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Publishing News: US Supreme Court dives into the Kirtsaeng “first sale” doctrine case

Justices hear first sale doctrine arguments, DRM frustrations reach the mainstream, what the Penguin-Random House merger means.

Here are a few stories from the publishing space that caught my attention this week.

Gavel.pngThe US Supreme Court began hearing oral arguments on Monday in Kirtsaeng d/b/a Bluechristine99 v. John Wiley & Sons Inc. This isn’t a sexy case, but it’s a very important one. The case, which I’ve covered here previously, involves textbooks that a student purchased in Thailand and resold in the US. David Kravets reports at Wired:

“The case tests the so-called ‘first sale’ doctrine, which generally allows the purchaser of copyrighted works to re-sell or use the work without the copyright holder’s permission. That’s why used bookstores, libraries, GameStop, video rental stores and even eBay are all legal. But how the doctrine applies to foreign-purchased works — the so-called gray market — has been a matter of considerable debate.”

Kravets provides a nice overview of the case, and notes that though it mainly deals with physical goods now, as digital goods (for various reasons) can’t be resold, court rulings will have far-reaching effects into the future when digital goods can be resold — waters companies like ReDigi are testing.

The immediate implications for physical goods resale are important to note. Joe Mullin at Ars Technica writes:

“Without ‘first sale’ doctrine in place, content companies would be allowed to control use of their goods forever. They could withhold permission for resale and possibly even library lending — or they could allow it, but only for an extra fee. It would have the wild effect of actually encouraging copyrighted goods to be manufactured offshore, since that would lead to much further-reaching powers.”

Washington, DC lawyer John Mitchell, who has defended students in cases similar to Kirtsaeng, wrote in an email to Mullin that the stakes in this case are high. Mitchell writes:

“There are millions of people living in poverty or near poverty in this country. They scarcely buy new shoes or new clothes, instead shopping at Goodwill Industries or other establishments catering to their needs. They buy used cars, used phones, and used computers. For the person who always buys new, for whom price is not a big factor, the next ‘point of distribution’ is probably the trash. (And, yes, there is case law supporting the right to take copies intended for the trash, clean them up, and resell them.) ‘First sale’ protects those downstream individuals who will never buy new and who would otherwise be left out.”

Mullin’s in-depth look at the case, the case history and what’s at stake is this week’s recommended read.

DRM frustrations spill into the mainstream

In what may be evidence that frustrations with DRM are approaching a boiling point — notably even with those outside the publishing industry — a post at The Economist addressed the issue and noted how the ebook market landscape may be beginning to change from a consumer perspective. The report states:

“Stoking the trend is consumers’ growing realisation that they may not be (as they often think) buying their e-books, music downloads and other digital content outright. In many cases, they are in effect just renting them, subject to tough rules buried in small print. Proprietary software can tie the e-book to a particular device. And the provider of the content can revoke the owner’s rights at whim.”

The report points to the Amazon Kindle debacle last month, which no doubt brought the issue into sharp focus for many readers. People who may never have heard of DRM or the debate surrounding it saw author Cory Doctorow quoted on NBC News saying:

“This fine print will always have a clause that says you are a mere tenant farmer of your books, and not their owner, and your right to carry around your ‘purchases’ (which are really conditional licenses, despite misleading buttons labeled with words like ‘Buy this with one click’ — I suppose ‘Conditionally license this with one click’ is deemed too cumbersome for a button) can be revoked without notice or explanation (or, notably, refund) at any time.”

The Economist report also highlights the recent Humble eBook Bundle offering, in which readers could pay what they wanted for a selection of DRM-free ebooks. It noted the success — 84,220 bundles sold for a total of $1,203,071.63, an average price of about $14 per bundle — and concluded: “Consumers seem to reward authors who trust them with their content.”

Opportunities in the Penguin-Random House merger

The Random House-Penguin merger was officially announced this week. Some purport the companies are teaming up to go to battle with Amazon and Apple. Some say the Penguin Random House merger is a reaction to both companies’ lackluster performances in the ebook market, a sort of power in numbers approach. Others say it’s more likely “about simple consolidation in a shrinking industry.”

In a post at PBS’ MediaShift, Jason Allen Ashlock, co-founder of Movable Type Management, took a look at what it all will mean for other publishers, for authors, and for readers — and what we might expect down the road.

Publishers can expect the typical business bumps that come along with consolidation upheaval — layoffs, reorganizations, changes in competition landscape — but Ashlock points out the mega-corporation merger could be good news for indie publishers and other small publishing houses that may be able to “capitalize on the fissures created beneath the immense weight of a mega-corporation.”

Ashlock covers possible changes in the ecosystem for authors, agents, and readers as well, but his future predictions are particularly thought-provoking. He says that the merger might put the new company in a position to open its own storefront in order to go toe-to-toe with Amazon (an idea others have lauded), but that an additional merger might make more sense — he writes:

“… to expedite the building of their retail component, Random + Penguin merges with Barnes and Noble. It’s not as crazy as it sounds. Not so long ago, and for not so long a time, Bertlesmann owned a large stake in BN.com. Not so long from now, they may again.”

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