First Sale Doctrine in Trademark and Copyright Law
Federal law allows owners of copyrights or trademarks to file suit for alleged infringement of their exclusive rights. Through a lawsuit, they can recover damages or ask a court to enjoin further unauthorized use of their protected materials. Certain uses of copyrighted or trademarked materials are allowed by law, even without the owner’s permission.
The first sale doctrine allows the resale of products that constitute or contain someone else’s intellectual property without the owner’s permission, as long as the person lawfully owns the product. The first sale doctrine is codified in U.S. copyright law, and court decisions have applied it to trademarks. It can serve as a defense to a copyright or trademark infringement lawsuit in certain situations.The First Sale Doctrine in Copyright Law
The first sale doctrine states that a copyright owner cannot prevent someone who has lawfully purchased a copyrighted work, such as a book, from selling, loaning, or giving that item to someone else. This allows the distribution of copyrighted materials beyond the initial sale by the copyright owner. Without the first sale doctrine, no one would be able to sell or otherwise dispose of books, CDs, DVDs, or other tangible works that they have purchased without the copyright owner’s authorization. Bookstores and libraries would need permission every time that they sold or loaned a book.
Federal copyright law has codified the first sale doctrine at 17 U.S.C. § 109. Limits apply to the doctrine when a copyrighted work is in digital rather than physical form. Section 109 also contains exceptions for certain types of media.Limits on Resale of Digital Copies
The first sale doctrine pre-dates the digital era. It assumes that copyrighted materials exist in physical form. People now buy mp3 files instead of CDs, digital movies instead of DVDs, and ebooks instead of books. Digital media files are not distinct, tangible items that can literally change hands after a sale. The process of copying a digital file is simpler than copying a CD or DVD, and much simpler than copying a book.
The U.S. Copyright Office has concluded that the first sale doctrine does not apply to the unauthorized resale of copyrighted materials in digital form. In a report issued in 2001, it stated that transmitting a digital file from one user to another creates a new copy of the copyrighted work.
Several court decisions have adopted the Copyright Office’s conclusions. For example, in 2018, the Second Circuit Court of Appeals affirmed a New York federal court’s ruling against a company that allowed consumers to sell digital music files that they had purchased through the iTunes store.Sale vs. Licensing of Work
For the first sale doctrine to apply, the person attempting to sell their copy of a copyrighted work must actually own that copy. A person who buys a book from a bookstore owns the paper on which the book is printed. They can sell that item to someone else. The same can be said for a CD purchased at a music store. That said, not all exchanges of money for copyrighted materials constitute a “sale.”
Many software companies include end-user license agreements (EULAs), stating that the consumer is only purchasing a license to use their software. If the EULA states that the license is not transferable, the consumer cannot legally sell or otherwise convey the software to anyone else.Exclusion of Certain Types of Work
Section 109(b) specifically excludes certain activities from the first sale doctrine. The Record Rental Amendment of 1984 states that the owner of a phonorecord, meaning any physical copy of a copyrighted audio recording or musical performance, cannot rent it to the public. The Copyright Software Rental Amendments Act of 1990 prohibits the rental of computer software. Both prohibitions only apply to for-profit rentals. Libraries and schools can still loan audio recordings and software.The First Sale Doctrine in Trademark Law
The first sale doctrine allows the resale of items bearing a trademark, such as a logo or brand name, after the trademark owner has sold those items, unless this is likely to confuse or deceive consumers. The U.S. Supreme Court applied the first sale doctrine to trademark law in Prestonettes, Inc. v. Coty, 264 U.S. 359 (1924).
The defendant in Prestonettes bought a product from the plaintiff, packaged it with other ingredients, and sold it to consumers. The packaging for the defendant’s product used the plaintiff’s trademarked name to indicate that the plaintiff’s product was included. The court held that this did not violate the plaintiff’s trademark rights.
Courts have identified certain limitations on the first sale doctrine for trademarks:Materially Different Goods
The first sale doctrine might not apply if the unauthorized seller’s product is “materially different” from the trademark owner’s product. In a 2009 ruling, the Tenth Circuit described this as a product that “is not genuine and may generate consumer confusion about the source and the quality of the trademarked product.” That case involved the resale of products without the warranty protections offered by the trademark owner, which harmed its reputation among consumers.Lack of Comparable Quality Controls
A trademark owner can overcome the first sale doctrine defense if it can show that the unauthorized reseller is using the trademark on goods that lack its quality control standards. Courts have identified a four-prong test that a trademark owner must satisfy:
- It maintains a substantial set of quality control standards and procedures for its products;
- It consistently applies these standards and procedures;
- The reseller is not abiding by these standards; and
- The sale of products that do not meet the trademark owner’s standards is likely to confuse consumers and harm the trademark’s value.