What's Mine, Isn't

...if tech companies have their way.

The principle of private property is fundamental to freedom and Western civilization.  The whole defining characteristic between the "free world" and the Communist world, was that under Communism, individuals had no control over their own lives, nor over their property.  In the abstract, individuals didn't even have property; they just were loaned it by the state.

In a free country, on the other hand, we have a very deep belief in the concept that, once an individual has purchased something, it is theirs to do with as they please, whatever that might be.  It may be unwise; it may be in bad taste; but it is their property.  This has been a general rule for hundreds of years.

Private property may seem obvious and well-settled, but it has been a running battle to preserve it - in many ways that may not seem obvious, but which affect each of us every day.  The first foundation is the First Sale Doctrine, whose origins go back many hundreds of years.  This legal principle holds that a seller loses all rights or controls over an object once he has sold it.

So, for example, if you buy a car from Ford, it is your car.  You can smash it with a sledgehammer if you like; you can haul it around the country as a "Lousy Cars" exhibit; you can sell it to the Chinese so they can tear it apart and learn how it's put together.  Ford would much rather you didn't do any of those things; they may even offer to pay you to stop doing them, if you did it enough and it caused them enough pain; but they have no legal means to restrict what you do with your own property.  However, they might refuse to sell you another Ford in the future - since at that point, the new Ford would belong to them, and they have control over their property before they sell it.

This matters.  Years ago, there was no such thing as free lending libraries as we know them today - because the book publishers would not allow them.  The argument was that people borrowing books for free from a library, were stealing revenue that the publishers should have gotten, since they could read the book without buying one.  However, the law evolved otherwise - if the library purchases the book legally, it belongs to the library, and is theirs to do with as they wish, including lending it out.

Now, the content of a book remains copyrighted, and cannot legally be copied; but the physical book itself falls under the First Sale Doctrine - even thought it contains copyrighted material.

From that day to this, companies have tried to find ways around the First Sale Doctrine.  The most obvious way is through use of tight contracting arrangements.  For example, with so-called "gray market" imports, companies want to sell their products at different prices in different countries - Americans are willing to pay a lot more for a pair of jeans, say, than Chinese in China are.  But this offers an opportunity for someone else to profit - go to China, buy a container-load of genuine, real Levi's at Chinese prices, ship them back here, and sell them at a price lower than the normal American one, but plenty high enough to cover costs.  Levi's has tried, through various contract requirements with their vendors and stores, to keep this from happening, but it doesn't work.  As long as the clothes are genuine - that is, not knockoffs like the fake Rolexes you see sold on Times Square streets - they are perfectly legal to ship around and resell, once you have purchased them legally.

Another try is for fashion designers to sue cheap-clothing makers for knocking off their designs.  Notice, again, we're not talking about the phony Rolexes.  This is a lawsuit over the design (cut, style, etc.) of a dress - the dress looks the same, but has a different logo on it, so there is no trademark infringement.  But thus far, this approach has not worked either; it's still legal to make your own version of a clothing item, as long as you don't copy any registered trademarks.

Software manufacturers have another way.  Do you own any Microsoft software?  Most people would say they do - after all, the whole world uses Microsoft Windows and Office, don't they?  And even Microsoft talks that way, reporting their gross annual "sales".  But, in fact, nobody owns any Microsoft software except Microsoft.  That copy of Windows you thought came with your computer?  No, no, you do not own it - you merely license its use.  You own the physical CD that came with it (though we see Microsoft getting away from even that as much as possible), but the software itself remains the property of Microsoft.

That's why they have little or no liability for bugs, security flaws, and misfeatures, and why they can (attempt to) prevent you from transferring the software to somebody else when you sell your computer, or moving it from one computer to another after you have installed it.  When you opened the software packaged, or turned on your new computer, you signified acceptance of an enormously long "End User License Agreement (EULA)" and, legally, became a licensee - not an owner.  This approach strips customers of most of the rights normal people associate with property ownership, since they are not "customers" at all, but only "licensees."

But what about situations in which there are elements of both hardware and software, and neither is of any use without the other?  Right now, we are watching a case study on the meeting point of trademark, copyright, and the First Sale Doctrine: the iPhone.

Now, what is an iPhone?  Well, it's a physical object that you hold in your hand.  It's made out of plastic and metal.  Some may find it a stylish and attractive accessory.  But without the software installed on it, it's pretty much useless.  And even with the software, it's still mostly useless without having a working account on a cellular telephone network.

For marketing reasons, Apple has signed exclusive agreements with AT&T Cellular.  iPhones will be sold only in accompaniment with an AT&T service plan.  Apple has every right to do this, of course, since prior to the sale the iPhones belong to them: they can sell them on whatever terms they please.  But what happens after you buy an iPhone?  Under the First Sale Doctrine, you could run over it with your car, and Apple could not complain.  So can they stop you from taking a screwdriver and soldering iron to it, taking it apart, and modifying it to work on some network other than AT&T?  They certainly would like to.

For hundreds of years, Americans have had an assumption that, once you have bought something, it is yours, and whatever you can physically get it to do is fair game.  Now, your actions may void the warranty, and that's fair; but no lawyers should be able to come after you for doing something strange with your own legally purchased property.

In the long term, this is a battle that the big companies tend not to win.  At one time, automobile manufacturers built their cars so as to make it very difficult to install a car radio that they didn't sell you; now they don't bother.  AT&T itself used to lease you the phones, and you had a very limited choice; now, there are thousands of different sorts of telephone that you can buy and plug into a standard jack.  Today, cellphones are "locked" to prevent you from changing the software on your own, and if you change carriers, you almost always have to buy a whole new phone; tomorrow, that won't be the case.

Petrarch is a contributing editor for Scragged.  Read other Scragged.com articles by Petrarch or other articles on Economics.
Reader Comments

Hmm, so what about mp3's?  Apparently, if I produce an mp3 recording of my song, and sell it to you, then you have every right to make copies of it and hand it out for free to anyone you please.

September 3, 2007 4:44 PM

First Sale Doctrine doesn't apply to music or ANY digital content.  FSD applies to things you own.  You don't own digital content unless you create it yourself.  Someone else owns it and you license it.  When you buy a Ford truck, you OWN that Ford truck.  You aren't licensing it from Ford Motor Company.  The defining aspect of personal property is that BECAUSE you own, no one else can.  It is not possible to hand it to someone else.  The iPhone is two separate things.  The hardware is yours to do with what you want.  You can break it or give it to someone else or whatever.   But the software ON it is owned by Apple.  That is good and proper.

September 3, 2007 4:54 PM
Add Your Comment...
4000 characters remaining
Loading question...