A topic that comes up fairly frequently in discussions on this site is the First-Sale Doctrine. As not all of our readers may be familiar with this term and its relevance to the home video industry, we thought it would be a good idea to offer a brief explanation of this often misunderstood tenet of copyright law.
First-Sale Doctrine Defined
What is First-Sale Doctrine (hereafter referred to as FSD)? To answer, it seems appropriate to briefly mention the Copyright Act of 1976. Created in that year and effective on January 1, 1978, the Copyright Act is the basis of copyright law in the U.S. and spells out the basic rights of copyright holders. FSD is codified in this act.
The First-Sale Doctrine, which is also known as the “first-sale rule” or “exhaustion rule”, is contained in Title 17, Chapter 1, Section 109 of the U.S. Code. It reads as follows:
“. . . the owner of a particular copy . . lawfully made . . . or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy . . .”
What FSD Means to Home Video
FSD is what allows libraries, used record shops and second-hand bookstores to operate. It also ensures that purchasers do not need to negotiate with or pay additional compensation to the original copyright owner when they wish to rent, sell or otherwise dispose of purchased copies. It is what allows companies like Redbox, Netflix, Blockbuster, etc. to rent titles that they have purchased. FSD is also what has allowed Redbox to circumvent the new release delay windows imposed on it by three Hollywood studios by buying those titles at retail rather than from the studios or their distributors. The bottom line for FSD in relation to the home video market is this: after you have purchased a DVD you can rent it for any price and under any terms you like.
What FSD Does Not Mean
While it allows for the rental, sale, transfer or disposal of purchased copyrighted content, FSD does not allow consumers to make or distribute illegal copies of copyrighted works. FSD does not in any way authorize piracy or intellectual property theft.
Because of FSD, the studios are helpless to prevent Redbox from sidestepping their delays and acquiring new releases through other methods. As frustrated as some Hollywood executives may be with Redbox’s business model, there is nothing they can do to prevent Redbox from obtaining titles from anyone it chooses and subsequently renting those titles.
While buying at retail may not be the most cost-effective or efficient method for Redbox to get new releases, the First-Sale Doctrine has allowed it–for the most part–to keep titles coming to its kiosks in the face of some major Hollywood opposition.