From Discs to Downloads: What it means for you and for copyright

“I can’t wait to get home and download [insert the newest hottest game here]!”  This phrase has become more and more common in the gaming market.  On August 21, EA Executive Vice President Patrick Soderlund told Games Industry International that gaming companies need to adapt to the new reality of the downloading market and that he believed physical retail will be gone within 10 years.  While there are certainly advantages to downloading a game, including instant access (usually), cheaper prices (presumably), and easier patches and access to DLC (ideally), moving away from discs to downloads can also severely limit the rights of all gamers, from table top players to video game enthusiasts, in secondary markets.

Licensed (legally) under a Creative Commons License from xkcd.com

The Law

First things first.  Let’s get the legal stuff out of the way.

Under American copyright law, the copyright holder has the exclusive right

to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending

17 USC §106(3) (the distribution right).  The copyright holder also has the exclusive right to reproduce the work (the reproduction right).

But what about libraries?  Tag sales?  Do you violate the copyright law every time you loan someone a book, sell your old Playstation games, or buy someone a DVD for their birthday?  Is that little old lady down the street who buys 50 cent copies of Agatha Christie novels at a used bookstore and then donates them to her local school library a hardened criminal?

No, because the first-sale doctrine provides a limitation to the copyright holder’s distribution right, and allows (with some exceptions) the owner of a copyrighted work to distribute that work (but not reproduce it) as he or she sees fit without infringing on the copyright holder’s distribution right.

Notwithstanding the provisions of section 106(3) [block quote above], 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.

 17 USC §109.  Breaking it down, in order to have access to the first-sale right, the copy of the work must have been legally made and distributed by the copyright holder (no claiming first-sale for pirated copies, even if you don’t know it’s pirated), the owner is the legal owner (and not a licensor, as disussed below), and the distribution must only implicate the distribution right, not the reproduction right or another right (you can sell, lease, rent, gift, or donate, but you can’t copy and sell, lease, rent, gift or donate).

The Law in Action

So now that we’ve gotten the legal background squared away, let’s take a step back and think about what this means for gaming.  When it comes to things like gaming books (for example D&D Player’s Guide), if someone has a legal copy (that is, one that was created and distributed by Wizards of the Coast), that person can sell, rent, or lease that copy to another purchaser, or give it away as a gift (in other words, go ahead and sell it on eBay if you want).  In fact, this chain can continue on.  Gamer A can buy the D&D book legally from WOTC, and then give it to Gamer B.  Gamer B can then use it for a few years and then sell it to Gamer C, who in turn, loans it to Gamer D to run his game.   Assuming that no reproductions are made, the first-sale doctrine allows each of these transactions.

This same series of transactions can easily apply to a video game in disc or cartridge format.  Gamer A buys Super Mario Brothers from Nintendo (legally) and gives it to Gamer B, who then sells it to Gamer C who loans it to Gamer D.  All perfectly legal.  Whether such sales are done in person, through eBay or over Craigslist doesn’t matter.

One more real world example:  GameStop.  The ability to buy used games or trade in used games are all based on application of the first-sale doctrine.

First-Sale, Digital Products, and Reproduction Issues

But what happens with digital objects?  Gamer A legally downloads a copy of Vampire: The Masquerade from Drive Thru RPG and decides he wants to give the copy to Gamer B for her birthday.  Gamer A then emails the file to Gamer B.  Does the first-sale doctrine still apply?  We have a legal copy and a legitimate owner.  But the very act of emailing a copy of the file to Gamer B infringes upon White Wolf’s reproduction right…and so first-sale doesn’t apply!  Even if Gamer A had immediately erased his copy, he’s still violated the reproduction right.

Meanwhile, Gamer C downloads a copy of Portal from Steam.  After beating the game in 3 days, Gamer C wants to sell her copy to Gamer D.  How does she do this without infringing upon the reproduction rights of Valve? (Note, there may also be an ownership issue as discussed below).

This isn’t just a problem for the gamer who wishes to sell or gift a product she no longer wants.  The lack of transferability and the secondary market also harms businesses.  While there are many gamers who will pay a premium price, others prefer to wait until the price drops (Note, for example, “Greatest Hits” titles that originally retailed around $40-$50 and now sell for around $20).  Gamers might be reluctant to spring early if they can’t recoup some investment by trading the game in at GameStop.  

Additionally, while it’s easy to share a disc or a cartridge, the inability (or illegality) of sharing a downloaded game limits access to new potential customers.  For example, Gamer A loans Gamer B his copy of Final Fantasy 7.   Gamer B decides to give the game a shot, although she doesn’t usually play JRPGs, and she loves it so much that not only does she buy her own copy of Final Fantasy 7, but she then becomes devoted to the entire series, buying each successive game as they come out.  However, if Gamer A isn’t able to loan Gamer B his copy (because first-sale doesn’t apply) then Square has just lost a potential customer.

And this isn’t just limited to gaming:  While it’s easy to see how first-sale would allow someone to sell or gift their copy of a CD (note, under the Copyright law, leasing of music is much more restricted), should someone be able to sell “pre-owned” music files legally downloaded from the iTunes store?  ReDigi thinks so, although the music industry disagrees, arguing that ReDigi’s pre-owned marketplace for legally purchased iTunes music is really just a clearinghouse for widespread copyright infringement.  However, ReDigi counters that it is possible for first-sale to apply in digital music purchases without implicating the reproduction rights of copyright holders:

Beckerman, in a telephone interview, said ReDigi does everything it can to block the unauthorized duplication of files in the ReDigi marketplace. Beckerman added that ReDigi’s technology cannot stop customers from file sharing or copying iTunes music purchases before they had uploaded them to the service.

“You can’t stop the world from committing copyright infringement,” he said. “But it’s impossible to infringe through ReDigi.”

The US Copyright Office, when examining First-Sale issues in light of the Digital Millenium Copyright Act, noted that the non-tangible nature of digital works means that traditional first-sale doctrine cannot necessarily be applied in the same way

The underlying policy of the first sale doctrine as adopted by the courts was to give effect to the common law rule against restraints on the alienation of tangible property. The tangible nature of a copy is a defining element of the first sale doctrine and critical to its rationale. The digital transmission of a work does not implicate the alienability of a physical artifact. When a work is transmitted, the sender is exercising control over the intangible work through its reproduction rather than common law dominion over an item of tangible personal property. Unlike the physical distribution of digital works on a tangible medium, such as a floppy disk, the transmission of works interferes with the copyright owner’s control over the intangible work and the exclusive right of reproduction. The benefits to further expansion simply do not outweigh the likelihood of increased harm.

 The US Copyright office also expressed its skepticism of valid “forward-and-delete” technology (that is, technology that would provide the closest workaround of the reproduction right issue), as well as noting that digital transmissions have a much greater impact on the market for legitimate works than do tangible works (for example, Napster vs. ripping and burning music CDs).  For gamers, then, a digital copy of an unwanted game then becomes a $50 investment in intangible and untransferrable property.  Is the cost really worth it?

And just to liven things up and make things more complicated, ReDigi has expressed interest in entering (or creating?) the used ebook market as well, potentially giving gamers a way to resell legally downloaded PDF game books.

 First-Sale, Digital Products, and Ownership

Remember how earlier I said there might also be an ownership issue when trying to invoke first-sale rights for digitally downloaded video games?  As noted above, in order for first-sale to apply, the seller must be the legal owner of the work.

Now, take a look at Blizzard’s End User License Agreement for Diablo III.  The very first line:

THIS SOFTWARE IS LICENSED, NOT SOLD.

Continuing on:

Subject to your agreement to and continuing compliance with this License Agreement, Blizzard hereby grants, and you hereby accept, a limited, non-transferable, non-sublicensable, non-exclusive license …

That’s right.  You don’t own your copy of Diablo III, you have a limited license to use it, a license which, it should be noted, severely restricts your ability to gift, donate, sell, or lease your copy to another player.  In other words, even if you somehow could deal with the reproduction issue (presumably with some forward-and-delete technology), you aren’t the legal owner of your digital copy and hence, can’t claim first-sale even if you wanted to.   Instead, you’re bound by the much more restrictive licensing agreement, that may limit things such as reselling, transferring, or loaning.  To add insult to injury, who wants to be told that they game that they bought and paid for isn’t really theirs?  Talk about not living up to expectations, Blizzard…

As a brief aside, and going back to ReDigi, while you certainly own your digital items purchased from iTunes, you may only be a licensee and not the legal owner for digital items purchased from Amazon or Google.

So why does this matter for gaming?  Courts have struggled as to whether an explicit license agreement (such as a EULA, shrinkwrap, or clickwrap) in software could be used to otherwise circumvent the first-sale doctrine.  The Ninth Circuit, for example, has ruled that an explicit software license can limit the first-sale doctrine, but has also ruled in favor of first-sale doctrine holding even in the case of explicit license agreements.  Talk about uncertainty when you want to sell a game you don’t play anymore…

The Court  of Justice of the European Union (CJEU), however, recently ruled that first-sale doctrine applies to software licenses, and that owners may resell or otherwise transfer those licenses, provided that the software would become inoperable on their computer (similar to the forward-and-delete debate regarding the DMCA).  In its press release on the ruling, the CJEU noted:

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

In other words, at least for European gamers, regardless of what Blizzard’s EULA may say, they have the right to resell their downloaded games, provided that in doing so, they are no longer able to play the game (such as, for example, un-registering a copy and transmitting an activation key).  For those of us on the other side of the pond, we just have to wait at least until the ReDigi litigation concludes.

Conclusion

I’ll be the first to admit that downloadable games can help the entire industry grow.  Whether it’s for an independent table top RPG to the latest smart phone craze to high-budget corporate titles, digital downloads are here to stay.  But before you get all excited about the newest DLC, take a moment to think about how, without the first-sale doctrine applying to digital objects, you could have just dropped $50 on non-transferrable (virtual) doorstop.

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One response to “From Discs to Downloads: What it means for you and for copyright”

  1. Laurie says :

    I have given this a fair amount of thought when it comes to digital books and music. I read a lot, even more so now that I have an ereader. Something about the format makes it easier to focus on reading and keep my mind from wandering off the page. I have bought several ebooks, but that gets expensive. Fortunately for me, I like classic literature, so I can go to Project Gutenburg and download classic books for free legally. And I have just obtained a library card so I can get some books from my local library. They don’t have everything I want to read, but they have some things. What I think it all comes down to, at least for the consumer, is perceived value.

    When a book is printed, the publisher has to pay for paper, ink, printing, glue, binding, and shipping. When it’s an ebook, it doesn’t matter if you make a hundred copies or a hundred thousand; the cost should stay relatively similar, and be way less than the cost of printing a physical book. If the consumer is a “book person”, one may assume that person likes to keep their books on shelves to look at and occasionally show off. You can’t do that with an ebook. eBooks are convenient when you want to take 20 books on vacation without packing an extra suitcase, so I suppose there is some perceived value in the convenience. But on the whole, most consumers do not want to pay the same price for an ebook as they do for hardcovers on the day of release because they know it didn’t cost as much to copy a file as it did to print a freaking hardcover of a book. eBooks should cost less than physical books. At the very least, smart publishers should include a download code for the ebook with purchase of each physical book. That way, you have one to put on your shelf, maybe to get the author to sign, and one to take on vacation.

    I have seen the download code method used with vinyl, which isn’t huge in the music industry at large, but which is making a small comeback in the punk world. Often, when you purchase a record on vinyl, it will come with a download code for the mp3 version of the album. This isn’t really necessary with CDs, because most people can easily make mp3s from a CD on their computer. I have yet to see a computer with a record drive.

    When it comes to games, part of the value of having the game on disc is that you have a backup. Downloading a game is fine, if nothing ever happens to your gaming system. If you get the red ring of death, you’d better hope you can retrieve your downloaded games again when you finally get another Xbox. I would imagine you can. I honestly don’t know how that works. Another part of the value is the ability to trade it in somewhere when you’re done with it. That is a known element in the gaming world. You play a game, you finish it, you trade it in at Game Stop for hardly anything. (Unless it’s a weird game that has extraordinary value. For some reason, they pay a lot for my Professor Layton games when I’m done with them.) I would think that should make downloaded games cost less. It also costs less to copy a file than it does to press a disc, print the art, package it, and ship it to a store. Some of those savings should be passed on to the consumer.

    Apparently, I’ve given this a lot of thought. Long story short, digital content could totally be the future, but I think it should be cheaper.

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