The First Sale Doctrine: e-Books, and the Impact on Libraries – Part 1

Industrial Shelf and Bookends

One of the hot button topics that currently have librarians concerned is the issue of how e-Books and e-Book publishers may dramatically change the dynamics of how libraries handle the loaning of materials to their patrons.  Libraries have long operated under the provisions of the law known as the First Sale Doctrine in regards to the purchase and distribution of books, as well as other materials they loan to patrons relating to United States Copyright Law.  However, e-Books and other digital materials present new challenges to this established law and the protections it has traditionally provided to libraries, as well as other individuals and organizations.

What is the First Sale Doctrine? In 1908 the United States Supreme Court ruled in Bobbs-Merrill Company v. Straus, that the publishers, Bobbs-Merrill Company, could not limit the re-sale of copyright protected materials that had been legitimately purchased. The defendants, Isidor and Nathan Straus, who were partners in the R. H. Macy Company department store, had purchased at wholesale from Bobbs-Merrill copies of the copyrighted book The Castaways.[1]

The Bobbs-Merill Company had a stipulation printed below the copyright notice:

“The price of this book at retail is one dollar net.

No dealer is licensed to sell it at a less price, and

a sale at a less price will be treated as an infringement

of the copyright.”[2]

Macy and Company had purchased the books with the intention of selling them at retail and was aware of the copyright stipulation; however, they sold the copies at a discounted price and the publisher brought suit stating that the Straus’ and, therefore, Macy Company had violated Copyright Law. The Supreme Court rejected this claim holding that the publisher’s exclusive distribution right applied only to first sale of copies of the work.[3]

Ever since, the First Sale Doctrine has been the cornerstone of this particular area of Copyright Law which has allowed libraries, used books stores, garage sales, etc. the ability to loan or sell copyrighted materials free of prosecution by publishers as long as the item had been legitimately purchased.

The First Sale Doctrine was later updated by Congress in 1976 under Title 17 § 109 of the United States Code in order to address the growth of new and yet undiscovered technologies. In fact § 109 is titled, Limitations on exclusive rights: Effect of transfer of particular copy or phonorecord.[4] Obviously in reviewing and updating the First Sale Doctrine, Congress was attempting to deal with the issues regarding the purchasing of music albums and the new technology that allowed a person to make copies of a copyrighted album by making a cassette recording. While it was alright to sell an album one had legitimately purchased, or loan it, it was not legal to make a copy. Of course many individuals during the seventies did just that. One would purchase, say, the newest Frank Zappa record, and then hook up their cassette recorder to their record player to make a copy for a friend. Or, if a person wanted to be truly egregious, they would sell the cassette copy of the album.

While the above activity is illegal, it was hardly one that could be legitimately enforced. The record companies lost sales due to the new technology. However, its impact was perhaps minimal until the advent of readily available digital media and software. And here, as Shakespeare would say, is the rub.

With the advent of digital media the issues involving the First Sale Doctrine have become blurred. Recent rulings have demonstrated that in some cases the courts are uncertain as to how to proceed. There are even concerns by libraries and other parties that the First Sale Doctrine may be doomed, especially where e-Books are concerned.  In order to understand this concern, we need to step back and look further into copyright law.

Another issue regarding the ability of libraries and indeed educational institutions as well as other organizations to pursue their mission of providing information resides in the legal concept of fair use. Fair use has been used as a defense for decades against litigation for copyright infringement. The idea of fair use is to allow for reproductions of copyrighted work to be used for the purposes of criticism, comment, news reporting, teaching, scholarship, or research. There are four factors the courts use to determine fair use and these are codified in Title 17 § 107 of the United States Code. They are as follows:

  1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
  2. the nature of the copyrighted work;
  3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole;
  4. and the effect of the use upon the potential market for or value of the copyrighted work.[5]

Along with the First Sale Doctrine, fair use is playing a key role in how digital materials are being treated within the law. It is the issue of fair use and perhaps its misappropriation that has many librarians concerned. Let us now take a look at an important case that has garnered much attention, especially within the blogosphere, where librarians and those advocating for technological freedom have been watching.

In Vernor v. Autodesk Inc., the 9th Circuit United States Court of Appeals has upheld that defendant appellant Autodesk Inc. was correct in their initial suit against plaintiff Timothy Vernor that he (Vernor) had infringed on Autodesk’s copyright. Timothy Vernor had purchased several used copies of Autodesk, Inc.’s Auto CAD software from a direct customer of Autodesk, and then sold them on eBay. Autodesk sued and had forced eBay to close Vernor’s account under the auspices of copyright infringement. Vernor counter sued and won an initial judgment against Autodesk in the Western District Court in Washington State using the First Sale Doctrine as an argument. Autodesk appealed, and despite the filing of an amicus brief by the ALA in support of Vernor, the 9th Circuit ruled for Autodesk on the grounds that because the software was a limited licensed property that First Sale did not apply.[6] The case was vacated and remanded back to the District Court.

When Vernor initially won his counter suit there was a wave of support and feelings of relief within the technology and library blog community. With the current ruling on Vernor v. Autodesk, there are fears that producers of digital media will begin to insist that their property is licensed, not purchased, thus getting around the First Sale Doctrine. Two other cases in different circuits have also dealt with this issue yet have not gone quite as far as Autodesk.

In the 2nd Circuit in Krause v. Titleserve, plaintiff William Krause had sued over the ownership of source code he had written as a consultant of the company Titleserve. Titleserve held that under Title 17 of the United States Code § 117 (a) (1) that ownership was a defense against copyright infringement. Krause had developed the code specifically for his employer’s use; however, when Krause decided to end his employment due to a disagreement over a new supervisor he took his laptop that contained the original source code and locked the six existing copies of the programs that resided within the company’s servers. In effect Titleserve could not modify the code if it needed to in order to add new information or fix bugs.[7]

Titleserve was able to eventually unlock the code and did modify Krause’s original program for internal use. During the suit the court looked to First Sale Doctrine against Krause’s claims of copyright infringement. The court concluded that there was not an issue of the programs being licensed and that Titleserve did indeed own them.[8]  “Not least because Titleserve had paid Krause substantial compensation and for the company’s sole benefit; Krause developed the program for Titleserve’s specific needs; the copies were stored on Titleserve’s own servers; and Krause never reserved the right to repossess the copies used by Titleserve and agreed that Titleserve had the right to continue to possess and use the programs forever, regardless whether its relationship with Krause terminated; and Titleserve was similarly free to discard or destroy the copies any time it wished.” (Biek and Carpenter)[9]

The third case of interest was argued in the D.C Circuit. In DCS Communications v. Pulse Communication, both parties created hardware that facilitated analog to digital converters for use in local phone systems.  At contention was that DCS had developed software for use with the hardware, which it had sold to Bellsouth. Pulse acquired the code through Bellsouth instead of continuing to develop their own software.  DCS sued over copyright infringement among a number of other legal issues. The contention that is relevant here is that the D.C Court, while finding in favor for DCS on many of the plaintiff’s allegations, concluded that the software developed by DCS could not reasonably be considered licensed to Bellsouth, as Bellsouth had purchased the software.  The Court went further to cite the copies of the software that were acquired by Pulse were within the guidelines of Title 17 USC § 117 which states,

“It is not an infringement for the owner of a copy of a computer software 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…”[10]

The D.C. Court was not going to uphold DCS’s claim of copyright infringement and DCS’s assertion that the software was licensed. The D.C. Court even mentions the First Sale Doctrine in their opinion.  So here we have the D.C. Circuit taking a very different stance on license versus ownership of digital media from that of the 9th Circuit. While the 2nd Circuit interpreted § 117 in a similar way stating that the “Congressional record is vague; however, ruled that notable limitations would seem to indicate that the processor does not own the work.[11]

Are the Courts split?  The 9th Circuit makes a strong claim that there is not a split, and further that the purchaser does not need to be aware of a license in order for it to apply.  And it is the 9th Circuit that has made the most concise argument regarding licensing over ownership of digital media while the 2nd and D.C. Circuits have been more ambiguous in their opinions.  The general feeling within the legal community is that the 9th Circuit is calling the shots in this debate. So where does this leave us with regard to e-Books and how it affects libraries?

To be continued in Part II…

~Kim Allman~

[1] Bobbs-Merril Co. v. Straus, 210 US 339 (2d Cir. 1908)

[2] Bobbs-Merril Co. v. Straus, 210 US 341 (2d Cir. 1908)

[3] Bobbs-Merril Co. v. Straus, 210 US 339 (2d Cir. 1908)

[4] 17 U. S. C. A. §109 341 (2005)

[5] 17  U.S.C.A. §107  241 (2005)

[6] Vernor v. Autodesk. Inc.,621 F.3d 1102

[7] Krause v. Titleserv Inc., 402 F. 3d 119 (2nd Cir. 2005)

[8] Ibid

[9] Biek, Aaron and Carpenter, Marcus (2010). First Sale Doctrine, Retrieved from

[10] 17 U.S.C.A. §117 486,487 (2005)


Filed under Books & Stuff, electronic resources, Library

3 responses to “The First Sale Doctrine: e-Books, and the Impact on Libraries – Part 1

  1. Pingback: The First Sale Doctrine: e-Books, and the Impact on Libraries – Part 2 | Charlotte Law Library News

  2. Pingback: The First Sale Doctrine: e-Books, and the Impact on Libraries – Part 3 | Charlotte Law Library News

  3. Pingback: E-books redux « The Accidental Law Librarian

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