Dabe Alan

Xbox One and the first-sale doctrine: there is no silver bullet for protecting used games

Xbox One and the first-sale doctrine: there is no silver bullet for protecting used games

There has been a sizeable uptick in conversations about the laws surrounding the sale of used products since rumors flared up that Microsoft may try to take steps to curtail the used games market.

Everybody seems to have the definitive answer about the legality of restricting used game sales, or how the first-sale doctrine applies to the games business. Despite all the varying opinions, there aren't any clear answers in this area. We contacted legal and copyright experts to see if we could find out the real story about how the first-sale doctrine will or won't protect video games in the coming years.

What we found is that entertainment copyright law is very much a legal gray area that is still being defined, and the coming issues with games consoles may even help clarify some issues.

The good news is that physical copies of games are likely to continue to be protected by the game buyer's right of first sale. The bad news is that there may no longer be physical video games, or at least not the way we understand them.

Caveat Emptor

“The consumer has a right to wholly re-sell what they own without paying any sort of fee, licensing or otherwise, to the original company… and the second-hand buyer can buy without needing to pay a separate fee to the original seller,” said Ken Lamance, editor of the law library of Legal Match, and an attorney with experience in the entertainment business.

This is a law that has annoyed the video game business for a long time, but it doesn't look like it will be changing any time soon.

“Video game manufacturers have tried to restrict the secondary market since there's been a secondary market,” said Parker Higgins of the Electronic Frontier Foundation, an advocacy group that seeks to protect consumer's digital rights. “But the first sale doctrine is written into the law, it's not just case law. It's outlined that when you sell someone physical goods they're allowed to do what they want with those goods. “

The catch is it's an old law, so it only applies to physical goods, and there's no clear cut answer about how this might be applied to digital goods.

“We're still seeing how that works with digital files,” said Higgins. “There are a lot of people out there interpreting that the way it works is that people have a lot less latitude when it comes to what they're allowed to do with their digital files.”

“There's a case going on right now about a market to re-sell MP3 files, and there was a case earlier this year that could have redefined the concept of first sale. This is something that hasn't fully shaken out. If I was Microsoft I would be hesitant to make this a cornerstone of my business right now,” he continued.

Caveat Venditor

While it remains unclear what the future might hold for buyers and sellers of digital goods, we do have some precedent for what it might mean for resellers like GameStop. The switch to digital goods has had major consequences for other businesses, and it could be a clue as to how things might proceed in gaming if Microsoft repositions their games as digital goods and licenses that can be accessed through a disc.

The good news is that physical copies of games are likely to continue to be protected by the game buyer's right of first sale. The bad news is that there may no longer be physical video games, or at least not the way we understand them.

Higgins offered the example of Netflix. Years ago, Netflix's main business was protected by the right of first sale. They purchased a copy of a DVD, and then they were able to rent that out as many times as they wished. It was their property. However, when Netflix switched to online movies, that right no longer applied even though many of the same principles were at work. Now Netflix is forced to license films and TV shows from publishers, and publishers have every right to refuse.

Netflix is not the only example though. Even libraries have been hit by the digital switch. Higgins said that so far book publishers have refused to actually sell eBooks to libraries, and are instead making them license the eBook for a set number of rentals. Once that limit has been reached, they must pay to renew the license.

This may mean that not much will change for the average gamer, but much could change for GameStop and other retailers selling used games. This precedent seems to lend credence to a Eurogamer report which suggests that there will be an activation fee for used games, but it will be paid by the second-hand retailer, not the buyer or seller.

Consumers vs. Corporations

The tricky part of all of this is that none of it is set in stone. The first-sale doctrine is law, but it has been altered before. For instance, Congress approved the Computer Software Rental Amendments Act of 1990 to address corporate concerns that renting software encouraged people to make illegal copies during the rental period rather than purchase authentic ones.

“Congress has demonstrated that it is aware of the potential profitability of certain industries, such as computer software, and those companies’ ability to protect their right to make a profit off of their creations,” said Lamance.

What may be the most important aspect of this debate is the fact that legal precedent may not necessarily be useful. “Truthfully, the way that copyright law ends up getting written in this country, neither consumers rights nor the health of the industry are taken into account. It's usually a handful of rights holders and whatever they're able to push through.”

It may come down to how much consumers are willing to let these corporations get away with when they push for stronger laws guarding copyright. “People in forums can say that they should get the rights of first-sale, but… are you going to stop buying video games? That's the question,” Higgins continued.

Because if you're not, then corporations have no disincentive to push for more favorable copyright legislation. Higgins doesn't think this is something to be taken lightly.

“We see this all the time with people proposing laws about restricting the kind of speech that can be in video games, but you'd be laughed out of office if you said you didn't think a song was allowed to be violent or a book. It seems like we see over and over that people start with video games,” Higgins explained. “And if we don't defend video games as speech then they go for the next thing. So I get a little bit nervous when companies say they want to control the way we buy and sell video games, because all the media we have in the future is going to be bought and sold digitally.”

“It's an important thing to defend because as go video games, often go the other forms of media.”

It could actually be the opposite, as console video games may be one of the last remaining kinds of software, or even digital content, that can be bought and sold “used.” Steam games can't be sold. Your copy of Windows 8 can't be sold. Books for your Kindle can't be sold.

You can look at it this way: Your physical copy, the disc, of Call of Duty: Ghosts for the Xbox One can be resold, but the license to play the game cannot be. In this way the technicalities of the first-sale doctrine are upheld, while the spirit of the law is not.

We're used to thinking about the “game” as being the disc inside the box, but these days that's simply the delivery mechanism. The product you buy is the license to play the game, and that is a purely digital product, which may not be protected under the first-sale doctrine. You won't be able to invoke “first-sale” against these practices the way you show a cross to a vampire; these rights will likely have to be preserved via the courts, and that would be a long and costly fight.

Ben actually asked Microsoft's Matt Booty this question: We're paying for a license to play the game, not the physical game itself. We're buying digital product, made up of ones and zeroes, and delivered online, regardless of where we bought the box that includes the code. Is the concept of a used game even relevant? Does such a thing exist?

“That's a great philosophical question, and we'd have to ask some gamers. I think the idea of 'I own this thing now, and I want to give it to someone else to own' is something that people can understand. We want to make sure that can still happen,” Booty replied.

Then he stated there are “details” about that process that they will talk about in the future, and the devil, as they say, is often in the details.