Table of Contents

Abstract......................................................................................................................................3

Introduction................................................................................................................................3

Looking at the History of the Doctrine......................................................................................4

Implication of Digital Era on the Doctrine................................................................................6

Understanding the Changes with the Digital Era.......................................................................7

Licensing vs. Ownership........................................................................................................8

Digital Media and the Absence of Physical Copies...............................................................8

Digital Rights Management (DRM).......................................................................................8

Court Decisions and Legal Ambiguities................................................................................8

Legislative Proposals.............................................................................................................9

Consumer Rights and Protections..........................................................................................9

Digital First Sale Concerns........................................................................................................9

Conclusion................................................................................................................................10

1
 Abstract
The first sale doctrine, a term of essential significance in copyright law allows the owner of
any particular lawful copy of a work that is copyrighted to resell, rent a copy without the
copyright owners permission. The main aim of this paper is to analyse the effects this
doctrine in the copyright system in which many types of works are disseminated by the
distribution to the public of the tangible copies that can be retransferred by the copy owners
to others who can easily use the copies of the work to access the work. The main purpose of
the effects has been to increase the affordability and availability of the copies of work.
Furthermore, the paper aims to analyse how the shift to digital dissemination via
transmissions over digital networks and in the forms of technologically protected digital
copies can lead to fewer freely transferrable copies of the copyrighted works that can be
distributed without the copyright owner’s consent under the first sale doctrine. The paper
incorporates suggestions and steps to be taken with regards to fostering availability of
copyrighted works when digital dissemination begins to materialize.

Introduction
There are certain limitations that are imposed in copyright law which has the aim to prevent
total monopolization of the subject matter which is copyrightable in nature- this is done with
the interest of preserving the balance of interest of the creator. The doctrine of exhaustion was
formulated by the beginning of the digital era. 1 When the doctrine was established, there have
been various views and opinions on the same by the legal fraternity. The creator of any work
under the copyright law has the sole rights for using the subject matter produced by them.
One right that creators have is the right of distribution which is not an absolute right, and
supplements the limitation that is produced by the doctrine of first sale which had been
developed parallelly in the US and German Copyright Laws.2

According to the doctrine of first sale, the right of distribution of a copy of the work up to the
time there has been a first legal transfer made with the consent of the owner or original work
can be controlled by the rights holder. The individual to whom the original work or copy is
delivered to has the right of further exploitation- and there is no consent required after the

1
DOCTRINE OF FIRST SALE IN COPYRIGHT LAW, IILS BLOG (Jul. 5, 2017),
https://www.iilsindia.com/blogs/doctrine-of-first-sale-in-copyright-law/ (last visited Oct 10, 2023).
2
Doctrine Of First Sale Limited To Selling The Branded Item In The Same Condition When It Was First Sold:
Delhi High Court - Trademark - India, https://www.mondaq.com/india/trademark/795106/doctrine-of-first-sale-
limited-to-selling-the-branded-item-in-the-same-condition-when-it-was-first-sold-delhi-high-court (last visited
Oct 10, 2023).

2
right of legal sale which is first made, which is in power of the rights holder hence it is
important to note that the rights holder is not vested with the power of redistribution.3

Whilst analysing this doctrine through the lens of the economy- it is seen to serve good to the
society. The few advantages of the doctrine are it lets the copyrighted work be sold at a much
lower price comparatively while making space for the secondary markets at the same time.
Furthermore, when looking at society it is important to note that the creative works contribute
to the combined culture. Because of constant circulation, we can see that if work runs out of
sales in the primary or prior market it can always be found in the secondary market. There is
an enabling of more creativity and development of the literature and various types of arts by
giving access to the public, this aids in the encouragement of the having a fair market with
the circumstances and support of fair trade and a perfect competition.

In the year 2001, the US Copyright office had reported to the party Congress on the effects of
technology and electronic commercial products with regards to the first sale doctrine. In the
report, the main conclusion that was arrived was it is too soon to talk about the effects of e-
commerce and encryption would be on the doctrine and instead of applying or recommending
any legislative approach the best way is to adopt a “wait and see” approach.4 However, it is
important to know that this approach will work best when it is known what is being looked
for. In order to evaluate the impact of technological changes on the operation of the first sale
doctrine – it is important to understand how the first sale doctrine has traditionally
functioned.

Looking at the History of the Doctrine

In the first US Act on Copyright, copyright owners have had the sole right to “vend” copies
their items or products. However, since 1908 the copyright law has expressly recognized the
copyright owners’ power to control sale of a particular copy of a work ends after the owners
first transfer of the copy.5 In general, this doctrine has been looked at as a recognition in the
copyright law historic disfavour of the restraints in the alienation of personal property. The
current copyright law framework gives the owners exclusive rights to distribute copies of

3
Cheshta Sharma, First Sale Doctrine under the Copyright Law, IIPTA (2017),
https://www.iipta.com/exhaustion-rights-parallel-imports-patent-law/ (last visited Oct 10, 2023).
4
Patrick Lastennet, A ‘Wait and See’ Approach Won’t Work: US Businesses Must Prepare for GDPR, THE
GLOBAL TREASURER (2017), https://www.theglobaltreasurer.com/2017/08/21/a-wait-and-see-approach-wont-
work-us-businesses-must-prepare-for-gdpr/ (last visited Oct 10, 2023).
5
Pascale Chapdelaine, First Sale or Exhaustion Doctrine, in COPYRIGHT USER RIGHTS: CONTRACTS AND THE
EROSION OF PROPERTY 0 (Pascale Chapdelaine ed., 2016),
https://doi.org/10.1093/oso/9780198754794.003.0006 (last visited Oct 10, 2023).

3
their works to the public by either sale or lending. However, in the past the copyright owner’s
control over the subsequent distribution was limited. The one who owns a lawful copy can
resell the copy or rent the copy. All of this has resulted in the flourishing in the first sale
doctrine. With the advent of the computer networks, and especially the rise of the internet
usage, there were many questions that had arisen especially with regards to how the doctrine
would operate in the digitally networked environment.

The concept of exhaustion in common law affects different types of intellectual property in
varying ways, but fundamentally, it signifies that the owner's rights over a particular work are
depleted after its initial use or sale. This principle is rooted in the idea of allowing the
unrestricted movement of goods within a healthy commercial environment. In the context of
copyright law in the United States, this exhaustion principle has taken shape as the First Sale
Doctrine and has evolved significantly over time.6

The First Sale Doctrine primarily acts as a constraint on the copyright owner's exclusive
distribution rights. In essence, when the creator of a work sells it through a lawful first sale,
their control over how the work is further distributed ends. The exclusive authority they held
over the subsequent distribution of the work ceases with such a sale. 7 Consequently, this
principle asserts that an individual who has legally acquired a copy of the work is not
obligated to seek permission from the copyright owner before disposing of the work in any
manner they choose.

The principle aligns with the policy of safeguarding individual rights, which is satisfied upon
the initial sale of a copyrighted item. At this point, the creator of the work receives fair
compensation. The policy concerns related to adequately incentivizing authors culminate in
an authorized transaction between the creator and another party. Afterward, the creator's
interests yield to the policy opposing any limitations on property alienation and trade. 8

It is widely accepted that copyright protection extends to the intellectual property itself and
not to the physical copies of the work. Thus, a clear distinction exists between the copyright
and the copies of the work. Allowing creators to control the distribution of their work beyond
the first sale would effectively grant them authority over the physical copies of the work,
which contradicts the purpose of copyright law. In the United States, the application of
6
Sharma, supra note 3.
7
First Sale Doctrine in Trademark and Copyright Law, https://www.bonalaw.com/insights/legal-resources/first-
sale-doctrine-in-trademark-and-copyright-law (last visited Oct 10, 2023).
8
R. Anthony Reese, The First Sale Doctrine in the Era of Digital Networks, SSRN JOURNAL (2003),
http://www.ssrn.com/abstract=463620 (last visited Oct 10, 2023).

4
copyright exhaustion principles in various cases laid the groundwork for the First Sale
Doctrine. The landmark decision of the Supreme Court in Bobbs-Merrill v. Straus9 in 1908
notably emphasized this principle, eventually leading to its statutory inclusion in the
Copyright Act the following year.10

Whilst looking at the Copyright Exhaustion Principle in India, it is important to note that
since there is a move towards a digital environment globally, every nation including India
needs to be equipped in dealing with the same from a legal standpoint. The move towards
digitization will certainly bring about new challenges to the application of copyright law in
India, and more can be learnt from the assessment as well as the inaccuracies from different
countries such as the United States. 11 While the copyright exhaustion principle is a common
law inheritance principle that India shares with the US- there is a failure to implement it in a
statutory form, however there is a combined reading of various provisions that secures the
interest of the lawful buyers of the creative content.

Implication of Digital Era on the Doctrine

Various treaties such as the WIPO Performance and Phonograms Treaty and the WIPO
Copyright Treaty have used the idea and principle of the doctrine to give legislators in
various nations the option of exhaustion in works of the copyright law. An important question
to ask is how does the first sale doctrine to the creativity that is original work, that are
projected in formats that are digital in nature? Can songs or eBooks be sold again once a legal
purchase of it has already been made? At present it is a grey area with regards to the extent of
the doctrine to include domains that are digital in nature. Usually, it has been seen that the
right holders attempt to extend their rights of enforcement by way of licensing agreement
enforcements. The main aim of the agreements is to give the right to retain distribution to the
right holders, this is done by preventing the licensee from having rights over the copy that are
exclusive. For an indefinite period, the right that exists in the copy is in favour of the right
holders.12 However, there is a deviation from the main intent of copyright laws and this is
seen especially with those selling their services online such as eBook providers.

The Digital Era has revolutionized the way we create, distribute, and consume intellectual
property, challenging traditional legal frameworks, including the First Sale Doctrine. The

9
Bobbs-Merrill v. Straus, 1908.
10
Reese, supra note 8.
11
DOCTRINE OF FIRST SALE IN COPYRIGHT LAW, supra note 1.
12
Sarah Reis, Toward a “Digital Transfer Doctrine”? The First Sale Doctrine in the Digital Era,
NORTHWESTERN UNIVERSITY LAW REVIEW (2015).

5
doctrine, deeply rooted in the law, dictates that once copyright owner sells or transfers a
physical copy of work that is copyrighted, they lose control over that particular copy.
However, in this digital age, where content is often distributed through licensing agreements
and protected by Digital Rights Management (DRM) technologies, the implications of the
First Sale Doctrine have become complex and contentious.13

Understanding the Changes with the Digital Era

For most of the twentieth century, there were many copyrighted works that had been
available to the public which were disseminated by the distribution of transferable tangible
material which was easy to be done. Most of the copies were generally easily transferrable.
The system of distributing the copyrighted works in tangible copies which are freely
alienable under the doctrine has primarily had three beneficial effects on the public access to
the works. Firstly, the system has increased the overall affordability of access of the
copyrighted works. Secondly, the system has helped the availability of the works to the public
and thirdly, the system has allowed the users to gain access to works whilst maintaining their
privacy from the copyright owners.14

The main policy arguments that favour consideration are access, preservation, privacy,
transactional clarity and innovation. Access is one of the most obvious policy reasons in
support of the first sale doctrine. The broad concept of access can be broken into affordability
and availability. It is important to note that without the first sale doctrine, secondary markets
such as bookstores would not exist, and without these secondary markets there would be no
downward pressure on the prices. The main advantage of the secondary markets is that they
offer the same products at cheaper prices. The aspect of preservation of the copyrighted
works also benefits the society because people can access the copyrighted works which is a
part of the cultural history.15 Copyright exhaustion also protects the consumer privacy,
because this allows the customers to transfer the works without obtaining permission from
the copy right holder. The transactional clarity is also promoted, this is because the first sale
doctrine reduces information and transaction costs. It is also important to note that copyright
exhaustion leads to innovation as well in three main ways- firstly innovation by the copyright
holders themselves, secondly innovation by the secondary market providers and thirdly
innovation by users.

13
Id.
14
Reese, supra note 8.
15
First Sale Doctrine in Trademark and Copyright Law, supra note 7.

6
Licensing vs. Ownership
One of the most significant shifts brought about by the Digital Era is the transition from
ownership to licensing. When consumers purchase digital copies of books, music, movies, or
software, they are often acquiring a license to use the content rather than owning a physical
copy. These licenses typically come with terms and conditions that restrict the resale or
transfer of digital content.16 As a result, the First Sale Doctrine, which primarily applies to the
resale of physical copies, becomes less applicable in the digital realm.

Digital Media and the Absence of Physical Copies

Unlike physical copies of copyrighted works that degrade with use and can be resold or
transferred, digital media lacks a tangible form and does not deteriorate. These characteristic
challenges the traditional notion of "copy" that the First Sale Doctrine relies upon. Some
argue that this absence of a physical copy makes it inappropriate to apply the doctrine to
digital goods.

Digital Rights Management (DRM)

The widespread use of DRM technologies further complicates the application of the First
Sale Doctrine.17 DRM mechanisms are designed to prevent or restrict unauthorized copying,
sharing, or transferring of digital content. While DRM can protect the rights of copyright
holders, it can also undermine consumers' ability to exercise their rights under the First Sale
Doctrine. DRM effectively overrides the traditional notion of ownership that the doctrine is
based on.

Court Decisions and Legal Ambiguities

Courts have grappled with the use of the doctrine to digital goods, leading to varying
outcomes across different jurisdictions. Some courts have upheld the right of copyright
owners to restrict resale and transfer of digital copies, while others have recognized consumer
rights to do so. These legal ambiguities create uncertainty and make it challenging for both
copyright owners and consumers to navigate the digital marketplace.

16
wardclassen, The First Sale Doctrine: Licensee or Owner?, MYSITE (2019),
https://www.wardclassen.com/post/2019/03/17/the-first-sale-doctrine-licensee-or-owner (last visited Oct 10,
2023).
17
E-books, digital rights management, and the first-sale doctrine » Abstract,
https://blog.taaonline.net/2017/09/e-books-digital-rights-management-and-the-first-sale-doctrine/ (last visited
Oct 10, 2023).

7
Legislative Proposals
In response to the evolving landscape of digital distribution and consumer rights, there have
been legislative proposals aimed at updating copyright law. These proposals seek to clarify
the rights of consumers regarding digital content and address the complexities arising from
licensing agreements and DRM. Legislative reform is essential to provide clear guidelines for
the digital age.

Consumer Rights and Protections

Amidst these complexities, it is crucial to protect the rights of consumers. Consumers should
have the ability to resell or transfer digital copies they have legally acquired, just as they can
with physical copies. Striking a balance between the rights of copyright owners and
consumers is essential in an era which is digital.

Digital First Sale Concerns

Copyright holders are apprehensive about the prospect of this doctrine being digital because
it could significantly diminish the level of control, they have exerted over digital content up
to this point. Moreover, they are concerned that it can inhibit the innovation of work that is
new. These concerns have their own basis. Content that is digital, such as e-books, can be
exchanged between individuals rapidly compared to physical products like books that are
hardcover or physical.18 Additionally, files which are digital do not experience significant
quality degradation. Individuals can instantly transfer content to one another, regardless of
what their geographical location is—a capability not feasible with physical property.

Another major concern is that copyright holders appear to harbour in connection with a
digital doctrine revolves the piracy issue. In the context of the digital realm, the industry that
publishes, which entered the digital landscape later than some other industries, has observed
the extensive piracy with regards to music files and harbours concerns with regards to the
potential for widespread piracy of e-books. 19 Furthermore, publishers’ express worries that
individuals may opt not to purchase new e-books if they discover the option of acquiring a
copy from a secondary market which is digital at a more affordable price, with no difference
in the quality of the product. Various publishers have implemented restrictions on e-books
that are technological and licensing in nature in an attempt to thwart file sharing that is

18
Alandis K Brassel, Confused, Frustrated, and Exhausted: Solving the U.S. Digital First Sale Doctrine
Problem Through the International Lens.
19
HDAVIES, The First Sale Doctrine in the Era of Digital Networks, TOOLS, PUBLICATIONS & RESOURCES
(2012), https://www.ala.org/tools/librariestransform/first-sale-doctrine-era-digital-networks (last visited Oct 10,
2023).

8
illegal. Despite the fact that Digital Rights Management (DRM) technology failed to
effectively curb piracy in the music industry, many publishers still rely on DRM and
exclusively offer e-books that have DRM protection. Nevertheless, instances of e-book piracy
are already taking place, and internet users can readily find instructions on how to remove
DRM protection from their Kindle e-books. The introduction of a market that is secondary in
nature for digital content may, paradoxically, dissuade individuals from involving in piracy
activities while allowing copyright holders to receive an amount of compensation from the
digital resales.

The main concern for copyright holders is that if they no longer have the control of the sales
of their own works, then they will no longer have the ability to implement price
discrimination. Price discrimination involves setting different prices for the same copyrighted
work in various regions or for specific customer groups. This was also seen when John Wiley
& Sons had once charged prices that were lower for textbooks in Thailand as compared to the
United States.

It was demonstrated in the legal case of Kirtsaeng v. John Wiley & Sons20, Inc., using the
main argument of price discrimination to limit the scope of the doctrine had not been
successful. Price discrimination is not a justification that is valid for rejecting doctrine, the
creation of secondary digital marketplaces might potentially enable copyright holders to
engage in the act of price discrimination. In such a scenario, copyright holders could adjust
prices higher in the primary market, knowing that consumers could recover of their costs
through resale. This could result in less interested consumers waiting until it becomes
available in the alternate market, thereby influencing pricing dynamics.

There are also some possible negative affects that may arise from affordability due to the first
sale doctrine. The access to the copyrighted works can be made less affordable by
undermining the copyright owner’s ability to directly capture the revenue from resales.
Without the first sale doctrine, it is possible that the copyright owner might charge a lower
initial sale price because they would want to control the sales. The copyright owner could
spread their desired return on each copy.21

20
Kirtsaeng v. John Wiley & Sons.
21
Chapdelaine, supra note 5.

9
 Conclusion
The Digital Era has introduced a multitude of challenges and uncertainties regarding the
application of the First Sale Doctrine. Licensing agreements, DRM technologies, the rise of
digital media, court decisions, legislative proposals, and consumer rights all contribute to the
evolving legal landscape surrounding the doctrine. While the traditional concept of ownership
that underpins the doctrine is challenged in the digital realm, it is essential to adapt copyright
law to safeguard both the interests of copyright holders and the rights of consumers. In this
digital age, achieving a harmonious balance between these interests remains a pressing and
complex challenge for intellectual property law.

The Indian law lacks a specific provision that officially acknowledges the right of
importation. Consequently, this absence potentially opens the door for parallel importation of
goods. Parallel importation pertains to the transfer of legitimately acquired goods, which are
available at a lower cost in one country, by independent entities (e.g., book retailers) for
resale in another nation. This practice could serve as an effective mechanism to prevent
monopolies in the market, which is particularly significant for a developing nation like India.
Since there are no international obligations against parallel importation, the courts could
reasonably argue that unless there is a clear provision granting importation rights to copyright
owners or explicitly prohibiting parallel importation, it should not be considered illegal in
India. It is worth noting that India aligns with the principle of international exhaustion rather
than national exhaustion.

10