exclusive rights in § 106 of the Copyright Act is the right of distribution or sale (§ 106(3)). This right doesn’t ordinarily come into play very often because of the “first sale doctrine,” which allows lawful purchasers to turn around and lend or re-sell copyrighted goods in most situations. Nevertheless, when Costco purchased Omega watches abroad and resold the watches in the US, Omega sued, claiming that Costco had made an illegal distribution of the watches by reselling them. Costco argues that the sale is permitted under the first-sale doctrine, but Omega claims that the first-sale doctrine does not apply to works produced abroad. The Court of Appeals for the Ninth Circuit agreed, relying on a statement by Justice Ginsburg in a concurring opinion in the Quality King case that the phrase “works lawfully made under this title” in § 109(a) of the Copyright Act means lawfully made in the US. In other words, the Ninth Circuit held that the first-sale doctrine does not apply to works manufactured abroad.
And that is why this case is important for libraries. In its amicus brief, LCA notes that “[b]y restricting the application of Section 109(a) to copies manufactured in the United States, the Ninth Circuit’s decision threatens the ability of libraries to continue to lend materials in their collections.” There are millions of volumes in library collections that were manufactured abroad. A more precise estimate than “millions” can probably never be known, though, because there is no reliable way of knowing where books in library collections were actually manufactured. So, if the Supreme Court agreed with the Ninth Circuit, and libraries determined that they could not find an alternative to the traditional first sale doctrine rationale for circulating foreign-manufactured works, they would face an impossible task in determining which of their books could not circulate under the new rule.
In the LCA brief, prepared by Jonathan Band, we argue that there are several alternative interpretations of the phrase “lawfully made under this title” that would avoid threatening the core function of libraries. The brief also argues extensively that libraries have a special status under copyright law, and to alter that status would alter the fundamental contours of copyright in ways that implicate constitutional protections, including the First Amendment.
The brief is highly readable and features a lot of great information about the history of libraries and their importance in the copyright policy regime. Check it out.