Xbox One and the "first-sale doctrine"

This "first-sale doctrine" has been popping up in discussions involving the Xbox One with people claiming it applies and other saying it doesn't because it's digital content. Courts have not been clear on this issue so I want to know what you all think.

http://www.justice.gov/usao/eousa/foia_reading_room/usam/title9/crm01854.htm

"The first sale doctrine, codified at 17 U.S.C. § 109, provides that an individual who knowingly purchases a copy of a copyrighted work from the copyright holder receives the right to sell, display or otherwise dispose of that particular copy, notwithstanding the interests of the copyright owner."

http://en.wikipedia.org/wiki/First-sale_doctrine

The first-sale doctrine plays an important role in copyright and trademark law by limiting certain rights of a copyright or trademark owner. The doctrine enables the distribution chain of copyrighted products, library lending, gifting, video rentals and secondary markets for copyrighted works (for example, enabling individuals to sell their legally purchased books or CDs to others). In trademark law, this same doctrine enables reselling of trademarked products after the trademark holder put the products on the market. The doctrine is also referred to as the "right of first sale," "first sale rule," or "exhaustion rule."

They will probably change the EULA for Xbox LIVE, if you want to use Xbox LIVE or the Xbox ONE you'll have to agree to it.

I don't know to what degree software EULAs have been challenged in court, but the way the vast majority of them have been written for the past couple of decades has already limited your ownership and right of first sale to a massive degree. To be honest, I don't really view what MS is doing with the Xbox One as being really any more restrictive than purchasing a PC game has been in recent years.

Or purchasing music and/or movies through iTunes which you also cannot sell.

True, but the lack of a legal challenge doesn't suddenly make it fine or legal. PC gamers may be willing to accept the way things have been, how how is the common consumer going to react if Microsoft pulls the trigger and the way things have been with console gaming for decades is suddenly changed? People are pushing back now on plans that are essentially "rumors" at this point. How will they react if the Xbox One actually pulls the trigger?

It's situations like these that will force the courts to take a stand.

Right, but you can sell and lend a movie on a DVD without any problems and suddenly games on a DVD are somehow special?

@golguin: That's where trying to blur the lines between physical and digital media gets weird. They're trying to have it both ways, and well, they sort of can since that's basically how PC game discs work too. Our digital future, man. It's a brave new world where the concept of ownership has been dramatically changed.

You don't own shit, mofo!

@golguin: I agree. Some solid legal precedent would be nice, and it's definitely the sort of thing consumer advocate groups out there are probably actively trying to figure out a way to challenge. However, considering the degree to which courts have been defending corporate patent and IP rights in recent years, I get the feeling that a lot of the restrictions in the EULAs of software and digital goods would probably be upheld.

this is very interesting

When will people understand that they do not own software? They own a license for the software and the plastic that creates the physical copy. You do not own the contents.

"The first-sale doctrine plays an important role in copyright and trademark law by limiting certain rights of a copyright or trademark owner. The doctrine enables the distribution chain of copyrighted products, library lending, gifting, video rentals and secondary markets for copyrighted works (for example, enabling individuals to sell their legally purchased books or CDs to others). In trademark law, this same doctrine enables reselling of trademarked products after the trademark holder put the products on the market. The doctrine is also referred to as the "right of first sale," "first sale rule," or "exhaustion rule."

The point is that you can legally SELL that piece of plastic with the software on it.

I'm a lawyer. First sale doctrine only applies to physical objects. So you have the right to resell that disc, but Microsoft doesn't have to honor that sale. Likewise you don't have the right to resell your XBLA purchases.

**sigh** Yes, you can sell the plastic with the data on it; that's what I was talking about. However, you cannot transfer (usually reselling) the license which is what you paid for. No one is stopping the act of someone selling the disc... they are stopping the license from being transferred which is not covered in the First-Sale Doctrine. Someone buying the game, agreed to that.

@golguin: While you might be able to sell the physical disc, the contents of that disc are governed by a different set of rules.

@tycobb:Sure, we don't own the software, but we do own the disc itself and the case. If we want to smash the disc into a million pieces or set it on fire, we can do that all we want. You are right, however, on not owning the contents to the disc itself, that we have a license for the software.

However, with this said, what does that have to do with the issue at hand? I'm not sure what side of the fence you're on here. Speaking in defense of my side, whether you disagree or not, we as the owner of the license are allowed to transfer this license to someone else (selling our used games) to someone else, and we should expect not to have to pay Microsoft or someone else for this transaction.

The license itself can easily be transferred on Microsoft's end easily, being that all games will be authenticated with your Xbox Live account, on installation of a game the Xbox will require you to be connected to the Internet likely to install the content, at that point the servers will detect that there was a previous owner of the software.

Microsoft has stated that this would require repurchasing the game in the past, and that you would need to pay full price for the game again... Whether or not this has changed, I'm not sure. What should happen, is a re-authentication process that transfers license ownership over to the account that will install the game itself. This will ensure that no two or more people can play the game at the same time without having to pay for a license.

NOW, here's the biggest problem. If Microsoft plans on charging an extra "activation fee" or anything for the transfer of ownership of this license, this would infringe on the "First-sale doctrine", outlined in this article. The "First-sale doctrine" does cover selling your used media in this way. I do expect, however, that Microsoft will change EULAs to allow them to screw you over by nullifying this by saying you only rent the content for an unspecified amount of time and can be revoked at any point in time, basically giving you no actual ownership of the product in any way, and basically allowing Microsoft to make as much money off of one game sale as they want.

If you make money off of a game, it ends there. You shouldn't be able to make more than the cost of the product over for it simply transferring ownership. You already MADE the cost of the product when the initial sale was made, what makes them think that making additional money on top of that justifiable?

I was shown an appropriate analogy for this scenario in relation to a car dealership. It went something along these lines:

Imagine purchasing a vehicle from GM, and completely paying off the car in full. Now, let's say some years down the line you decide to sell your car to someone else, as you feel there is still value left in the car. Normally, in this situation, you would sell the car to another person for example, and get the money from them for the agreed amount, and that would be it.

Let's imagine instead you purchase a vehicle, but from Microsoft instead. Everything leads up to the same conclusion, except in this case, Microsoft would try to charge additional money from selling the used car to the person buying it from you.

How does anyone justify this? I don't care if it's digital or not. You're already not selling a physical product, outside of the disc it comes on, and there's already enough problems surrounding that, and now they plan on trying to profit off of exchanging ownership of the software?

Imagine buying a game for $60 let's say, and now you sell it to your friend for $0.01, and he sells it back to you for $0.01, and you repeat this process 1,000 times. What happens in this scenario? Does Microsoft make thousands of dollars off these transfers between two people?

I understand that this is an extreme example, but I'm simply extrapolating from what we're given in terms of what will happen with these used-games transfers.

I personally don't care about Microsoft, I have had a strong dislike for them, their products, and their business decisions, but this is certainly an all time low. I think a lot of people can at least agree with me on the last part, as there are a lot of people who are disappointed, and quite frankly, disgusted with what they've seen with the new Xbox One.

Think of it this way: a next gen console game is basically a good (the disc) and a service (the license, along with the baked in online support). In buying the game you buy the good and get access to the service. If you want, legally, you can totally sell the disc, it's yours. You never owned an exclusive right to that service though, at most you have a contract to use it. Microsoft doesn't have to provide that service to anyone it doesn't want to. First sale doctrine has nothing to do with that.

@leonblade: You're wrong; you cannot resell/transfer the license unless you have permission from the publisher or whomever is listed in the license agreement.

And for the love of god, stop comparing software to physical objects!

Oh, you can't transfer the license? Says who? I ask because I know the answer, but I'd like to hear what you say.

You own the disc, the box, and the manual. You do not own the software on the disc.

@tycobb: Is that all you have to say in response to what I said? I will compare software to physical objects as I wish.

Whether or not I can resell the license or not is not the point, people have been able to sell used games legally for years now, the only thing contesting this is Microsoft with their new console.

Are you supporting Microsoft making money off of transfer of ownership of a license then, is that what you're saying? You think it's not okay for a car dealership to make money off of selling a used car to someone else, but it's okay if a software company wants to make more money off of data from transferring that?

Do you realize how stupid that sounds? As a programmer myself, I understand the need to protect your data from piracy, however I would NEVER ask for something like what Microsoft is posing here, because I'm not a greedy bastard who expects money any time someone wants to sell a copy of my game to someone else provided that they aren't able to keep a copy for themselves.

A simple light-weight DRM system is all that's needed to protect against this. A license should be transferred over with the sale of the used item, and so authenticating the license with the servers transfers ownership and nullifies the previous owner's abilities to use the software.

You DON'T need to make money on top of this.

http://en.wikipedia.org/wiki/First-sale_doctrine

However, in Europe, the European Court of Justice ruled on July 3, 2012, that it is indeed permissible to resell software licenses even if the digital good has been downloaded directly from the Internet, and that the first-sale doctrine applied whenever software was originally sold to a customer for an unlimited amount of time, as such sale involves a transfer of ownership, thus prohibiting any software maker from preventing the resale of their software by any of their legitimate owners.^[3][4][5] The court requires that the previous owner must no longer be able to use the licensed software after the resale, but finds that the practical difficulties in enforcing this clause should not be an obstacle to authorizing resale, as they are also present for software which can be installed from physical supports, where the first-sale doctrine is in force.^[6][7] The ruling applies to the European Union, but could indirectly find its way to North America; moreover the situation could entice publishers to offer platforms for a secondary market.^[4]

From GTA IV's manual that I randomly pulled off the shelf:

LICENSE: Subject to this Agreement and its terms and conditions, Licensor hereby grans you the nonexclusive, non-transferable, limited right and license to use one copy of the Software for your personal use on a single console or computer (unless otherwise specified). The Software is being licensed to you and you hereby acknowledge that no title or ownership in the Software is being transferred or assigned and this Agreement should not be construed as a sale of any right in the Software.

Now you know the true answer.

@golguin: I appreciate you bringing some facts into this topic against @tycobb who appears to have no idea what he's talking about.

I counter your game manual with a court ruling.

http://en.wikipedia.org/wiki/First-sale_doctrine

However, in Europe, the European Court of Justice ruled on July 3, 2012, that it is indeed permissible to resell software licenses even if the digital good has been downloaded directly from the Internet, and that the first-sale doctrine applied whenever software was originally sold to a customer for an unlimited amount of time, as such sale involves a transfer of ownership, thus prohibiting any software maker from preventing the resale of their software by any of their legitimate owners.^[3][4][5] The court requires that the previous owner must no longer be able to use the licensed software after the resale, but finds that the practical difficulties in enforcing this clause should not be an obstacle to authorizing resale, as they are also present for software which can be installed from physical supports, where the first-sale doctrine is in force.^[6][7] The ruling applies to the European Union, but could indirectly find its way to North America; moreover the situation could entice publishers to offer platforms for a secondary market.^[4]

@leonblade@golguin You guys realize that you automatically agreed to the terms that you wouldn't sell/transfer the license when you bought the game right? I am also referring to American law. If you are referring to any other country then I will say that it may be different and you could possibly resell the license there. Microsoft will more than likely have different rules in place for those countries as each country has its own sets of laws that must be abided.

Okay, so that sounds exactly what Microsoft says when they say they have a plan for used games. I'll be interested to see what that plan is, as I'm sure you will too.

I am referring to the transfer of license which you said you can't do. I didn't know Xbox One wasn't going to be sold in Europe.

@tycobb: The point is, in the transfer of license as @golguin pointed out, the EU law ruled over the licence itself

Where the copyright holder makes available to his customer a copy – tangible or intangible – and at the same time concludes, in return form payment of a fee, a licence agreement granting the customer the right to use that copy for an unlimited period, that rightholder sells the copy to the customer and thus exhausts his exclusive distribution right. Such a transaction involves a transfer of the right of ownership of the copy. Therefore, even if the licence agreement prohibits a further transfer, the rightholder can no longer oppose the resale of that copy.

A ruling in Europe has nothing to do with the US (yet). As of right now, in the US, you cannot sell/transfer a license that you agreed to not sell/transfer. Why the snarky remark about Xbox One not being sold in Europe? I just agreed with you that Microsoft will have to use different rules and probably allow the resell there.

Europe is not the US. I already stated I am referring to the US and that Microsoft will have to handle things differently in Europe.

I swear you and Golguin are the same person because no two people can be this hard headed and it be a coincidence that you just created your account while continuing to spew the exact same information. No two people can misread my posts the exact same way.

@tycobb: As for @golguin I don't believe his remarks of the Xbox One in Europe were intentional. As for the whole "Europe is not the US" thing, I understand that. The point of bringing it up is to say that the law can always overrule a EULA agreement like this, and that it's very possible that based on the large percentage of people who are distraught over the whole used games thing, it wouldn't be too surprising if that carried overseas to America as well.

As for @golguin and I being the same person, you're thinking too much into this. Neither of us misunderstood you, you misunderstood us it would seem. I only registered my account now after finding this article, and wanting to reply to your comments, that is all.

And you believe that the US and it's laws are set in stone?

Actually, lets try a little thought experiment @tycobb. Do you believe that a movie on a DVD and a video game on a DVD are essentially the same in regards to data on a piece of plastic?

EDIT: This thought experiment is going to carry over to a movie on a blu ray and a video game on a blu ray both being played on an Xbox One.

Well, I can guarantee you that the law won't change before the Xbox One comes out.

Full disclosure: I don't live in Europe and I'm not a law expert. I'm here because I think it's an interesting discussion. I do remember hearing about that ruling though last year. People wondered if that meant that Steam, for example, would have to put a system in place to allow for the transfer or resale of games to be able to continue selling games to people in Europe. So far, I haven't heard of anyone doing anything like this. Microsoft might be the first to implement something, whether it's because they're required to by law, are trying to please consumers used to the current system, or are trying to please used game sellers. I would bet on this issue coming up in US courts. Here's the most recent US thing I could find http://appleinsider.com/articles/13/04/01/judge-denies-right-to-resell-itunes-songs-digital-media-still-protected-under-copyright-laws. I would bet this issue will continue to come up either way.

Yes, and if this Xbox One system is put in place it's going to come up A LOT MORE until it eventually reaches the Supreme Court. People are already running into issues with giving away their library of music on itunes in case they die.
I really don't think people understand how big of a deal this is and how far these policies can go.

There is no need for a "thought experiment", when it comes to US law he is correct. Usually when you buy anything on a disc you are buying a license, and there are rules to that license.

The only person who appears to have no idea what they're talking about, is you. Comments like ' I will compare software to physical objects as I wish.' are childish and shows how lacking or willing to understand you are in this argument. Yes, it sucks, I for one hope that this is a giant misunderstanding and Microsoft and Sony find a solution that keeps used games viable for those of us who don't quite have the funds to spend on a $60 game, a game which we may not like, while also finding a solution that allows for publishers to continue to reap in the benefits of their works as the game is sold, resold and continually sold for years to come. Ultimately, if they knew we were all going to keep buying the same copy x-amount of times, then they'd be able to make less copies and possibly keep production costs down, but that's a far flung future we're very far from. We've all been burnt by bad games, perhaps a few of us with Colonial Marines as of late, but those opinions aside, if you're going to start spouting off doctrines as your burden of proof and use it in the wrong context, then people in this community have every right to call you out and correct you. It's what makes Giant Bomb a great place, because we have so many people who specialize in different areas and know about their specialties, 'this one being the law', better than the rest of us.

As has been said, numerous times, in the US, you own the disc and packaging, nothing more. If you wanted to get really detailed, you also own the physically burnt data to the DVD or Bluray platter as well, but you don't own the means to use that without software to run it, which is where a license comes in. There was a case in the UK and they were supposed to proclaim that digital purchases would be covered under a 'Rights to Goods Act' but as far as I know, that never came around. Probably because they realized that if they did that, I-Tunes, Amazon Instant Video, Netflix, Steam, XBLA, PSN, basically every free MMO on the market and every other digital goods marketplace would have to find a way to allow license transfers in order to comply, something that would cost the current industry billions of dollars. And right now, with new consoles, ones coming into a market which have been very unfriendly to new consoles (3DS taking ages to pick up speed, Vita still floundering about and the Wii-U barely standing on one leg), I don't think that's something this industry needs to be worrying about right now.

If Microsoft and Sony plan to go through with controlling a used games market, then it will come to bite them in the ass in due time. There's really no point in arguing the legal sides of something we A. Don't know the means by which it will work and B. Isn't even out yet. It's all speculation and gossip at this point.

Do you believe the release of the Xbox One is going to push this issue into the spotlight if the rumors about the system are true?

DVD Movies do not have clauses that say I am not allowed resell it. At least none of the ones I have found on the shelf. The only clause that they state is that I am allowed a copy and redistribute them and they are for home use only. Video games on the other hand do have a license agreement. The licenses on the boxes and inserts are the sole difference and we all agreed to them when purchasing.

I am done with this thread for now. Time to drink! =)

When you come back I'd like to hear your thoughts on what's preventing the movie industry from implementing a similar system on the Xbox One once they see that Blu Rays with movies are being freely passed around while publishers are getting a piece of the cake on Blu Rays with video games.

So I can't buy a DVD from a friend and expect it to play on every device that plays DVD movies?

Eh, I can respond to this real quick. Blu-Rays weren't built with that in mind. It won't be until the next generation of physical media comes out that they will be able to implement some sort of licensing into it. If the movie industry wants to do it, they will. I don't see them doing that though because with streaming becoming more and more popular, I am sure physical movie sales are taking a hit and implementing this would not only hurt the sale more, but also end up killing the new format before it even got started.

They all have there own rules and restrictions. I don't know all the rules they have for movies, but i know i cant set up a projector in my front lawn and let the neighborhood watch it under the license i have purchased, and i cant receive money or goods in exchange for people watching my copy of the movie. Im sure if they wanted to they could restrict the devices i viewed the movie on, hell on PSN i cant watch a downloaded movie on another PS3 unless i deactivate the video license from the other PS3.

I do find these rules as basically a bullshit way of side stepping other laws, but that does not make what @tycobb said wrong.

I don't think this will really be relevant to the X1 or the PS4 and their efforts to impact the used games market. You will by some means be able to sell your games bought for either platform. The console makers are too tied up with retailers for them to truly end the possibility of reselling.

Rumors to the contrary are just that, rumors. And in just about two weeks, we'll likely know more.

@tycobb: you realized a while back the U.S. supreme court flat out said UELAs mean nothing because no one reads them right? If you need I can try and find a link. So if the EULA says I don't own it, the supreme court said "No it's gibberish not a real contract"

If you don't mind.

That is correct. I also can't set up the projector in my large living room and invite 40 people to watch that same movie, but I can and I will if I feel like it. At the end of the day the fact that you can't "transfer the license" doesn't mean anything regarding how people consume digital media on a disk.
What does the license agreement currently say about Xbox 360 games? Am I legally allowed to sell my friend a copy of Bioshock Infinite and are they legally able to play that game on their own Xbox 360? Can Microsoft legally prevent that Xbox 360 game disk from playing in their Xbox 360?

@tycobb: Sure give me about five or so minutes.

http://www.theregister.co.uk/2001/11/28/us_court_ruling_nixes_software/ Heres one, I'll post more in a few.