Towards an Electronic Devices Flea Market in the Cloud? YODA says…YES!

U.S. Representative Blake Farenthold (R-TX) announced last week that he has introduced a bill in Congress, the You Own Devices Act (YODA), which would amend Section 109 of the Copyright Act by providing that the first sale doctrine applies to any computer program enabling a machine or another product to operate.  

If YODA is enacted, owners of electronic devices would no longer be barred from selling them by the companies which manufactured the devices, as they claim that the software needed to operate the device was not sold, but licensed to the first buyer. Companies are doing so as they claim copyright ownership in the software.

I Will Fight For Your Right
to Resell Your Electronic Device

However, under §109(a) of the Copyright Act, “the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.” This is the so-called first sale doctrine, which allow consumers to resell the work they lawfully bought, or rather, the material object in which the copyrighted work is embodied, whether it be a book, a LP (boy, am I THAT old?) or a CD, even though §103(3) of the Copyright Act gives copyright owners the exclusive rights to distribute copies or phonorecords of copyrighted work.

Under YODA, the owner of an electronic device which needs software to operate [are there any devices left which do not need software to operate?] would be entitled “to transfer an authorized copy of the computer program, or the right to obtain such copy, when the owner sells, leases, or otherwise transfers the machine or other product to another person.” This could not be waived by agreement, but the owner of a machine could not retain an unauthorized copy of the computer program after transferring the machine or the product and the copy of the computer program to another person.

YODA would thus allow consumers to resell their digital devices, but also their digital goods, at least if they sell their electronic device, and if they do not retain a copy of the goods.

At the moment, digital goods are out of the scope of the first sale doctrine. The Southern District of New York put a screeching halt last year to the digital music reselling industry, by holding in Capitol Records v. ReDigi that the first sale doctrine does not authorize the lawful owner of a digital music file to resell it, even if only one file exists before or after the transfer.

In that case, ReDigi marketed itself as "the world's first and only online marketplace for digital used music.”  ReDigi's users had first to download its "Media Manager” program, which analyzed users’ computers and built a list of digital music files eligible for sale. Only music bought on iTunes or from another ReDigi user was eligible, while music downloaded from a CD or other file-sharing website was not.  After the list was built, users could upload any of the eligible files to ReDigi's "Cloud Locker" service and were thus no longer available on user’s computers, but users could still stream the music. Media Manager continued to run on users’ computers to check if music had been retained after being sold or uploaded for sale. If any was fund, Media Manager prompted the user to delete the file, and ReDigi suspended the accounts of users who refused to comply.

For the SDNY, this was copyright infringement, not fair use, and such practice was not protected by the first sale defense either. The Court reasoned that, because a digital music file sold on ReDigi  violated the exclusive rights of the copyright owner, it was thus an unlawful reproduction, and, as such, was out of the scope of § 109(a) as it was not "lawfully made under that title."

If enacted, YODA could lead the way to a law expressively granting U.S. consumers the right to resell their digital goods. That, in turn, would create an electronic marketplace for digital goods, such as this one patented last year by Amazon, a flea market in the cloud.