This is a copy of my comments to the Federal Trade Commission, who are asking for comments on DRM technologies for a Town Hall Meeting in March.
As you are doubtless aware, the Copyright Act of 1976 codifies the First-Sale Doctrine. This states that a purchaser of a copyright work has the legal right to sell or give away the copy, once it has been obtained–so long as no additional copies have been made.
One major issue I have with DRM technologies is that they deny the customer his legal right to resell the product on the second hand market. Also, in many cases purchased products may evaporate if the DRM provider goes out of business, yet still these products are described as being sold to the customer, with words like "buy", "purchase" and "on sale" being used.
Netflix will let me keep a movie indefinitely, but I can’t sell the disc, and they reserve the right to demand it back. Similarly, iTunes digital movies can be kept indefinitely, but I can’t sell the movie, and Apple can turn off my access to it, analogous to demanding the disc back. Netflix describe their service honestly, as rental. Apple describe their service as purchase, with the button saying "Buy now".
This seems to me to be confusing. Physical video stores like Blockbuster would not be allowed to say "Buy this movie for $3.89!" when the terms were actually rental with no due date for return, so I don’t understand why digital movie rentals are treated differently.
I have a simple proposal. It should be illegal to describe something as being "sold" or "for sale" unless the corresponding right of resale is available to the purchaser. Instead, a phrase such as "indefinite rental" should be used, as that’s what is really being offered.
In other words, when I "buy" a movie from the PS3 online store, I’m not really buying it, because I can’t resell it second hand when I’m done with it. So Sony should not be able to pretend I’m buying it; they should be legally required to describe the offering accurately, as an "indefinite rental".
I think this would go a long way towards making it clear to the average consumer that their DRM-protected purchased content comes with metaphorical strings attached, and that it might go away one day.
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While you are at it, send letters to government bodies that impose an annual real estate tax on your house, demanding that realtors stop using expressions such as “for sale” and “buy.” According to the common understanding of “sell” and “buy,” a person who buys what the seller is selling at full asking price now owns the property and need not pay addition fees to keep it. Real estate taxes amount to lifetime renting fees if you want to stay in your house, because if you do not pay your real estate tax the government will take your home and “sell” it to another person from whom they can collect rent again. Realtors should be made to say that they are not selling you a house, but, rather, collecting a fee that allows you to rent the house from the government.
There’s nothing specific to real estate in your argument. The government will happily seize and sell your car in order to try and pay off your debts. There’s nothing specific to taxation in the structure of the argument either–if you don’t pay your mortgage they’ll take your house too.
So if we accept your argument, the corollary is that as long as you can be compelled to give up your possessions in order to pay back your debts, you can never truly own anything. Which is an interesting argument, but not a very useful one. Yes, we can view ourselves as mere subjects, ultimately forever in serfdom to corporations and governments, effectively renting our existences–but within that framework, there are very real differences between different kinds of property transaction.
In particular, I do have the right to resell my house, or even rent it out, so in that sense I did genuinely buy it.
I think that there is something specific to real estate here. The government does not recurrently tax most of my possessions. Once I buy them, I own them free and clear. I might be in debt for a while if I buy an expensive computer, but once I pay off the seller, nobody is going to come after me every year, telling me I must pay them or they will seize it.
I cannot own a house, however, without incurring a permanent, annual rental fee to governmental bodies that tax the house. I can never own it free and clear, unlike most of my possessions. Even if I have paid off my house, failure to pay taxes will result in seizure of the house.
True, I can resell my house, and I did not mean to suggest that real estate is exactly analogous to DRM protected products. It is a different kind of “indefinite rental,” a situation where one can never pay in full to own the property free and clear. You must keep paying a fee every year for the privilege of living in the house, or the house will be taken from you.
You can’t own and operate a car without paying an annual tax. Nevertheless, you have the right to resell a car, which means that you genuinely purchased it. So while there’s a difference between things you own that aren’t taxed and things you own which are, the important factor in whether something is sold or rented isn’t whether it’s taxed or not.
Nobody calls it rental when you buy a car.
And as I said, all your property can be subject to confiscation if you don’t continue to pay a fee to the government (your annual taxes). It just happens that the fee is in most cases not based on exactly what items you have or how much they’re worth. There are exceptions, though–if you own jewelery or artwork which gradually appreciates in value, you can bet you’ll have to pay a fee each year. Does that means you can’t buy a painting or a wristwatch? I don’t think so.
I considered cars as I was thinking about real estate, and it is not quite the same. If I do not pay the annual registration fee, PennDOT is not going to confiscate my car. True, I run the risk of a fine if I am caught driving on public roads without having renewed my registration, but even that will not result in the seizure of my car. If I lived on a 200-acre farm, chances are that I could drive an unregistered car around my property without ever being bothered. At the very worst I could leave my unregistered, uninsured car in my driveway with impunity. That is why my sense is that I am owning my car rather than renting it. The yearly fees I pay feel like a price that must be paid for the privilege of driving on public roads.
I do realize that if I do not pay my income tax, the government may take any item that I own. Perhaps I would be more logically consistent if I said that I felt like I owned nothing, because the government could take any of my belongings in place of unpaid taxes. Perhaps my sense of ownership is not logically consistent. My house feels like a different kind of property because it, specifically, is being taxed, and it, specifically, will be taken away if I do not pay my real estate tax. The other things that the government may impound are not tied to a tax on them.
Tax rules for paintings and jewelry I know nothing about. I’ve heard of a luxury tax, which I thought was paid only at the time of purchase. I did not know that some people have to pay an annual fee on wristwatches. Maybe I would feel like I was renting my watch if the government told me it would be seized if I did not pay an annual fee on it.
I was referring to capital gains tax. Most consumer goods don’t gain in capital value, but things like jewelry and artworks can. Often people choose to defer declaring the gained value until the item is sold, but that can lead to unpleasant surprises.
Also, DRM proponents would doubtless argue that like with your car, they don’t take the file away, they just take away your ability to play it.