Digital exhaustion

UCLA Law Review

Volumn 58, Issue 4, 2011, Pages 889-946

  Perzanowski, Aaron ^a   Schultz, Jason ^b  

^a WAYNE STATE UNIVERSITY   (United States)

^b UNIVERSITY OF CALIFORNIA   (United States)

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[No Author keywords available]

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EID: 79959222691     PISSN: 00415650     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (478)

1. We will use the term digital works to refer to works distributed by the transmission of data rather than tangible media. Although media like CDs and DVDs are used to distribute works that are, in a strict sense, digital, the key distinction for our purposes is one between delivery via objects and delivery via data transmission.
2. Dylan F. Tweney, Amazon Sells More E-Books Than Hardcovers, WIRED, July 19, 2010, http://www.wired.com/epicenter/2010/07/amazon-more-e-books-than- hardcovers.
3. Lisa Respers France, Is the Death of the CD Looming?, CNN.COM, July 20, 2010, http://www.cnn.com/2010/SHOWBIZ/Music/07/19/cd.digital.sales.
4. see also Jessica E Vascellaro & Sam Schechner, Slow Fade-Out for Video Stores, WALL ST. J., Sept. 30, 2010, http://online.wsj.com/article/ SB10001424052748704082104575515933391663168.html (ascribing Blockbuster's bankruptcy and the demise of the video-rental store to Netflix, Redbox, and on-demand video products).
5. Nick Wingfield & Merissa Marr, Apple Computer Aims to Take Over Your Living-Room TV, WALL ST. J., Sept. 13, 2006, at Bl.
6. Ed Christman, Digital Divide, BiLLBOARD.BIZ, May 22, 2010, http://www.billboa1d.bi2/bbbiVcontent-dispby/magz¡ne/upÍ Tontye3il2fe2557a9382597671a522cclcc901d.
7. Jacqui Cheng, Forget the Box: Downloads Dominate Online Software Purchases, ARS TECHNICA, May 28, 2010, http://arstechnica.com/software/news/ 2010/05/forget-the-box-downloads-dominate-online-software-purchases.ars.
8. Lance Whitney, Digital Game Downloads Beat Retail Store Sales, CNET NEWS, Sept. 20, 2010, http://news.cnet.com/8301-10797-3-20016943-235.html.
9. JONATHAN ZITTRAIN, THE FUTURE OF THE INTERNET-AND HOW TO STOP IT 102-03 (2008).
10. Moreover, with respect to embedded and tethered copyrighted goods such as the iPhone, Kindle, and TiVo, rights holders are able to lock in user-generated data such as favorites, bookmarks, annotations, ratings, and avatars. See MDY Indus, v. Blizzard Entm't, 616 F. Supp. 2d 958, 966-67 (D. Ariz. 2009), affd, No. 09-15932, 2010 U.S. App. LEXIS 25424 (9th Cir. Dec. 14, 2010).
11. Facebook, Inc. v. Power Ventures, Inc., No. C 08-5780 JF (RS), 2009 WL 1299698, at *4 (N.D. Cal. May 11, 2009).
12. Microsoft's Datei Defense Takes Bite Out of Apple's Playbook, antitrust today, Feb. 8, 2010, http://www.antitrusttoday.com/2010/02/08/microsoft's-datel- defense-takes-bite-out-of-apple's-playbook.
13. See Herbert Hovenkamp, Post-Sale Restraints and Competitive Harm: The First Sale Doctrine in Perspective, 66 NYU ANN. SURV. AM. L. 487 (2011 ).
14. See infra note 200 and accompanying text.
15. Stewart v. Abend, 495 U.S. 207, 228 (1990).
16. Copyright law provides authors several discrete exclusive rights, among them the right to distribute copies of their works. See 17 U.S.C. § 106 (2006) (granting copyright owners the exclusive rights to reproduce the work, to prepare derivative works, to distribute copies, to perform the work publicly, and to display the copyrighted work publicly). Several exceptions and limitations to those rights are found in the Copyright Act.
17. See id. §§ 107-20.
18. Prior to the Copyright Act of 1976, federal copyright statutes provided copyright holders with the exclusive right to vend.
19. See Copyright Act of 1909, ch. 320, §1, 17 U.S.C. § 1 (1946) (amended 1947).
20. International Copyright Act of 1891, ch. 565, § 1, 26 Stat. 1107 (amended 1909).
21. Copyright Act of 1790, ch. 15, § 1, 1 Stat. 124 (amended 1802).
22. See 17 U.S.C. § 106(3) (2006).
23. See John A. Rothchild, The Incredible Shrinking First-Sale Rule: Are Software Resale Limits Lawful?, 57 RUTGERS L. Rev. 1, 11 (2004) (noting "authority for the proposition that even a gift of a copy can constitute a public distribution").
24. see also Ford Motor Co. v. Summit Motor Prods., Inc., 930 F.2d 277, 299 (3d Cir. 1991) ("The term 'other transfer of ownership' is broad enough to encompass gifts.").
25. Despite its name, the first sale doctrine does not require that the copyright owner initially dispose of the copy by selling it. Giving a copy away is enough to exhaust the distribution right. See 2 PAUL GOLDSTEIN, GOLDSTEIN on COPYRIGHT § 7.6.1 n.4 (3d ed. 2010) ("[A] gift of copies or phonorecords will qualify as a 'first sale' to the same extent as an actual sale for consideration.").
26. MELVILLE B. NIMMER & DAVID NIMMER, NIMMER ON COPYRIGHt § 8.12[B][l][a] (Matthew Bender rev. ed. 2010).
27. WILLIAM F. PATRY, PATRY ON COPYRIGHT § 13:15 (2010) ("Since the principle [of the first sale doctrine] applies when copies are given away or are otherwise permanently transferred without the accoutrements of a sale, 'exhaustion' is the better description.").
28. See, e.g., Columbia Pictures Indus, v. Redd Home, Inc., 749 F.2d 154, 159 (3d Cir. 1984) ("The first sale doctrine prevents the copyright owner from controlling the future transfer of a particular copy once its material ownership has been transferred.").
29. Am. Int'l Pictures, Inc. v. Foreman, 576 F.2d 661, 664 (5th Cir. 1978) ("After the first sale of a copy the copyright holder has no control over the occurrence or conditions of further sales of it.... The first sale thus extinguishes the copyright holder's ability to control the course of copies placed in the stream of commerce.").
30. But see infra note 139 and accompanying text (noting statutory limitations on the right to loan or rent computer software and sound recordings).
31. See Joseph P. Liu, Owning Digital Copies: Copyright Law and the Incidents of Copy Ownership, 42 WM. &. MARY L. REV. 1245, 1303, 1310-11, 1320-21, 1330-33, 1336 (2001) (privacy, access, preservation, transactional clarity).
32. R. Anthony Reese, The First Sale Doctrine in the Era of Digital Networks, 44 B.C. L. REV. 577, 584 (2003) (access, preservation, privacy).
33. Molly Shaffer Van Houweling, The New Servitudes, 96 GEO. L.J. 885, 898-905, 914-16 (2008) (transactional clarity and salience).
34. See Reese, supra note 19, at 585-94.
35. See, e.g., UMG Recordings, Inc. v. Augusto, No. 08-55998, 2011 U.S. App. LEXIS 52 (9th Cir. Jan. 4, 2011 ) (applying the first sale rule to distribution of used promotional CDs via eBay).
36. See Reese, supra note 19, at 587.
37. see also Mike Anderiesz, Publishers Rankled by Secondhand Games Boom, GUARDIAN, Jan. 19, 2006, http://www.guardian.co.uk/technology/2006/jan/19/games. guardianweeklytechnologysection2.
38. David D. Kirkpatrick, Online Sales of Used Books Draw Protest, N.Y. TIMES, Apr. 10, 2002, http://www.nytimes.com/2002/04/10/technology/10BOOK.html.
39. Troy Wolverton, Video Games' Second Life, THE STREET, Dec. 2, 2005, http://www.thestreet.com/story/10255424/video-games-second-life.html.
40. Press Release, The NPD Group, Bargain-Hunting Gamers Turning to Impulse Buying, Used Titles (Oct. 15, 2009), available at http://www.npd.com/press/ releases/press-091015.html.
41. See Douglas Lichtman, First Sale, First Principles, MEDIA INST. (Apr. 26, 2010), http://www.mediainstitute.org/new-site/IPI/2010/042610-FiistSale.php. We are skeptical about the practical benefits consumers will realize from price discrimination.
42. See infra Part I.C.
43. Reese, supra note 19, at 585. As some commentators have argued, first sale's flexibility and competition with the copyright owner's initial sale may also produce more efficient price discrimination than a single monopolistic approach. See Wendy Gordon, Intellectual Property as Price Discrimination: Implications for Contract, 73 CHI-KENT L. REV. 1367, 1383-90 (1998) (noting that secondary markets are often much better at price discrimination than single monopolistic ones).
44. see also Anindya Ghose, Michael D. Smith & Rahul Telang, Internet Exchanges far Used Books: An Empirical Analysis of Product Cannibalization and Welfare Impact, 17 INFO. SYS. RES. 3 (2006) (noting that 84 percent of used book sales from Amazon.com's secondary market came from buyers who would not have otherwise purchased a new book at the price set by the copyright owner). Even after accounting for the 0.3 percent reduction of publisher's gross profits due to Amazon's secondary market for books, that market results in net welfare gain of nearly $88 million annually.
45. Id. at 3, 5.
46. See Reese, supra note 19, at 594-95, 599.
47. See, e.g., id. at 598 (citing Worldwide Church of God v. Phila. Church of God, Inc., 227 F.3d 1110 (9th Cir. 2000)).
48. U.S. REGISTER OF COPYRIGHTS, REPORT ON ORPHAN WORKS (2006), available at http://www.copyright.gov/orphan/orphan-report-full.pdf.
49. see also Anna Vuopala, Assessment of the Orphan Works Issue and Costs for Rights Clearance (May 2010), available at http://ec.europa.eu/infornwtion- society/activities/digital-libraries/doc/reports-orphan/anna-report.pdf.
50. See Brewster Kahle, THE OPEN LIBRARY, available at http://librivox.org/ the-open-library-by-brewster-kahle(last visited Mar. 23, 2011).
51. Liu, supra note 19, at 1330-31.
52. Deirdre K. Mulligan & Jason M. Schultz, Neglecting the National Memory: How Copyright Term Extensions Compromise the Development of Digital Archives, 4 J. APP. PRAC. & PROCESS 451 (2002). While Reese argues that these preservation purposes fall under the overall rubric of access, we think the strength of the cultural preservation argument earns it separate categorization.
53. See Reese, supra note 19, at 603.
54. The canonical example of such loss is the Library of Alexandria. See Protecting Ancient History m Iraq, NPR (Feb. 20, 2003), http://www.npr.org/ templates/story/story./=978050.
55. See Julie E. Cohen, A Right to Read Anonymously: A Closer Look at 'Copyright Management' in Cyberspace, 28 CONN. L. REV. 981 (1996). This preference for transactional privacy aligns with longstanding consumer expectations and strong professional norms in the bookstore and library communities, not to mention state and federal laws supporting consumer privacy.
56. See Video Privacy Protection Act of 1988, Pub. L. No. 100-618, 102 Stat. 3195 (1998) (codified at 18 U.S.C. § 2710 (2006)).
57. In re Grand Jury Subpoena to Amazon.com Dated Aug. 7, 2006, No. 07-GJ-04 (W.D. Wis. June 26, 2007) (sealed order), available at http://www.medialawlunch. com/documents/2008-01-amazon.pdf;.
58. Tattered Cover, Inc. v. City of Thornton, 44 P.3d 1044 (Colo. 2002).
59. Associated Press, Feds Retreat on Amazon Buyers' Identities, MSNBC.COM, Nov. 27, 2007, http://www.msnbc.msn.eom/id/21997757.
60. Stephen Labaton, Lewinsky's Lawyers to Turn Over Records of Book Purchases, N.Y. TIMES, June 23, 1998, at A13.
61. Code of Ethics of the American Library Association, art. Ill, http://www.ala.org/ala/issuesadvocacy/proethics/codeofethics/ Code%20of%20Ethics%20of%20th.pdf (last visited Mar. 23, 2011).
62. See Cohen, supra note 29. It is also worth noting that personal privacy is not the only interest at stake. In situations involving product reviews, criminal investigations, or competitive reverse engineering, it is essential that access to copyrighted works be predicated on anonymity. First sale ensures that such anonymity is available from secondary markets if the rights holder does not offer it directly.
63. See Van Houweling, supra note 19, at 897-98 ("The existence of unusual property rights increases the cost of processing information about all property rights. Those creating or transferring idiosyncratic property rights cannot always be expected to take these increases in measurement costs fully into account, making them a true externality." (citing Thomas W. Merrill & Henry E. Smith, Optimal Standardization in the Law of Property: The Numerus Clausus Principle, 110 YALE L.J. 1, 8 (2000)).
64. see also Hovenkamp, supra note 9, at 24 ("In the simple story the first sale doctrine reduces downstream transaction costs.").
65. Liu, supra note 19, at 1321; Merrill & Smith, supra, at 3 ("[T)he law will enforce as property only those interests that conform to a limited number of standard forms.").
66. See Straus v. Victor Talking Mach. Co., 243 U.S. 490, 501 (1917) ("[I]t must be recognized that not one purchaser in many would read such a notice, and that not one in a much greater number, if he did read it, could understand its involved and intricate phraseology...").
67. Van Houweling, supra note 19, at 897-98.
68. see also Merrill & Smith, supra note 31, at 44-45 (discussing the costs of processing notice).
69. This protection from high information costs and transactional complexity stems from similar rules in real and personal property law, which have traditionally disfavored servitudes due to their tendency to provide insufficient notice, restrain alienation, limit future unforeseen usability, and impose high information costs on subsequent purchasers. See Zechariah Chafee Jr., The Music Goes Round and Round: Equitable Servitudes and Chattels, 69 HARV. L. REV. 1250, 1261 (1956).
70. Merrill & Smith, supra note 31, at 18.
71. Van Houweling, supra note 19, at 897-98. While some may argue that consuméis can discipline copyright owners by rejecting items sold on nonstandard terms, empirical studies suggest that consumers will not reject goods-even those with unacceptable or confusing terms-unless those terms are salient and essential to the purchase.
72. See id. at 932-33 (noting studies on consumer transactions and salience). Therefore, market discipline is unlikely to solve this problem.
73. See, e.g., OK Computer Special Collector's Edition CDs-DVD, AMAZON.COM, http://www.amazon.eom/Computer-SPECIAL-COLLECTORS-CDs-DVD/dp/B001PPF130 (last visited Mar. 23, 2011).
74. See, e.g., Vernor v. Autodesk Inc., No. 09-35969, 2010 WL 3516435 (9th Cir. Sept. 10, 2010).
75. Mark Anderson, New CD-Swap Site Hooks Music Fans, WIRED, June 8, 2006, http:/Avww.wired.com/culture/culturereviews/news/2006/06/71106. Other exceptions and limitations, such as fair use, also create innovation incentives.
76. See generally Red von Lohmann, Fair Use as Innovation Policy, 23 BERKELEY TECH. L.J. 829 (2008).
77. Although both Netflix and Redbox rely primarily on distribution deals with studios to obtain discounted DVDs and Blu-Ray discs in bulk, both companies have relied on the first sale doctrine to overcome efforts by content owners to limit their ability to offer certain titles. See Dorothy Pomerantz, Red Menace, FORBES.COM (Mar. 6, 2009), http://www.forbes.com/2009/03/06/redbox-blockbuster- rentals-business-media-rebox.html (noting that when Universal demanded that Redbox wait forty-five days before offering new titles, Redbox acquired the discs from local Best Buy locations instead). When The Weinstein Company, distributor of films such as Academy Award winner VlCKI cristina barcelona (The Weinstein Company 2008), signed an exclusive distribution agreement with Blockbuster, Netflix likewise relied on retail purchases and the first sale doctrine to make those titles available to its customers.
78. See Transcript of Netflix, Inc. Q3 2009 Earnings Call (Oct. 22, 2009) (statement of Netflix CEO Reed Hastings), available at http://sœkingalpha. œnVarticle/168407-netflU-inc-q3-2009-eamings-call-transcript (noting that because "retail is so big and diffused, " studios have been unable to prevent retail acquisition and that because of "liquidity in the supply chain, " the purchase of used retail copies saved Netflix money). Perhaps more important than the benefit it offers established firms like Netflix, the first sale doctrine offers fledgling companies important benefits. First, it provides some additional incentive for content owners to negotiate licenses. Second, it places a ceiling on the price content owners can demand in those negotiations. And third, it provides a failsafe mechanism that enables an innovative firm to move forward even without copyright holder permission.
79. See YOCHAl BENKLER, THE WEALTH OF NETWORKS (2006).
80. ERIC VON HIPPEL, DEMOCRATIZING INNOVATION 2, 72-73 (2005) (noting that unrestricted access to products has resulted in important user innovations, including advances in mountain biking, wind surfing, the heart-lung machine, and farming equipment).
81. William W. Fisher III, The Implications for Law of User Innovation, 94 MINN. L. REV. 1417 (2010).
82. Katherine J. Strandburg, Users as Innovators: Implications for Patent Doctrine, 79 U. COLO. L. REV. 467 (2008).
83. These innovations included protective cycling armor, enhanced carrying straps to increase storage capacity, and metal studs added to tires to increase traction. See VON hippel, supra note 38, at 35-36.
84. See id. at 1. For example, von Hippel's research shows a significant percentage of user innovation in a range of fields, including extreme sports, surgery, library information systems, printed circuit CAD software, and open-source web server security.
85. Id. at 20 tbl.2-1.
86. See, e.g., REBOUND DESIGNS, http://www.rebound-designs.com (last visited Mar. 23, 2011).
87. see also SECRET STORAGE BOOKS, http://www.secretstoragebooks.com (last visited Mar. 23, 2011 ).
88. See Shikha Chauhan, Explore Time With Creative CD Clocks, HOME QUOTIENT, Sept. 19, 2009, http://www.homeqn.com/entry/remodelista-explore-time-with- creative-cd-clocks.
89. See Daniel Bauen, NESblmky-Nintendo Controller Bike Flasher, INSTRUCTABLES, http://www.instructables.com/id/Bike-Hasher-Made-fiom-NES- Controller (last visited Mar. 23, 2011).
90. see also LED Sneakers, MAKEZINE.COM, July 14, 2010, http://blog.makezine. com/archive/2010/07/led- sneakers.html.
91. Chauhan, supra note 42.
92. This is not to say that other legal doctrines do not constrain user innovation. See Fisher, supra note 38, at 1449-50 (the derivative work right).
93. Pamela Samuelson, The Quest for a Sound Conception of Copyright's Derivative Work Right (forthcoming).
94. Strandburg, supra note 38 (patents). However, but for the first sale doctrine, even modifications that did not constitute derívate works would be unlawful to distribute if they incorporated the original work. In addition, as we argue below, a broad conceptualization of copyright exhaustion might well protect users in these circumstances.
95. Otherwise, user innovators would be forced to find rights holders and negotiate the right to redistribute their modified goods, assuming the owners would grant such a right.
96. Van Houweling, supra note 19, at 900 (citing Julia D. Mahoney, Perpetual Restrictions on Land and the Problem of the Future, 88 VA. L. REV. 739 (2002)) (noting the problem of the future in the context of environmental conservation easements in which conditions and scientific understanding of environmental impact change over time and the easements become outdated and potentially even antithetical to their original purpose).
97. Id.
98. Van Houweling notes that "[t]he problem of the future is further compounded when a servitude arises in a context of rapid and unpredictable change, making unforeseen obsolescence especially likely." Id. at 901.
99. see also Bilski v. Kappos, 130 S. Ct. 3218, 3227-28 (2010) (stressing the importance of patent law's policy to promote new and unforeseen inventions).
100. von HIPPEL, supra note 38, at 7 (noting that manufacturers also have insufficient incentive to provide custom solutions for small groups of users, leaving users to provide their own solutions), 46 (observing that users often see problems or innovations before original manufacturers).
101. Admittedly, potential infringement of the reproduction and derivative work rights presents the most likely legal objection to many forms of user innovation. However, in those instances where the act of distribution increases exposure to liability, the first sale doctrine serves to facilitate user innovation. As described in more detail below, the broader common law exhaustion principle in copyright law addresses not only claims of unauthorized distribution but reproduction and the preparation of derivatives as well. See infra Part H.B.
102. Switching costs would be reduced further if consumers were assured data portability between platforms. See Jacqui Cheng, Data Portability Finally Comes to Facebook, Plus Friend Groups, ARS TECHNICA, http://arstechnica.com/media/ news/2010/10/data-portability-finally
103. But see Jason Kincaid, Google to Facebook: You Can't Import Our User Data Without Reciproaty, TECHCRUNCH (Nov. 4, 2010), http://techcrunch.com/2010/1l/ 04/facebook-googlecontacts. If games purchased for the Xbox were playable on the Wii or could be modified to ensure interoperability, the switching costs facing consumers would be significantly lower from the outset. Because lock-in is a key component of the pricing and overall strategy in the video game market, private efforts to enable interoperability are unlikely. Other markets appear more amenable to cross-platform cooperation.
104. See, e.g., Dave Caolo, Barnes & Noble Releases eReader AppforiPad, THE UNOFFICIAL APPLE WEBLOG (May 27, 2010), http://www.tuaw.com/2010/05/27/ barnes-and-noble-releases-ereader-app-for-ipad.
105. Users of Edison phonographs, in contrast, faced significant switching costs because Edison utilized a unique playback technology that ensured that its records could only be played on its machines. See RANDALL STROSS, THE WIZARD OF MENLO PARK 220 (2007).
106. See Liu, supra note 19, at 1249.
107. Reese, supra note 19, at 610-12.
108. See Liu, supra note 19, at 1339.
109. Reese, supra note 19, at 581.
110. see also U.S. COPYRIGHT OFFICE, LIBRARY OF CONG., DMCA SECTION 104 REPORT 48 (2001) [hereinafter DMCA Section 104 report], available at http://www.copyright.gov/reports/studies/dmca/dmca-study.html.
111. See Brian W. Carver, Why License Agreements Do Not Control Copy Ownership: First Sales and Essential Copies, 25 BERKELEY TECH L.J. (forthcoming 2011), available at http://ssrn.com/abstract=1586580.
112. Reese, supra note 19, at 614.
113. Van Houweling, supra note 19, at 889-90.
114. Carver, supra note 54.
115. See David Nimmer et al., The Metamorphosis of Contract to Expand, 87 CALIF. L. REV. 17, 36-40 (1999).
116. Rothchild, supra note 15, at 31-33.
117. see also, e.g., UMG Recordings, Inc. v. Augusto, 628 F.3d 1175, 1180 (9th Cir. 2011).
118. Van Houweling, supra note 19, at 938 (citing the Microsoft Vista EULA as an example).
119. Van Houweling, supra note 19, at 917 ("Before the advent of inexpensive and user-friendly copying technology, for example, most of the things that consumers did with copies of copyrighted works did not implicate copyright law at all. A consumer could buy a book and read it without thinking twice.").
120. See Aaron Perzanowski, Fixing RAM Copies, 104 NW. U. L. REV. 1067, 1068 (2010).
121. MAI Sys. Corp. v. Peak Computer Inc., 991 F.2d 511 (9th Cir. 1993).
122. But see Cartoon Network v. CSC Holdings, Inc., 536 F.3d 121, 130 (2d Cir. 2008) (holding temporary buffer copies are not "copies" under the Copyright Act).
123. Section 117 of the Copyright Act provides some protection for consumers who purchase computer programs. 17 U.S.C. § 117 (2006). This protection also depends on the disputed issue of copy ownership.
124. See Carver, supra note 54- Consumers who purchased digitally encoded works other than computer programs currently receive no statutory protection for their creation of copies necessary to use a work.
125. Digital Millennium Copyright Act § 103, 17 U.S.C. § 1201(a)-(b).
126. See Peter Moore, Steal This Disk: Copy Protection, Consumers' Rights, and the Digital Millennium Copyright Act, 97 Nw. U. L. REV. 1437, 1440-42 (2003).
127. See DMCA SECTION 104 REPORT, supra note 53, at 39 (noting library association concerns that DRM and section 1201 would inhibit core library functions such as interlibrary loan programs, preservation of works, and accepting donations of works).
128. Id. at V (Executive Summary).
129. Id. at 78.
130. Id. at xvi-xvii, 75-76.
131. See supra text accompanying note 1.
132. see also Greg Sandoval, Netflix Delights Studios With Big Checks, CNET NEWS, July 29, 2010, http://news.cnet.com/8301-31001-3-20012024-261.html.
133. Marguerite Reardon, Roku Adds Amazon Video on Demand, CNET NEWS, Mar. 3, 2009, http://news.cnet.com/8301-1023-3-10186046-93.html.
134. See, e.g., Pamela Samuelson, Google Book Search and the Future of Books in Cyberspace, 94 MINN. L. Rev. 1308, 1348 (2010) (noting the requirement under a proposed settlement that e-book purchases from Google Book Search be kept on Google servers).
135. see also Jacqui Cheng, "Universal DRM" Renamed UltraViolet, Beta Starts This Fall, ARS TECHNICA, July 20, 2010, http://arstechnica.com/ gadgets/news/2010/07/dece-moving-forward-with-beta-tests-but-still-sans-apple. ars.
136. See Reese, supra note 19, at 612.
137. DMCA section 104 report, supra note 53, at xviii ("[T]he transmission of a work from one person to another over the Internet results in a reproduction on the recipient's computer, even if the sender subsequently deletes the original copy of the work. This activity therefore entails an exercise of an exclusive right that is not covered by section 109.").
138. See Matthew Lasar, Connecticut AG CaUs Amazon, Apple to Woodshed Over E-Book Deals, ARS TECHNICA, Aug. 2, 2010, http://arstechnica.com/apple/news/ 2010/08/connecticut-ag-to-amazon-apple-lets-talk-about-e-books.ars.
139. Reese, supra note 19, at 625-27.
140. Many copyright owners attempt to evade the first sale rule by attaching licensing terms to their works. We doubt that a license alone is sufficient to transform a transaction that is otherwise indistinguishable from a sale into something else for the purposes of first sale. But that remains an open question. See infra note 293.
141. See Jonathan Weinberg, Hardware-Based ID, Rights Management, and Trusted Systems, 52 STAN. L. REV. 1251, 1272-78 (2000) (concluding that while price discrimination almost certainly benefits rights holders by enabling them to more fully capture surplus value, it does not necessarily benefit consumers).
142. See William W. Fisher III, Property and Contract on the Internet, 73 OU-KENT L. REV. 1203, 1249 (1998) (arguing copyright should "give creators enough entitlements to induce them to produce the works from which we all benefit but no more").
143. Glynn S. Lunney Jr., Patent Law, the Federal Circuit, and the Supreme Court: A Quiet Revolution, 11 SUP. CT. EGON. REV. 1, 5 (2003) (suggesting patent protection should be conferred only to the "precise extent[ ] necessary to secure each individual innovation's ex ante expected profitability").
144. See Brad Stone, Amazon Erases Orwell Books From Kindle, N.Y. TIMES, July 17, 2009, http://www.nytimes.com/2009/07/18/technology/companies/18amazon.html. This new level of control over consumer uses has also affected how free and open various platforms and devices can be in terms of censorship and free speech.
145. See Rich Jaroslovsky, Apple's Real 'Death Grip' Is on Its Customers, BUS. WK., July 8, 2010, http://www.businessweek.com/news/2010-07-08/apple-s-real- death-grip-is-on-its-customers-rich-jaroslovsky.html.
146. Contra Reese, supra note 19, at 598-99 (citing Worldwide Church of God v. Phila. Church of God, Inc., 227 F.3d 1110, 1112-23 (9th Cir. 2000)) (noting that notwithstanding plaintiffs successful copyright action against publishing new versions of religious text, already existing versions that had been lawfully distributed could continue to be shared and distributed under first sale).
147. See Reese, supra note 19 at 577, 630-44.
148. Pamela Samuelson & Jason Schultz, Should Copyright Owners Have to Give Notice of Their Use of Technical Protection Measures?, 6 J. ON TELECOMM. & HIGH TECH. L. 41, 58-59 (2007).
149. Mark Hefflinger, Walmart to End Support for DRM-Wrapped Songs m October, DIGITAL MEDIA WIRE (June 1, 2009), http://www.dmwmedia.com/news/2009/06/01/ walmart-end-support-drm-wrapped-songs-october, .
150. see also Letter From the Fed. Trade Comm'n to Wal-Mart Stores, Inc. (June 23, 2010), available at http://www.ftc.gov/os/closings/100623walmartletter.pdf.
151. Letter From the Fed. Trade Comm'n to MLB Advanced Media (Oct. 9, 2008), available at http://www.ftc.gov/os/clœings/081009mlbamclosingletter.pdf.
152. Letter From the Fed. Trade Comm'n to Microsoft (Sept. 30, 2008), available at http://www.ftc.gov/os/closings/080930msnmusicclosingletter.pdf.
153. See supra note 66.
154. See Google Book Search Settlement and Reader Privacy, ELEC. FRONTIER FOUND. (July 2009), http://www.eff.org/issues/privacy/google-book-search- settlement. In addition, vendors have developed technologies to spy on their customers. Blizzard's popular online game World of Warcraft installs a program on every player's computer called Warden to monitor user activity to detect cheating, as subjectively defined by Blizzard.
155. Mike Schramm, Blizzard's New Warden, and Our Privacy, WOW.COM (Nov. 15, 2007), http://www.wow.com/2007/ll/15/blizzards-new-warden-and-our-privacy.
156. See MDY Indus, v. Blizzard Entm't, 616 F. Supp. 2d 958 (D. Ariz. 2009), affd. No. 09-15932, 2010 U.S. App. LEXIS 25424 (9th Cir. Dec. 14, 2010).
157. see also Paul McDougall, Apple to Patent iPhone M Switch, INFO. WK. (Aug. 23, 2010), http://www.informationweek.com/news/software/hosted/showArticle./ html?articleID=226900049&subSection=News (reporting Apple's attempt to patent technology that monitors iPhone, iPod Touch, and iPad users who make unauthorized use of technology and disables that technology).
158. See Aleecia M. McDonald & Lorrie Faith Cranor, The Cost of Reading Privacy Policies, 4 I/S: J.L. & POL'Y FOR INFO. SOC'Y 543, 562-68 (2008).
159. see also Guilbert Gates, Facebook Privacy: A Bewildering Tangle of Options, N.Y. TIMES, May 12, 2010, http://www.nytimes.com/interactive/2010/05/ 12/business/facebook-privacy.html. In practice, many consumers simply ignore the terms of such restrictions, leading them to make choices in the marketplace based on incomplete information.
160. Moreover, companies frequently modify and update their terms of service (TOS)/EULA documents, forcing users to parse the differences and new terms at an even higher cost. For example, according to the Electronic Frontier Foundation's TOS tracking website, TOSBack, Apple's iTunes Store has changed its terms and conditions twelve times between February 24, 2009, and June 24, 2010. Apple iTunes Store Terms and Conditions, TOSBACK, http://www.tosback.org/ policy.php?pid=4 (last visited Mar. 23, 2011). The latest version was over four thousand words long. The time and expense to read these terms carefully even a single time often outweighs the value proposition of the content by ten, twenty, or even hundred fold.
161. See McDonald & Cranor, supra note 79.
162. Van Houweling, supra note 19, at 15 (noting psychological research that suggests buyers conserve effort during their decisionmaking process by focusing on a limited number of salient product features and may not accurately account for the costs of use restriction, especially when such restrictions are bundled with more salient features and terms, such as price).
163. Consider Blizzard's response when a programmer created a code to automate rudimentary tasks in its World of Warcraft game. After 25, 000 users purchased the unauthorized program, Blizzard relied on its TOS, EULA, and section 1201 to shut down this user innovation. Blizzard Entm't, 616 F. Supp. 2d 958.
164. See also Davidson v. Jung, 422 FJd 630, 642 (8th Cir. 2005) (holding that user-innovated .game servers for Blizzard games violated section 1201).
165. Ryan Lord, Microsoft Unleashes Banhammer on Xbox 360 Modders, TOM'S GUIDE (Nov. 13, 2008), http://www.tomsguide.com/us/MicrosoftBans-Xbox-360-Mods, news-2933.html.
166. See Export Notes From ¡Books?, APPLE DISCUSSIONS, http://discussions.apple.com/thread.jspa?messageID=11806259&#l1806259(last visited Mar. 23, 2011) (noting that Apple's iBooks app specifically disallows exportations of annotations and highlights).
167. see also Samuelson, supra note 68, at 1348 (noting restrictions on annotations in the proposed Google Book Search settlement).
168. In addition, the security and safety of users and their systems has also
169. see also Mark Hefflinger, AT&T Apologizes for iPad Email Breach; Blames "Hackers, " DIGITAL MEDIA WIRE (June 14, 2010), http://www.dmwmedia.com/news/2010/06/14/atampt-apoiogizes-ipad-email-breach- blames-quothackersquot.
170. 210 U.S. 339 (1908).
171. Id. at 341.
172. Id. at 342.
173. Id. at 341-42.
174. Id. Ten percent of Macy's stock was purchased at retail for the full one-dollar price.
175. Id. at 342.
176. Copyright Act of 1790, ch. 15, § 1, 1 Stat. 124 (amended 1802).
177. Bobbs-Merrill, 210 U.S. at 349.
178. Id.
179. Id. at 351.
180. Id. at 350-51. Tellingly, Bobbs-Merrill brought no contract claim against Macy's.
181. Id. at 350.
182. See Quality King Distrib., Inc. v. L'anza Research Int'l, Inc., 523 U.S. 135, 141-42 (1998) ("Congress subsequently codified our holding in Bobbs-MerriD that the exclusive right to 'vend' was limited to first sales of the work.").
183. Copyright Act of 1909, ch. 320, §1, 17 U.S.C. § 41 (1946) (amended 1947).
184. The next major revision of the Copyright Act brought only minor changes to the doctrine's statutory formulation. Section 109 of the Copyright Act of 1976 offered one important clarification- the doctrine applies only to copies or phonorecords "lawfully made under this title." 17 U.S.C. § 109(a) (1976). That is, for the distribution of a copy to be privileged under the first sale doctrine, that copy must have been created under the copyright holder's authority or pursuant to a statutory license or privilege.
185. See H.R. REP. NO. 94-1476, at 79 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5692. This statutory tweak, consistent with prior judicial interpretation, clarified that the distribution of infringing reproductions falls outside of the protection of the first sale rule.
186. Id.
187. The Copyright Act draws "a fundamental distinction between the 'original work' which is the product of 'authorship' and the multitude of material objects in which it can be embodied. Thus, in the sense of the [Act], a 'book' is not a work of authorship, but is a particular kind of 'copy."' H.R. REP. NO. 94-1476, at 53, reprinted m 1976 U.S.C.C.A.N. at 5675.
188. see also Matthew Bender & Co. v. W. Publ'g Co., 158 F.3d 693, 702 (2d Cir. 1998) (noting the distinction between works and the copies in which they are fixed).
189. "A work is 'fixed' in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration." 17 U.S.C. § 101 (2006).
190. Stephens v. Cady, 55 U.S. (14 How.) 528, 531 (1852) (holding that the purchase of an engraving plate did not entail the right to reproduce copies).
191. see also Stevens v. Royal Gladding, 58 U.S. (17 How.) 447, 452 (1854) (recognizing the severability of a copyright from ownership of the material object embodying the protected work).
192. Copyright Act of 1909, 17 U.S.C. § 41 (1946) (amended 1947) ("[C]opyright is distinct from the property in the material object copyrighted.").
193. See Pushman v. N.Y. Graphic Soc., Inc., 39 N.E2d 249 (N.Y. 1942) (holding that the copyright of an original work of art accompanied physical transfer of the work). Indeed, some courts continue this mistake today.
194. See Carver, supra note 54 (noting the persistent confusion among courts on this point).
195. Section 202 states: Ownership of a copyright, or of any of the exclusive rights under a copyright, is distinct from ownership of any material object in which the work is embodied. Transfer of ownership of any material object, including the copy or phonorecord in which the work is first fixed, does not of itself convey any rights in the copyrighted work embodied in the object; nor, in the absence of an agreement, does transfer of ownership of a copyright or of any exclusive rights under a copyright convey any property rights in any material object. 17 U.S.C. § 202 (2006).
196. see also H.R. REP. NO. 94-1476, at 124, reprinted in 1976 U.S.C.C.A.N. at 5664 (noting Congress's intent to alter the common law rule applied in Pushman).
197. See Zechariah Chafee Jr., Equitable Servitudes on Chattels, 41 HARV. L. REV. 945, 981-82 (1928).
198. H.R. REP. NO. 98-987, at 2 (1984), reprinted in 1984 U.S.C.C.A.N. 2898, 2899.
199. S. REP. No. 162, at 4 (1983).
200. see also Chafee, supra note 33, at 1261 ("Where chattels are involved and not just land or a business, the policy in favor of mobility creates even stronger cause for courts to hesitate and scrutinize carefully factors of social desirability before imposing novel burdens on property in the hands of transferees.").
201. John D. Park & Sons Co. v. Hartman, 153 F. 24, 39 (6th Cir. 1907).
202. Id.
203. See Sebastian Int'l, Inc. v. Consumer Contacts (pty) Ltd., 847 F.2d 1093, 1096 (3d Cir. 1988).
204. Burke & Van Heusen, Inc. v. Arrow Drug, Inc., 233 F. Supp. 881, 883-84 (E.D. Pa. 1964).
205. see also DMCA SECTION 104 report, supra note 53, at 86.
206. PATRY, supra note 16, § 13:15.
207. See, e.g., Buck v. Jewell-LaSalle Realty Co., 283 U.S. 191, 197 (1931).
208. Columbia Pictures Indus., Inc. v. Aveco, Inc., 800 F.2d 59, 63-64 (3d Cir. 1986).
209. Columbia Pictures Indus., Inc. v. Redd Home, Inc., 749 F.2d 154, 159-60 (3d Cir. 1984).
210. United States v. Powell, 701 F.2d 70, 72 (8th Cir. 1983) ("Although the [copyright] holder's other rights remain intact (reprinting, copying, etc.), the vendee holds the right to distribute the transferred copy in whatever manner he chooses.").
211. Precious Moments, Inc. v. La Infantil, Inc., 971 F. Supp. 66, 67 (D.P.R. 1997) ("The first sale doctrine, however, limits only the distribution rights of the copyright owner; it does not limit the other exclusive rights enumerated in § 106, including the right to prepare derivative works.").
212. Even within this narrative, some pressing questions about the application of the first sale doctrine remain. First, how do we reliably identify the owner of a copy in an environment of increasingly prevalent licensing of consumer products? See Carver, supra note 54. Second, how does first sale interact with the copyright holder's right to control the importation of copies, particularly copies made outside the United States? Compare Quality King Distribs, Inc. v. L'anza Research Int'l, Inc., 523 U.S. 135, 152-54 (1998) (holding that the first sale doctrine precludes liability for the reimportation of works into the United States), with Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982, 990 (9th Cir. 2008) (holding that the first sale defense was unavailable where the defendant imported and sold watches manufactured and first sold outside of the United States).
213. See supra Part I.
214. The terms "first sale" and "exhaustion" are occasionally used interchangeably. See PATRY, supra note 16, § 13:15 (noting that outside of the United States, "[t]he principal exception to the distribution right" is referred to as the exhaustion doctrine).
215. see also WIPO Performances and Phonograms Treaty arts. 8, 12, Dec. 20, 1996.
216. WIPO Copyright Treaty art. 6, Dec. 20, 1996 (noting the exhaustion of the distribution right). We will use "first sale" to refer to the limitation of the distribution right and "exhaustion" to refer to the broader principle-which includes the first sale rule-that copyright owner interests are limited as against owners of copies.
217. In Henry Bill PuU'g Co. v. Smythe, the court explained that "Inseparably with the transfer of the title in any copy of the work must go the right of alienation, so far as the peculiar protection of the copyright statutes is concerned-" 27 F. 914, 923 (C.C.S.D. Ohio 1886). The "doctrine running through all the cases" confirmed that the violation of purported conditions on the resale copies is not infringement.
218. Id.
219. The Henry Bill court held the first sale principle inapplicable because the defendants acquired their copies from a bailee entrusted to deliver the copies but had no title to the books. Id. at 926-28.
220. See infra Part III.
221. 61 F. 689 (2d Cir. 1894).
222. Id.
223. Id. The contract of sale provided that "all paper taken out of the building is to be utilized as paper stock, and all books to be sold as paper stock only, and not placed on the market as anything else.".
224. Id.
225. Id. at 690.
226. Id. at 691.
227. Id. ("The exclusive right to vend the particular copy no longer remains in the owner of the copyright by the copyright statutes.").
228. 105 F. 772, 776-77 (7th Cir. 1901).
229. Id. at 773.
230. Id. at 776-77.
231. Id. at 777.
232. Id.
233. Id. (noting that "no legal right of the appellee was invaded by" cleaning, trimming, or rebinding the books).
234. Id.
235. Id. at 776-77.
236. Id. at 778. The court assumed that the cover design was a protectable component of the work.
237. Id.
238. Id at 777.
239. Id.
240. 211 F. 379, 380 (W.D. Wash. 1914).
241. Id. at 381.
242. Id. at 381-82.
243. Id. at 382.
244. 215 F. 772 (E.D. Pa. 1914).
245. Id. at 775.
246. Id.
247. Id.
248. Id. at 779.
249. Occasionally, this balance is achieved legislatively. The Copyright Act entitles libraries, for example, to copy works in their collections to preserve against loss and deterioration. See 17 U.S.C. § 108 (2006). Congress has restricted copy owners' rights when doing so was deemed necessary to preserve incentives for creativity.
250. See Computer Software Rental Amendments Act of 1990, Pub. L. No. 101-650, §§ 801-05, 104 Stat. 5134 (1990) (codified at 17 U.S.C. § 109(b)) (restricting copy owners' rights to rent, lease, or lend computer programs for commercial purposes, but providing exceptions for video games and nonprofit libraries); Record Rental Amendment Act of 1984, Pub. L. No. 98-450, 98 Stat. 1727 (1984) (codified at 17 U.S.C. § 109(b)) (restricting copy owners' rights to rent, lease, or lend phonorecords for commercial purposes but providing an exception for nonprofit libraries).
251. 120 F. 631 (2d Cir. 1903).
252. Putnam's Sons purchased its copies from D. Appleton & Co., presumably another Kipling licensee.Id.
253. Id.
254. Congress did not recognize a derivative work right until the 1976 Act. See 1-3 NIMMER & NIMMER, supra note 16 (noting the occasional difficulty of distinguishing derivative and collective works).
255. 27 F. Supp. 655, 660 (D. Mass. 1939).
256. Id.
257. Id.
258. Fawcett Publ'ns, Inc. v. Elliot Publ'g Co., 46 F. Supp. 717, 717 (S.D.N.Y. 1942).
259. Id. at 717-18.
260. id. at 718.
261. See WILLIAM S. BURROUGHS & BRION GYSIN, THE THIRD MIND 29-33 (1978) (describing the cut-up method of composition).
262. Benday dots are an inexpensive method for printing color and shading, named for printer Benjamin Day. See JOHN UPDIKE, MORE MATTER: ESSAYS AND CRITICISM 727 (1999).
263. See Blanch v. Koons, 467 F.3d 244 (2d Cir. 2006).
264. Lantern Press, Inc. v. Am. Publishers Co., 419 F. Supp. 1267 (E.D.N.Y. 1976). In Lantern Press, the court endorsed prebinding, the practice of purchasing paperback books, binding them in hardcovers, and then reselling them. The goal of prebinding is not to repair or restore a damaged copy, but to "extend the service life of the book and protect the text from destruction in use.".
265. Id. at 1270;.
266. see also Ginn &. Co. v. Apollo Publ'g Co., 215 F. 772, 778 (E.D. Pa. 1914) (identifying the copy owner's right to preserve and renovate his copy).
267. Lee v. A.R.T. Co., 125 F.3d 580 (7th Cir. 1997).
268. Id. at 581.
269. 17 U.S.C. § 101 (2006).
270. Lee, 125 FJd at 581.
271. Id. at 581-82.
272. see also C.M. Paula Co. v. Logan, 355 F. Supp. 189 (N.D. Tex. 1973) (holding that the transfer of copyrighted images from lawfully obtained greeting cards to ceramic plaques did not constitute a reproduction or an adaptation of the images).
273. Mirage Editions, Inc. v. Albuquerque A.R.T. Co., 856 F.2d 1341, 1343 (9th Cir. 1988).
274. Id. at 1344.
275. Id.
276. As the ClearPlay controversy makes clear, the exhaustion principle does not provide easy answers to all derivative work questions. ClearPlay developed DVD players capable of programmatically skipping or muting offensive content during playback. Copyright holders alleged that even though the performances were private and no permanent copy of the altered film was created, the performance constituted a derivative work. See generally Alison R. Watkins, Surgical Safe Harbors: The Family Movie Act and the Future of Fair Use Legislation, 21 BERKELEY TECH. L.J. 241 (2006).
277. Anticipating litigation, ClearPlay and others sought a declaratory judgment of noninfringement. Id. at 245.
278. Before the court could decide whether such displays violate the derivative work right, Congress enacted the Family Movie Act, which permits automatic content skipping so long as no permanent copy is created. Id. at 251-54.
279. see also Family Movie Act of 2005, Pub. L. No. 109-9, 119 Stat. 223 (2005) (codified in 17 U.S.C. § 110(11) (2006)).
280. This legislative fix could be seen as an extension of the exhaustion principle that applies to both copy owners and authorized viewers of performances. Id.
281. See 17 U.S.C. § 106(5) (providing copyright holders with the exclusive right "in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly").
282. Id. § 101 ("(T)o 'display' a work means to show a copy of it, either directly or by means of a film, slide, television image, or any other device or process or, in the case of a motion picture or other audiovisual work, to show individual images nonsequentially.").
283. Id. § 106(5). A public display is one that occurs in a place open to either the public generally or a group of people exceeding a "normal circle of a family and its social acquaintances.".
284. Id. § 101. A public display also occurs when the display is transmitted to a place open to the public or a group outside a typical social circle "whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times. ".
285. Id.
286. Categorizing displays as public or private is not always an easy task. Compare Columbia Pictures Indus, v. Aveco, Inc., 800 F.2d 59 (3d Cir. 1986) (holding that the rental of rooms to members of the public for the purposes of viewing performances of video cassettes violated the public performance right), with Columbia Pictures Indus, v. Profl Real Estate Investors, 866 F.2d 278 (9th Cir. 1989) (holding that performances of motion pictures to renters of hotel rooms were not public).
287. see also Cartoon Network LP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008) (holding that the playback of recorded television programs at the request of cable subscribers was not a performance "to the public").
288. 17 U.S.C. § 109(c).
289. This privilege right also applies to anyone authorized by the owner of a copy. Even if work is on loan from a private collection, a museum is entitled to display it publicly. Id.
290. See H.R. REP. NO. 94-1476, at 79-80 (1976), reprinted m 1976 U.S.C.C.A.N. 5659, 5693 ("mhe general principle that the lawful owner of a copy of a work should be able to put his copy on public display without the consent of the copyright owner... [is a]... traditional privilege of the owner of a copy."). For a detailed account of the legislative history of this provision, .
291. see 5 PATRY, supra note 16, § 15:10.
292. See H.R. REP. NO. 94-1476, at 80, reprinted m 1976 U.S.C.C.A.N. at 5693 ("[t]he committee's intention is to preserve the traditional privilege of the owner of a copy to display it directly, but to place reasonable restrictions on the ability to display it indirectly in such a way that the copyright owner's market for reproduction and distribution of copies would be affected.").
293. Act of Aug. 18, 1856, ch. 169, 11 Stat. 138, 139 (1856).
294. Act of Jan. 6, 1897, ch. 4, 29 Stat. 481, 481-82 (1897).
295. Act of Mar. 4, 1909, ch. 320, 35 Stat. 1075, 1075 (1909).
296. Id.
297. Act of July 17, 1952, ch. 923, 66 Stat. 752, 752 (1952).
298. Motion pictures were recognized as protectable subject matter in 1912. See Act of Aug. 24, 1912, ch. 356, 37 Stat. 488, 488 (1912).
299. See 17 U.S.C. § 106(4) (2006) (listing "literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works" as works for which copyright owners enjoy the exclusive right of public performance). To perform a work is "to recite, render, play, dance, or act it, either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible.".
300. Id. § 101. The performance and display rights share a common definition of "public. ".
301. Id. More recently, Congress provided a limited digital public performance right for sound recordings.
302. Id. § 106(6).
303. Prior to the 1976 Act, public performance rights in lectures, sermons, addresses, musical works, and nondramatic literary works extended only to for-profit public performances. Therefore, copy owners were arguably given sufficient latitude to exploit their copies, rendering exhaustion largely unnecessary. Under the 1909 regime, however, the public performance of dramatic works infringed regardless of the defendant's profit motive.
304. See Act of Mar. 4, 1909. Likewise, current law does not condition infringement of the public performance right on commercial activity. 17 U.S.C § 106(4).
305. Unlike the act of display, which generally entails little more than presenting an unaltered and unmediated copy of the author's work to an audience, performance typically involves an element of interpretation, fusing the author's expression with some original contribution by the performer. While a display is an exploitation of a copy, a performance is perhaps better understood as an exploitation of the underlying work. But not all performances add original expression. The projectionist at your local theater does not interpret the films she exhibits. See 17 U.S.C. § 101 (defining the performance of a motion picture as "show[ing] its images in any sequence").
306. The choice between these strategies is informed by both consumer preferences and the available technology. Most audiences would rather watch a performance of Krapp's Last Tape than read a copy of the play. Until the advent of the VCR, there was simply no consumer market for copies of motion pictures. Over time, these practices can change. Hollywood, for example, makes more money each year on home video purchases, rentals, and television licensing than it does at the box office. See Edward Jay Epstein, Hollywood's Profits, Demystified, SLATE, Aug. 8, 2005, http://www.slate.com/id/2124078. But longstanding practices can become embedded in both consumer expectations and copyright doctrine.
307. Congress has applied the exhaustion principle to address transactions that intertwine copy ownership and public performance. After the Fourth Circuit held that video arcades violated the public performance right when they allowed customers to play lawfully purchased games in public, Congress intervened. See Red Baron-Franklin Park, Inc. v. Taito Corp., 883 F.2d 275 (4th Cir. 1989).
308. Since enabling public use was the only common and obvious reason to purchase an expensive coin-operated arcade game, Congress created a limited exception that exhausted the public display right in such games. See 17 U.S.C. § 109(e). This provision lapsed in 1994. Act of Dec. 1, 1990, Pub. L. No. 101-650, § 804, 104 Stat. 5136 (1990).
309. see also 4 patry, supra note 16, § 14:32. It is difficult to divine any clear legislative policy from Congress's experimentation with exhaustion of the performance right, given its limited nature. But its decision to limit the public performance right, even temporarily, suggests some sensitivity to the interests of copy owners in the customary use and enjoyment of lawfully acquired copies.
310. 17 U.S.C. §117.
311. See Pamela Samuelson, CONTU Revisited: The Case Against Copyright Protection for Computer Programs in Machine-Readable Form, 1984 DUKE L.J. 663, 692-94.
312. As originally enacted, section 117 provided in relevant part: [T]his title does not afford to the owner of copyright in a work any greater or lesser rights with respect to the use of the work in conjunction with automatic systems capable of storing, processing, retrieving, or transferring information, or in conjunction with any similar device, machine, or process, than those afforded to works under the law, whether title 17 or the common law or statutes of a State. Act of Oct. 19, 1976, Pub. L. No. 94-553, 90 Stat. 2541, 2565 (1976). The House Report noted that section 117 was "intended neither to cut off any rights that may now exist, nor to create new rights that might be denied under the Act of 1909 or under common law principles currently applicable." And "[w]ith respect to the copyright-ability of computer programs, the ownership of copyrights in them, the term of protection, and the formal requirements of the remainder of the bill, the new statute would apply." H.R. REP.NO. 94-1476, at 116 (1976), reprinted m 1978 U.S.C.C.A.N. 5659, 5731.
313. Pub. L. No. 93-573, 88 Stat. 1873 (1974).
314. See NATI COMM'N ON NEW TECHNOLOGICAL USES OF COPYRIGHTED WORKS, FINAL REP. 12 (1979) [hereinafter CONTU]. This definition was codified in 17 U.S.C. § 101.
315. See infra Part III.
316. CONTU, supra note 186, at 13.
317. The notion that temporary instantiations of a work stored in memory are copies for the purposes of the Copyright Act is a controversial one. See Perzanowski, supra note 58.
318. CONTU, supra note 186, at 13 ("[O]ne who rightfully possesses a copy of a program... should be provided with a legal right to copy it to that extent which will permit its use by that possessor.").
319. Id.
320. Id.
321. Id.
322. Id.
323. Id. at 12-13. Without this limitation, section 117 could enable the sale of putative backup copies in direct competition with the copyright holder.
324. See 4 PATRY, supra note 16, § 11:43. The copy owner's right to redistribute copies under section 117 does not extend to adaptations. Since such copies are "lawfully made" under Title 17, section 117 functions in part as an implicit limitation on section 109.
325. See generally H.R. REP. NO. 96-1307 (1980), reprinted in 1980 U.S.C.C.A.N. 6460.
326. Although the CONTU report is frequently cited by courts and commentators, its authoritative weight is far from clear. However, to the extent Congress acted on CONTU's recommendations without any additional legislative history, as it did with respect to section 117, the CONTU report is the best indication of Congress's intent, by virtue of being the only evidence available. See 4 PATRY, supra note 16, § 11:30.
327. Compare CONTU, supra note 186, at 13, with 17 U.S.C. § 117 (2006).
328. This change excluded those, like bailees, who rightfully possessed copies but had no ownership interest in them. See Quality King Distribs., Inc., v. L'Anza Research Int'l, Inc., 523 U.S. 135, 146-47 (1998) (noting that the use of the term "owner" in section 109 excludes bailees). Some have argued that it excludes mere licensees from taking advantage of the privileges outlined in section 117.
329. See id. But treating consumers who acquire copies through transactions that look like purchases as mere licensees of physical objects is difficult to square with reason or sound policy.
330. See Carver, supra note 54.
331. See 17 U.S.C. § 117(a)-(b). In response to the Ninth Circuit's decision in MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993), the Digital Millennium Copyright Act added a new subsection clarifying that the creation of copies of a program in the course of maintenance or repair of a computer does not infringe.
332. See 17 U.S.C. § 117(c).
333. The Benefit Authors Without Limiting Advancement or Net Consumer Expectations (BALANCE) Act, for example, would have amended section 109 to allow copy owners to transmit work to a single recipient so long as the transferor did not retain a copy.
334. See BALANCE Act, H.R. 1066, 108th Cong. (2003). The BALANCE Act was never reported out of the House Committee on the Judiciary. Scholars have advocated statutory fixes to sections 109 and 117 for well over a decade.
335. See, e.g., Fred H. Cate, The Technological Transformation of Copyright Law, 81 IOWA L. REV. 1395, 1447-51 (1996).
336. 33U.S.591 (1834).
337. Id.
338. see also Donaldson v. Beckett, (1774) 1 Eng. Rep. 837 (H.L.), 2 Brown's Pari. Cases 129 (rejecting perpetual common law copyright in favor of an exclusively statutory regime).
339. Unlike its predecessors, the 1976 Act protected both published and unpublished works, bringing an end to the bifurcated system of state and federal protections. See Ralph S. Brown Jr., Unification: A Cheerful Requiem for Common Law Copyright, 24 UCLA L REV. 1070, 1070 ( 1977) (noting that under the 1976 Act, the "dual system that has persisted since the beginning of the republic gives way to a unified national copyright"). The 1976 Act continues to countenance state law protection for sound recordings created prior to 1972. 17 U.S.C. § 301(c).
340. See Liu, supra note 19, at 1299-1300.
341. The 1976 Act limits protection to "original works of authorship." 17 U.S.C. § 102(a). But Congress left originality "purposely ... undefined ... to incorporate without change the standard of originality established by the courts under the present [1909] copyright statute." H.R. REP. NO. 94-1476, at 51 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5664.
342. S. REP. NO. 94-473, at 50 (1975).
343. In the context of joint authorship, for example, courts have held that an author must contribute expression to a protected work. See, e.g., Childress v. Taylor, 945 F.2d 500, 507 (2d Cir. 1991). Childress rejected Nimmer's contention that the contribution of unprotectable elements, such as ideas, is sufficient to establish joint authorship.
344. See NIMMER, supra note 16, § 6.07.
345. The 1976 Act offers no definition of infringement. Instead, section 501 deems one who violates any of the exclusive rights defined in section 106 an infringer. See 17 U.S.C. § 501. Nor does the Act instruct courts as to the amount or type of copying that violates the reproduction right. Indeed, "[n]o copyright statute, going back to the 1710 English Statute of Anne, has ever defined the degree or type of reproduction that will give rise to infringement." 3 PATRY, supra note 16, § 9:64. The substantial similarity standard, the most prevalent formulation of the test for infringement, developed entirely through common law evolution.
346. Aside from the exceedingly thin reed offered by the phrase "to authorize, " the Copyright Act lacks any explicit recognition of secondary liability for infringement. See 17 U.S.C. § 106 (providing copyright holders with "exclusive rights to do and to authorize" the enumerated acts). Despite this statutory silence, the common law of copyright has developed powerful and nuanced doctrines of secondary liability. Vicarious liability, an outgrowth of respondeat superior, applies when a defendant "has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities." A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1022 (9th Cir. 2001) (quoting Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 262 (9th Cir. 1996)). Contributory liability "originates in tort law and stems from the notion that one who directly contributes to another's infringement should be held accountable." Fonovisa, 76 F3d at 264- In Sony, the U.S. Supreme Court established the staple article doctrine, which limits contributory liability when a product is capable of substantial noninfringing use. Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 442 (1984). Most recently, the Court limited the practical effect of Sony by reinvigorating secondary liability premised on intentional inducement of infringement.
347. See Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 914 (2005).
348. 17 U.S.C. § 101 (defining "work made for hire").
349. Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 740-41 (1989) (holding that "employee" and "scope of employment" as used in the "work made for hire" definition "should be understood in light of the general common law of agency").
350. See Shyamkrishna Balganesh, Debunking Blackstonian Copyright, 118 YALE L.J. 1126, 1167-68(2009).
351. See, e.g., 17 U.S.C. §§ 114-15. Indeed, these and other key provisions of the Copyright Act are effectively private agreements.
352. See JESSICA LLTMAN, DIGITAL COPYRIGHT 36-39 (2001 ).
353. 1 patry, supra note 16, § 2:1 (describing the post-1995 amendments to the Copyright Act as "in form if not content[, ] private industry standards agreements dressed up in legislative garb").
354. United States v. Loew's, Inc., 371 U.S. 38 (1962) (affirming lower court decision that block-booking violated section 1 of the Sherman Act).
355. United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948) (holding that block-booking, the conditioning of the sale or license of one copyrighted work on the sale or license of another work, unlawfully enlarged the scope of individual copyrights).
356. Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488, 493 (1942) (holding that the use of a patent to restrain competition with the sale of an unpatented product constitutes misuse).
357. Lasercomb Am., Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990) (recognizing misuse as a defense to copyright infringement).
358. Lasercomb, 911 F.2d at 979 n.22. The defense applies even if the defendant was not itself subject to plaintiffs misuse. Id. at 979.
359. See, e.g., qad. Inc. v. ALN Assocs., Inc., 770 F. Supp. 1261, 1267 (N.D. 111. 1991) (holding that the failure to disclose a work as a derivative constituted misuse), affd, 974 F.2d 834 (7th Cir. 1992).
360. For a thorough history of the development of the misuse doctrine, see Brett Frischmann & Dan Moylan, The Evolving Common Law Doctrine of Copyright Misuse: A Unified Theory and Its Application to Software, 15 BERKELEY TECH. L.J. 865 (2000).
361. 9 F. Cas. 342, 348 (C.C.D. Mass. 1841) (stating an early formulation of the fair use standard).
362. See Pamela Samuelson, Unbundling Fair Uses, 77 FORDHAM L. REV. 2537 (2009).
363. See 17 U.S.C. § 107(2006).
364. See, e.g., Harper & Row Publishers v. Nation Enters., 471 U.S. 539, 547 (1985) (describing section 107 as "codiffying] the traditional privilege of other authors to make 'fair use' of an earlier writer's work").
365. Ty, Inc. v. Publ'ns Int'l Ltd., 292 F.3d 512, 517 (7th Cir. 2002) ("The defense of fair use, originally judge-made, now codified, plays an essential role in copyright law.").
366. Suntrust Bank v. Houghton Mifflin Co., 268 F.3d 1257, 1264 (11th Cir. 2001) ("Until codification of the fair-use doctrine in the 1976 Act, fair use was a judge-made right.").
367. But see Triangle Publ'ns v. Knight-Ridder Newspapers, 626 F.2d 1171, 1174 (5th Cir. 1980) ("In codifying the concept of fair use, Congress made clear that it in no way intended to depart from Court-created principles or to short-circuit further judicial development.").
368. H.R. Rep. no. 94-1476, at 66 (1976), reprinted in 1976 u.S.C.C.a.n. 5659, 5680. Congress insisted that "the courts must be free to adapt the doctrine to particular situations on a case-by-case basis. ".
369. Id.
370. See 4 PATRY, supra note 16, § 10:8 (noting that "Congress was merely recognizing, not codifying, a common-law doctrine" in section 107).
371. See United States v. Atherton, 561 F.2d 747, 750 (9th Cir. 1977) (noting that the first sale doctrine "has been judicially read into the statute from a judicial gloss drawn on 17 U.S.C. § 27").
372. See Chafee, supra note 103, at 981-82.
373. Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 350 (1908) (describing the Court's task as "purely a question of statutory construction"). The line separating the development of common law rules and statutory interpretation is not a clear one.
374. See Louise Weinberg, Federal Common Law, 83 NW. U. L. Rev. 805, 807 (1989) ("[T]here is no useful theoretical dividing line that would let us say with confidence, 'On this side we have the common law, and on that we have statutory interpretation.'").
375. Craig Green, Repressing Erie's Myth, 96 CALIF. L. REV. 595, 619 (2008) ("[0]ne could stare oneself blind trying to separate common law from statutory or constitutional interpretation, remedial law, and other 'non-common-law' judicial decision-making.").
376. Copyright Act of 1891, §4952, 26 Stat. 1107(1891).
377. See supra Part II.B.
378. See Harper & Row Publishers v. Nation Enters., 471 U.S. 539, 595 n.19 (1985) (Brennan, J., dissenting) ("The broad language adopting the common-law approach to fair use is best understood as an endorsement of the essential fact-specificity and case-by-case methodology of the common law of fair use.").
379. This common law approach can still be seen today as courts struggle to apply section 109. See Quality King Distribs. v. L'anza Research Int'l, 523 U.S. 135, 152 (1998) ("An ordinary interpretation of the statement that a person is entitled 'to sell or otherwise dispose of the possession' of an item surely includes the right to ship it to another person in another country.").
380. Parfums Givenchy, Inc. v. Drug Emporium, Inc., 38 F.3d 477, 482 n.8 (9th Cir. 1994) (recognizing a judicially created exception to the Ninth Circuit's limitation of the first sale doctrine to works made in the United States if an authorized first sale occurs in the United States).
381. See Jay Dratler Jr., Common-Sense (Federal) Common Law Adrift m a Statutory Sea, or Why Grokster Was a Unanimous Decision, 22 SANTA CLARA COMPUTER & HIGH TECH. L.J. 413, 419 (2006) ("When Congress is mute or unintelligible on an important point in an otherwise comprehensive statutory scheme, it is up to the courts to fill in the gaps. Doing so is neither judicial legislation nor judicial activism. Rather, it is an exercise in developing federal common law, within the interstices of federal statutes, universally recognized as legitimate, notwithstanding Erie.").
382. Peter Westen & Jeffrey S. Lehman, Is There Life for Erie After the Death of Diversity ?, 78 MICH. L. REV. 311, 331-32 (1980) ("When a court in this country acts in a common law capacity, it performs precisely the same function as when it interprets a statute: It legislates 'interstitially' by 'filling in the gaps left by the legislature, ' fully recognizing that the legislature 'can by the ordinary legislative process correct results if it does not approve.'").
383. (footnotes omitted) (quoting John Hart Ely, The Supreme Court, 1977 Term-Foreword: On Discovering Fundamental Values, 92 HARV. L. Rev. 5, 50 (1978)).
384. H.R. REP. no. 60-2222, at 19 (1909), reprinted in E. FULTON BRYLAWSKI & ABE GOLDMAN, 6 LEGISLATIVE HISTORY OF THE 1909 COPYRIGHT ACT (1976).
385. See supra notes 130-133.
386. H.R. REP. NO. 94-1476, at 79 ( 1976), reprinted m 1976 U.S.C.C.A.N. 5659, 5693.
387. see also id. at 81 (noting that section 109(b), now section 109(c), was intended to "preserve the traditional privilege of the owner of a copy to display it directly").
388. Quality King, 523 U.S. at 152 ("There is no reason to assume that Congress intended either § 109(a) or the earlier codifications of the doctrine to limit its broad scope."). When Congress enacted section 117, applying the exhaustion principle to computer programs, it did so without any statement of its legislative intent.
389. See H.R. REP. NO. 96-1307 (1980), reprinted m 1980 U.S.C.C.A.N. 6460.
390. Quality King, 523 U.S. at 152.
391. Whether Congress or the courts are better suited institutionally for addressing the issue of digital exhaustion is also a point of consideration. While a full discussion is beyond the scope of this Article, it is worth noting that there have been no major revisions to Title 17 since 1998, with copyright legislation becoming increasingly difficult to pass. Thus, in addition to the benefit of flexibility offered by an evolutionary case-by-case approach, courts offer the advantages of deciding fair use issues only in the factual context of an actual case or controversy and doing so in a comparatively timely manner. This has been the case for most of modern fair use law as well. See Samuelson, supra note 218.
392. Bloomer v. McQuewan, 55 U.S. (14 How.) 539, 549 (1852).
393. Adams v. Burke, 84 U.S. (17 Wall.) 453, 455 (1873).
394. see hovenkamp et al., IP and Antitrust: An analysis of Antitrust Principles Applied to Intellectual Property Law 33-20 (2d ed. 2010) (identifying Adams as the source of the "'first sale' or exhaustion doctrine").
395. See Adams, 84 U.S. (17 Wall.) at 456.
396. See Keeler v. Standard Folding-Bed Co., 157 U.S. 659, 666 (1895) ("[0]ne who buys patented articles of manufacture from one authorized to sell them becomes possessed of an absolute property in such articles, unrestricted in time or place.").
397. See Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 518 (1917) (rejecting a patent infringement claim premised on the patent owner's requirement that unpatented products used with the patented equipment be leased solely from the patent owner).
398. 224 U.S. 1, 19, 24-25(1912).
399. See Quanta Computer, Inc. v. LG Elees., Inc., 553 U.S. 617, 626 (2008) (citing Motion Picture Patents, 243 U.S. at 518).
400. Id.
401. See Van Houweling, supra note 19, at 913-14 (noting that just one year after A.B. Dick, the Court distinguished it and reaffirmed Adorns v. Burke, 84 U.S. (17 Wall.) 453 (1873), and its progeny as the proper line of reasoning for exhaustion cases and later confirmed the rule in Straus v. Victor Talking Machine Co., 243 U.S. 490 (1917), and Motion Picture Patents, 243 U.S. 502).
402. Glen O. Robinson, Personal Property Servitudes, 71 U. CHI. L. REV. 1449, 1465 (2004) ("Following Adams, the Court regularly repeated the [patent exhaustion] rule but with no useful elaboration of the principle underlying it beyond the simple assertion that the patentee is deemed to have received his full patent reward from the sale price of the patented good.").
403. 220 U.S. 373, 404-05 (1911).
404. 243 U.S. at 517.
405. 272 U.S. 476, 489-90 (1926).
406. Van Houweling, supra note 19, at 919-20.
407. 553 U.S. 617 (2008).
408. Id.
409. Id. at 630 (quoting Adams v. Burke, 84 U.S. (17 Wall.) 453, 457 (1873)).
410. Id.
411. Quanta also addressed concerns over skillful lawyers using artful drafting to end run around exhaustion. Id. ("By characterizing their claims as method instead of apparatus claims, or including a method claim for the machine's patented method of performing its task, a patent drafter could shield practically any patented item from exhaustion."). Since Quanta, at least one court has followed the Supreme Court's lead and held that postsale conditions, famously upheld by the Federal Circuit Court of Appeals in Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992), are now exhausted as well.
412. See Static Control Components v. Lexmark Int'l, Inc., 615 F. Supp. 2d 575, 585-86 (E.D. Ky. 2009) (holding that Quanta overruled Mallinckrodt sub silentio).
413. See supra Part II.B.
414. See 17 U.S.C. § 109(a) (2006).
415. See id. § 109(c).
416. See id. §117.
417. Section 117 also provides copy owners with the right to create archival copies since programs are susceptible to loss. CONTU, supra note 186, at 13.
418. Id.
419. See 17 U.S.C. § 117(b).
420. See Cate, supra note 200, at 1449-50.
421. The unthinking classification of RAM instantiations as copies, however, remains a flawed analytical step. See Perzanowski, supra note 58, at 1075-80.
422. DMCA SECTION 104 REPORT, supra note 53, at xviii, xix.
423. STAFF OF H. COMM. ON THE JUDICIARY, 105TH CONG., SECTION-BY-SECTION ANALYSIS OF H.R. 2281 AS PASSED BY H.R. ON AUG. 4, 1998, at 24 (Comm. Print 1998).
424. 17 U.S.C. §101.
425. See MARTIN DAVIS, THE UNIVERSAL COMPUTER: THE ROAD FROM LEIBNIZ TO TURING 164-65 (2000) (describing the distinction between program and data as an illusion).
426. Allen Newell, The Models Are Broken, The Models Are Broken!, 47 U. PITT. L. REV. 1023, 1033 (1986) ("fflhe boundary between data and program-that is, what is data and what is procedure-is very fluid.").
427. The best explanation for copyright law's differing treatment of digital media and computer programs is one rooted in historical accident and the institutional limitations of the legislative process. When CONTU drafted section 117 and Congress enacted it, both bodies were focused on the newly clarified status of computer programs as protectable subject matter. In the late 1970s, few anticipated the pervasiveness of digital media that defines today's copyright marketplace. Neither CONTU nor Congress rejected the notion of robust exhaustion rules for digital media; they simply did not consider it.
428. Courts have less room to develop common law exhaustion rules for computer programs since section 117 addresses them explicitly and in great detail. While common law exhaustion rules can supplement statutory rules, they cannot be inconsistent with the terms of the Copyright Act.
429. As noted in the Section 104 Report, there is great fear among copyright owners that a digital first sale rule would lead to massive infringement of their works because there would be no easy method of distinguishing between legal first sale copies and illegal infringing copies. See DCMA SECTION 104 REPORT, supra note 53. Our approach attempts to provide some balance to this concern by framing the issue of digital exhaustion as an equitable one in which courts could, based on the facts of a particular case, determine how to balance the interests of both copy and copyright owners. Moreover, given the continued extension of copyright's term, the elimination of copyright formalities, and a myriad of low-cost, revenue-generating opportunities that digital distribution affords copyright owners, it would seem only fair to provide an equally robust expansion of exhaustion to maintain copyright's balance in this arena.
430. See Carver, supra note 54, at 29-30.
431. See Reese, supra note 19, at 612.
432. A similar approach could also assist libraries to cleanly enable the lending of digital media.
433. See DMCA SECTION 104 REPORT, supra note 53, at 47-48. Note that this worry is nothing new, as consumers have always been able to copy their LPs, cassettes, or CDs before reselling them on the secondary market.
434. See id. at 46.
435. see also Master's Program Final Project Abstract, Univ. of Cal. Berkeley Sch. of Info., Trifecta: Creating P2P Software That Enables Fair Use (2004), http://www.ischool.berkeley.edu/programs/masters/projects/2004/trifecta.
436. See Announcement, Coming Soon for Kindle, AMAZON.COM KINDLE CMTY. FORUM (Oct. 22, 2010, 8:33 AM), http://www.amazon.conVtag/kindle/forum/ref=cm-cd-cg- ef-tft-tp.'-encoding=UTF8&cdForum=FxlD7SY3BVSESG&cdThread= TxlG2UI09PJ050V&displayType=tagsDetail (noting that Amazon plans to add the ability to loan e-books purchased on a Kindle to other Kindle users).
437. See supra Part II.B.
438. In the e-book market, private efforts have attempted to ensure some measure of interoperability. See Caolo, supra note 50.
439. 433F.Supp.2d 1236(D.Colo. 2006).
440. Id. at 1238.
441. Id. at 1239.
442. id. at 1239, 1242.
443. Id. at 1241-42.
444. Id. at 1242.
445. One could also imagine exhaustion helping to establish other innovative businesses and services, such as shops that would offer to load all of one's CD collection onto a digital stereo component. See Stephen H. Wildstrom, Bring Your CDs Into the iPod Age, BUS. WK., May 23, 2005, http://www.businessweek.com/ magazine/content/052l/b3934036-mz006.htm.
446. 17 U.S.C.5 117(b) (2006).
447. See id. § 117(a).
448. CONTU, supra note 186, at 13.
449. The Slingbox, Vulkano, and Orb are three examples.
450. Note that some courts have strongly hinted that space shifting should be considered a fair use under section 107. See In re Aimster Copyright Litig., 334 F.3d 643, 652-53 (7th Cir. 2003).
451. While we are not against such a finding, we feel it might be more appropriate to approach such limitations under exhaustion, especially when the tie to copy ownership is so clear. Cf. Robin A. Moore, Note, Fair Use and Innovation Policy, 82 N.Y.U. L. REV. 944, 968 (2007).
452. von Lohmann, supra note 36.
453. 17 U.S.C. § 101. But see Cartoon Network LP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008) (holding that the playback of recorded television programs at the request of cable subscribers was not a performance "to the public").
454. See Jessica Litman, Lawful Personal Use, 85 TEX. L. REV. 1871 (2007).
455. von Lohmann, supra note 36.
456. See Liu, supra note 19, at 1268-71 (noting the limitations of fair use and implied and express license defenses for digital copying).
457. Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417 (1984) (holding that the recording of over-the-air television broadcasts for time-shifting purposes is a fair use).
458. Importantly, the exhaustion principle we describe does not directly contribute to the resolution of the license-versus-sale debate. See supra Part I.C. Exhaustion, like first sale, is triggered by the sale or other disposition of copy ownership. The exhaustion principle broadens the user privileges that flow from a sale, but it does not, in itself, inform the pressing question of what sorts of transactions are properly classified as sales. Courts have demonstrated deep division and more than occasional confusion over this question.
459. See Carver, supra note 54. The Ninth Circuit's recent decision in Vemor v. Autodesk has done little to clarify the extent to which copyright holders can attach restrictions on use to transactions that to the average consumer appear to be nothing more than standard sales of off-the-shelf products.
460. See Vemor v. Autodesk, Inc., 621 F.3d 1102 (9th Cir. 2010).
461. Although Apple famously stripped DRM from music sold over its iTunes store, it continues to wrap movies, e-books, and applications in DRM, as do most other online retailers. While ostensibly intended to limit infringement, DRM technology suppresses competition between technology platforms by facilitating the sort of consumer lock-in that the first sale doctrine has traditionally helped us avoid. See Aaron K. Perzanowski, Rethinking Anúcircunwention's Interoperability Policy, 42 U.C. Davis L. Rev. 1549, 1613 (2009).
462. Compare Universal City Studios, Inc. v. Reimerdes, 111 F. Supp. 2d 294 (S.D.N.Y. 2000) (rejecting the possibility of a fair use defense to a claim of circumvention), with Chamberlain Group, Inc. v. Skylink Techs. Inc., 381 F.3d 1178 (Fed. Cir. 2004) (requiring a causal nexus between circumvention and infringement). Scholarly opinion has likewise been divided on this point. Some have argued that the text of section 1201 embraces the fair use defense.
463. See Jane C. Ginsburg, Copyright Use and Excuse on the Internet, 24 COLUM.-VLA J.L. & ARTS 1, 8-9 (2000).
464. Pamela Samuelson, Intellectual Property and the Digital Economy: Why the Anti-Circumvention Regulations Need to Be Revised, 14 BERKELEY TECH. L.J. 519, 538-40 (1999). Others maintain that fair use offers no statutory defense under section 1201.
465. See David Nimmer, Appreciating Legislative History: The Sweet and Sour Spots of the DMCA's Commentary, 23 CARDOZO L. REV. 909, 979 (2002) ("Section 1201... leaves no room within the statutory orbit for a general Congressionally-sanctioned fair use defense.").
466. In some sense, this rulemaking proceeding functions as a quasicommon law adjudication. Given limited statutory guidance, the Copyright Office is left to devise its own standards for defining and evaluating classes of works and whether the uses of those works are noninfringing. Those standards have evolved considerably over time. See Aaron K. Perzanowski, Evolving Standards and the Future of the DMCA Anticircumvention Rulemaking, J. INTERNET L., Apr. 2007, at 1. The most recent of these rulemakings was particularly focused on issues of exhaustion and platform competition, adopting exemptions that allow owners of mobile phones to unlock and jailbreak their devices. U.S. COPYRIGHT OFHCE, RECOMMENDATION OF THE REGISTER OF COPYRIGHTS IN RM 2008-8 (2010), available at http://www.copyright.gov/1201/2010/initialed-registers-recommendation-june-1l- 2010.pdf.
467. 17 U.S.C. § 1201(c) (2006).
468. Universal City Studios, Inc. v. Reimerdes, 82 F. Supp. 2d 211, 219 (S.D.N.Y. 2000) ("If Congress had meant the fair use defense to apply to [section 1201] actions, it would have said so.").
469. 381 F.3d 1178.
470. Id.
471. Id. at 1202.
472. Id. at 1204.
473. Storage Tech. Corp. v. Custom Hardware Eng'g & Consulting, Inc., 421 F.3d 1307, 1319 (Fed. Cir. 2005). There, the court applied the exception permitting the creation of copies of computer programs for the purposes of maintenance and repair of computer equipment.
474. See 17 U.S.C. § 117(c) (2006).
475. MGE UPS Sys. Inc. v. GE Consumer & Indus., 612 F.3d 760 (5th Cir. 2010). The Fifth Circuit subsequently withdrew its opinion in MGE, relying instead on two grounds: (1) that no GE employee engaged in an act of circumvention and (2) that the mere use of a work-after a third party circumvents its technological protection measures (TPM)-does not violate section 1201. MGE UPS Sys. Inc. v. GE Consumer & Indus., 622 F.3d 361 (5th Cir. 2010). Despite the court's decision to focus its holding on a narrow factual issue, its extension of the ChamberlainJStorage Technology rationale remains persuasive.
476. The Sixth Circuit has also interpreted section 1201 narrowly. See Lexmark Int'l v. Static Control Components, 387 F3d 522 (6th Cir. 2004) (refusing to apply section 1201 when a protection measure restricted one means of accessing a work but left others available).
477. Congress did not intend section 1201 to enable copyright holders to limit postsale access to or use of lawfully acquired copies of works. H.R. REP. NO. 105-551, pt. 1, at 18 (1998) ("Paragraph (a)(1) does not apply to the subsequent actions of a person once he or she has obtained authorized access to a copy of a work... even if such actions involve circumvention...."). Nevertheless, copyright holders and TPM providers continue to rely on persistent access controls to restrict postsale use. And courts have enforced those restrictions despite the legislative history and continued criticism from commentators.
478. See Perzanowski, supra note 294, at 1613.