In an unusual move, the U.S. House Judiciary Subcommittee on the Courts, IP and the Internet took a field trip to the United States District Court for the Southern District of New York Monday to hold a copyright hearing. Perhaps they wanted a change of pace, or perhaps the field trip was suggested by ranking member Rep. Jerrold Nadler (who represents the 10th district of New York.) In any case, the subject of the hearing was one near and dear to libraries—first sale, that exception to copyright that allows that once a lawful copy of a work is purchased, the owner of that copy can distribute or dispose of that copy. As we know, libraries would be unable to lend books or other library resources without the first sale exception.
The subcommittee was interested in three issues. One, should the copyright law be changed to address the Supreme Court ruling in Kirtsaeng v. Wiley? Two, should the law be amended to reflect “digital first sale?” The third topic was ReDigi, a business model that tested a secondary market for digital music, and it turned out to be of most interest to the subcommittee. In 2013, Capital Records, Inc. successfully sued ReDigi for copyright infringement, although ReDigi plans to appeal.
Stephen M. Smith, president and CEO of John Wiley & Sons, Inc. spoke about the difficulties publishers now faced in light of the Kirtsaeng decision. When the Supreme Court ruled that regardless of where textbooks were made and sold, if lawfully purchased, first sale would apply to those textbooks once imported to the US. For publishers, this decision could impact their ability to price discriminate—that is, sell book editions at different prices overseas. Their concern is that a buyer could purchase books overseas at a lower price, “reimport” them to the US, and resell them at a profit here while still undercutting the publishers’ U.S. retail price for the reimported book.
Greg Cram, associate director of copyright and information policy at New York Public Library, explained the importance of Kirtsaeng to libraries. His testimony was endorsed by the Library Copyright Alliance (LCA), of which the American Library Association is a member. He said that libraries should be able circulate any books that they purchase, even those published or manufactured overseas, with the assurance that they are not infringing copyright law. The subcommittee seemingly had little interest in addressing Kirtsaeng, asking only one question on the topic. One can optimistically assume that Congress will not attempt to change the copyright law to address the Kirtsaeng decision. Such an effort, however, is not out of the question.
Cram also described licensing digital resources, including ebooks, as a major shift from the traditional model where libraries buy physical copies of books and other materials, which they then lawfully loan to users under the first sale doctrine. He explained that libraries, including New York Public Library, were working collaboratively with publishers to resolve digital transition issues, and spoke specifically about ebook challenges. He said that while ebook business models are evolving, problems persist. For example: libraries can only provide access to ebooks if they continue to pay license fees; that license terms are often problematic and include arbitrary terms; and that the cost of ebooks is significantly higher than the cost of print books. Cram also noted that managing access to ebooks is unpredictable, because license renewal terms varied from year to year. The difficulty of preserving ebooks and the threat of losing continued access to the cultural record they contain was another concern emphasized in his testimony.
In conclusion, Cram asked that Congress closely monitor the evolving digital marketplace to ensure that it is sufficiently competitive to provide widespread public access to works. In addition, he said, Congress may need to consider whether to prohibit the enforcement of contractual limitations that circumvent copyright exceptions, like the first sale, that the library and the public rely on.
The bulk of the hearing inquiry was devoted to ReDigi, a nascent business that tested the legality of re-selling digital music under the first sale doctrine. As noted above, Capitol Records, Inc. successfully sued ReDigi for copyright infringement and ReDigi plans to appeal.
The subcommittee was not sympathetic to the idea that digital files licensed to consumers were covered by the first sale doctrine, noting that first sale only applies to the distribution right, not the reproduction right. Even though ReDigi’s model ensured that the distribution of a digital music file could be achieved without making a reproduction, the idea just didn’t sound right to the subcommittee. Concerns over piracy were raised even though piracy is essentially precluded by ReDigi’s technology. Instead, the subcommittee’s (and publishers’) concern is the potential creation of a secondary market in which rights holders are not compensated.
We can look forward to more subcommittee hearings as members of the House continue their broad “review” of copyright law in light of the digital environment, as well as to numerous roundtables conducted by both the USPTO and the U.S. Copyright Office. Only time will tell if Congress and the two government agencies reach the same conclusions about copyright modernization and whether legislation to change current law will be introduced.
Later in the day, I participated in an “after hearing” panel at NYU law school coordinated by Parker Higgins from the Electronic Frontier Foundation. Jason Schultz who recently accepted a position at NYU law, and Sherwin Siy, Vice President, Legal Affairs at Public Knowledge (PK), also spoke. Sherwin testified at the hearing and urged the subcommittee to consider consumer uncertainty when purchasing digital content. Unlikely to read “click on” license text associated with digital content, consumers may not realize that they do not own the content they purchase as they would with analog goods. He also suggested changes to Section 117, expanding aspects of the computer software exception to all digital works.
Audience members, primarily NYU law students agreed with Jason that they expected the House subcommittee to be more knowledgeable about digital technologies than the numerous questions asked of John Ossenmacher, CEO of ReDigi, implied. We also discussed at some length ebooks, and the perception of some that publishers missed the boat on how to transition to the digital environment. Of course, I talked about libraries and the importance of first sale to a group favorable to libraries and appreciative of our copyright advocacy in the public interest.
The technical, business, and political environments in which Congress and other federal agencies are assessing key parts of copyright law are complex and can be very fast-changing. Librarians and others who care deeply about providing the public with robust access to information in the digital age are encouraged to keep close watch on District Dispatch for more on these vital issues.