The Year Ownership Broke

We're taking part in Copyright Week, a series of actions and discussions supporting key principles that should guide copyright policy. Every day this week, various groups are taking on different elements of the law, and addressing what's at stake, and what we need to do to make sure that copyright promotes creativity and innovation.

One of our worries in writing The End of Ownership was that, given the pace of traditional print publishing, the questions we raise would be stale before the book made its way into the hands of readers. It turns out that fear, unlike many expressed in the book itself, was unfounded. Sure, new examples of the erosion of consumer property rights have continued to multiply like so many soaking mogwai in the months since we made our final manuscript edits.

But if anything, that demonstrates the ongoing relevance of the basic themes we identify: tangible copies continue to be displaced by digital distribution; license terms still routinely insist that sales should be treated as contingent grants of permission; embedded software and DRM, now more than ever, ensure that manufacturers and IP rights holders are the true masters of the devices we buy, preventing us from modifying, repairing, and even using the things we think we own; and despite evidence of deception, digital retailers still insist on marketing their goods using terms like "buy" and "own." But these profound shifts in the dynamics of ownership remain unknown, or at least poorly understood, by the average consumer attempting to navigate an increasingly complex marketplace—one that highlights the many benefits of licensing, subscribing, and "sharing," while simultaneously diverting attention from the security and autonomy afforded by old fashioned personal property rights.

2017 looks to be a watershed year for ownership. For better or worse, what happens over the next 12 months will go a long way towards deciding whether we will live in a world in which we own and can control the products we rely on. Or instead, 2017 could set us on a path towards a future that looks a lot like Philip K. Dick's Ubik, with each of us negotiating with Alexa over the fee to unlock our front doors.

In the market, the push for smart devices—burdened though they are by restrictive license terms, software locks, and code designed to constrain our behavior—persists. A cursory glance at the new wares on display at CES earlier this month reveals that the trend of software-enabled and network-connected devices is still going strong, all good sense be damned. Can I interest anyone in a wifi hairbrush? Or perhaps a smart mirror?

Given the state of market, developments in the courts, administrative agencies, and perhaps Congress are crucial in determining whether and to what extent consumers will be permitted to retain the rights associated with ownership in the things they buy. 

On the judicial front, the courts are poised to decide two cases that squarely address consumer ownership rights, one in the copyright space, the other concerning patents. The Second Circuit will be hearing the long-awaited appeal in Capitol Records v. ReDigi. There the court will be asked to decide whether consumers who purchase digital music enjoy the same rights to alienate their interests that analog consumers have exercised for decades at used record shops. ReDigi developed a marketplace for used digital music that carefully replicated the one-to-one exchange familiar from the analog world. But in an analytically-murky decision, the district court held that ReDigi's system infringed both the reproduction and distribution rights of copyright holders.

Meanwhile, the Supreme Court is set to hear Impression Products v. Lexmark, a case that challenges two flawed holdings of the Federal Circuit. Lexmark concerns the printer-maker's single-use restriction that forbids consumers from refilling ink cartridges they've purchased under pain of patent infringement. The Federal Circuit held, first, that such post-sale restrictions on the use of a chattel are enforceable as a matter of patent law, and second, that overseas sales authorized by the patent holder cannot trigger exhaustion—a holding in no small degree of tension with the Supreme Court's 2012 opinion in Kirtsaeng. 

On the administrative agency side of things—well legislative agency, but who's keeping score—the Copyright Office is fresh off a deeply disappointing report on Software-Enabled Consumer Products, in which it concluded after nearly 70 pages of analysis that software embedded in consumer devices poses no real problems. This, despite the fact that copyright holders have leveraged their ownership of software to interfere with resale, to stifle competition and user innovation, to prevent repair, and to disable devices altogether. The Copyright Office dismisses these concerns, in part, by arguing that the companies involved learned their lesson. It wrote for example that "market forces may discourage copyright owners from attempting to prevent independent repair activitie," citing the outcry when John Deere infamously asserted that farmers enjoy a mere license to operate the equipment they buy. But just weeks after the Copyright Office's handwaving, John Deere released a new license agreement that affirmatively denies farmers the right to repair their devices or even look at the software that makes them run. So much for the market.

As you may have heard, leadership changes are underway at the Copyright Office. The new Register of Copyrights will have many responsibilities, chief among many hope is, you know, registering copyrights. But to the extent the Copyright Office continues to pursue an active policy agenda, it needs to take the question of consumer ownership seriously. The Office still has an study of Section 1201 underway, which implicates many of the same concerns about ownership outlined above. Here's hoping the Office takes them more seriously the second time around.

With a new administration set to take over at the end of the week, other agencies will have new leadership as well, among them the Federal Trade Commission. The FTC has played an important role over the years guarding against the most egregious abuses in the digital marketplace. When Major League Baseball, Microsoft, and Walmart threatened to shut down servers providing consumers access to digital media purchases, the FTC stepped in. More recently, when Nest decided to brick thousands of Revolv home automation hubs without even the offer of a refund, the FTC again flexed its considerable muscle. It made sure that consumers were at least compensated for their now-worthless devices. With the Trump administration poised to choose to three of the FTC's five commissioners, the Commission may be less inclined to aggressively target deception and unfair practices.

Speaking of deception, spurred by the Commerce Department's White Paper on Remixes, First Sale, and Statutory Damages and some research by a couple of crackpot academics, the PTO and NTIA are planning public hearings on the "Buy Now" button and its potential for misleading consumers. Again, how high of a priority this issue will remain in a Trump administration is hard to predict.

Then of course, there's Congress. Copyright reform remains on the agenda. A meaningful overhaul of the 1976 Act should be a longterm project. The current proposal is short on details, but appears to be decidedly small-bore. We've also seen legislation that more directly targets the ownership question in recent years, like the Unlocking Technology Act and the You Own Devices Act. Although these bills haven't made much headway, they do suggest that some in Congress care about the threats to ownership facing consumers. And I expect we will see similar proposals in the coming term.

Legislation, regulation, and judicial opinions matter. But when it comes to the fight for ownership, we think nothing is more important than awareness. As we talk to people about our book, we see over and over again that once consumers recognize the threats to their rights that the current digital marketplace represents, they are alarmed. Some are shocked. Others are outraged. They see the choices they confront and their consequences differently. Some even start to behave differently. That's why we are telling this story to anyone who will listen, and why we hope you will do the same.