Supreme Court case may determine legality of re-selling apps and devices, and even alter the concept of ownership

November 1, 2012
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Do we really own the devices that we buy? Or are we just licensees who cannot re-sell our phones, tablets and computers?

Should you be able to re-sell apps, games, e-books and just about any material that you have bought? We asked this question earlier this year, raising a few points for and against the argument. The doctrine of fair use says you can legally repurpose any content or material for academic or personal use. The doctrine of first sale says you can lend or re-sell copyrighted goods without interference, for as long as you “own” the copy.

But copyright holders are always challenging these principles, saying these negatively affect their businesses. First that comes to mind are the grey-market importations of books aimed at reducing the cost of a university education. Then there’s also the re-sale of content that comes with an e-book reader or any other computing device — which may include smartphones and tablet computers. With the prevalence of digital media, the issue also becomes relevant in light of being able to re-sell apps and content that you have bought.

There is a case currently pending in the U.S. Supreme Court that may eventually determine whether we, as consumers, can legally re-sell these goods. Kirtsaeng vs John Wiley & Sons is currently the highest-stakes intellectual property dispute of the year — even bigger than Apple vs. Samsung — because it can potentially change the notion of ownership in America.

Arguing for first-sale is Thai-born Supap Kirtsaeng, who bankrolled his university education by importing books from Thailand and re-selling these online in the U.S. market, thereby undercutting the local retailers and publishers. John Wiley & Sons took notice, and sued Kirtsaeng for copyright infringement, and has so far won in the lower courts. If the Supreme Court rules for the publisher, it will mean that re-selling of goods will be illegal. No more grey-market books. No more garage sales. No more re-selling of your Kindle Fire with the e-books inside. Planning to sell your DVD collection? You might end up going to jail.

Why this may be important to you

This might also have a significant effect on the online goods marketplaces that have built their business upon downstream commerce, such as eBay, Amazon and the like.

But I think what will affect our primary audience more is the possibility that we may no longer be legally allowed to re-sell our mobile devices. Manufacturers can potentially claim their devices are protected by copyright, and therefore cannot be re-distributed in secondary markets. Omega successfully argued for this, after they claimed that a small engraved brand on their watches is copyrighted material. Omega won their case against Costco, which sold brand new Omega watches cheaper after re-importing these from overseas.

Earlier, the courts ruled that the first-sale principle only applied to products manufactured within the U.S., and therefore all goods manufactured overseas are not covered by the principle. But with many goods manufactured abroad nowadays — including electronics devices — this could mean the first sale principle will no longer apply to such goods.

Can we legally re-sell apps, phones and tablets?

The first arguments were heard by the Supreme Court last Monday, and the focus then was on two things. First is the case for offshore manufacturing. Kirtsaeng’s lawyers argued that upholding the decision for Wiley & Sons will be a strong incentive for manufacturers to offshore their operations, because they will then have better control over secondary markets. Second is the legality of resale or display of a copyrighted item. This will imply that, for instance, a Toyota car sold the U.S. cannot be legally re-sold by the first “owner” without first seeking consent from Toyota itself, or that an artwork cannot be legally displayed by a museum without the author’s or his representatives’ consent.

We expand our argument to cover mobile devices, given that manufacturers can claim their devices contain intellectual property that cannot be redistributed. Our smartphones, tablets media players and computers contain intellectual property within the apps and software, and even the proprietary chipsets and hardware design.

Right now, the first sale principle means you can re-sell these items because you have bought them, except perhaps for any apps or e-books that cannot be sold without first deleting other copies. But with the upcoming Supreme Court ruling, your “purchase” of a device might actually just mean you are only licensed to use the device, but that you don’t actually own the technologies therein, because these are protected by intellectual property rights.

The Supreme Court is trying to be fair with its decision-making process, in particular trying to find a viable middle-ground. We will be watching developments on this case.

Comments

  • candlelarbra5212

    Hopefully the supreme court sees reason and doesn’t indulge the over aggressive profit seeking corporations. There is no reason why this shouldn’t be allowed, if one man can sell a publishers own text books cheaper than them, then doesn’t that say something about the ethical standards of the publishers who’s only objective is to corner students into buying their overpriced books?

    If we end up not being allowed to resell our own property and it is designated that we only have a license than we, as purchases of that license, should be able to resell it, or sell it back to the people who sold it to us in the first place.

    Seriously if this goes through in favour of the publishers than I’ll lose all faith in the free market. I mean seriously, competition and marketplace choice but only when it suits you and profit margins are increased.

    • http://profiles.google.com/k3gman Keg Man

      i agree, we would only see prices inflate. What about used cars? Do we just throw them in the garbage now?

  • Wild_Tech_Debby

    I guess I’ll have to throw my iPhone 4 in the garbage, since it will be illegal to sell it to someone.

    (Is anyone THAT foolish to really believe that will be the new law??? Anyone even MORE foolish than the androidAuthority staff writers.)

    • http://profiles.google.com/k3gman Keg Man

      It can happen, but it shouldn’t. They’ve already ruled that jailbreaking a tablet is illegal.

  • Michal

    So it will be illegal to list any ‘Used’ gadgets on ebay.

  • raindog469

    If the Supreme Court does rule in favor of Wiley, I’m pretty sure they’re going to make a distinction between goods manufactured and sold overseas, then imported for grey-market resale here, vs. goods manufactured overseas and sold for the first time here. They’ll find a way to make it affect importation but not domestic resale.

    I could be wrong — this is the court that ruled in favor of Citizens United, after all, and effectively upheld Omega v. Costco — but normally the Court isn’t in the habit of making broad rulings that obviate centuries of case law.