Used Games and the Digital World

As this is my first real post, I figured I’d start out by laying down my ground rules for this blog.  My goal is to update this blog twice a week, on Wednesdays and Fridays.  I may add a Monday post if blogging here becomes more of a habit, and I may add special posts for extremely important legal events (such as if a SOPA-like piece of legislation rears its head again).  With that in mind, let’s get to our first topic: used games.

There have been some interesting rumors over the past month or so about Valve’s intended plans for a Steam game loaning system, as well as a German court case against Valve dealing with resale rights.  This leads me to wonder how a company such as Valve can implement a digital used game (or game lending) system without running afoul of the law.

Now, reselling physical copies of games is a relatively simple matter.  While copyright holders generally control the sale and distribution of their copyrighted materials (under 17 U.S.C. 106(3) as the distribution right), the First Sale Doctrine limits this right in some important respects  Specifically, First Sale Doctrine limits the distribution right to the first sale of the work (from copyright holder to the owner of the physical copy.  After this first sale, the copyright holder no longer holds a legal interest in the distribution of a work.  As a result, people can lend or sell the physical copies of their games as they see fit.  I can sell or lend any of my XBox 360 games as I see fit, so that my friends can see what a great game Red Dead Redemption is.  There have been a couple of Supreme Court cases dealing with First Sale, notably Kirtsaeng v. Wiley, where the Court upheld the applicability of First Sale to objects purchased outside the United States.

However, there are some very important limits to the First Sale Doctrine that apply to a digital game purchased off of a service like Steam.  The first limitation is that the individual must actually own the work (the “ownership” requirement).  This limitation becomes especially limiting with digital copies of games, since (in my experience) most End User Licensing Agreements only grant a license to use the work.  In fact, the Steam Subscriber Agreement specifically says that games purchased through Steam are “licensed, not sold” and that this license “confers no ownership or title” in games purchased from Steam.  The other major limitation is that First Sale only applies to the distribution right, so other forms of copyright infringement (such as making copies of a work without permission) potentially apply.  The right to control when another party may make copies of a copyrighted work poses some interesting questions for digital copies of games, since Steam would need to create new copies to facilitate any used game sales or loans (just as a technical consideration).  As far as I can tell, there isn’t a clear answer to this specific issue. The ReDigi case, dealing with an online reseller of used music files, seems to indicate that the court system doesn’t think that First Sale applies to digital copies.  This case was decided in the US District Court of Manhattan and only applies to ReDigi’s first version specifically.  ReDigi only provides a hint of how courts might view this issue, but other judges and courts may disagree.

Regardless, the limited nature of the First Sale Doctrine seems to present some rather substantial obstacles to selling and lending digital copies of games the way you or I could currently sell or lend a physical disc.  The ownership issue alone might sway a judge to hold that the copyright holder still has a legal interest in the sale and distribution of their digital work even after a sale.  Until we see a court case dealing with this issue, the matter from a consumer rights perspective will remain unresolved.

The Steam Subscriber Agreement actually has some interesting little tidbits for some of Valve’s future plans, showing how they might bypass some of these legal concerns through the power of proper contracting (every attorney knows the true power contracts hold).  Their section on Billing, Payment, and Other Subscriptions includes an entire section (section D if you are curious).  Their method involves transferring a subscription from one user to another using a preset marketplace (such as the Steam Community Marketplace, where hat subscriptions fly back and forth).  Valve, in this case, claims to act as an agent of the content owner (and again states that the user has no ownership right) and charges fees for the service (Gamestop can’t charge fees, though they have other ways to make money off used game sales).  None of this is a substitute for the First Sale Doctrine, since Valve limits the sales to one particular marketplace (that they control) and maintain the right to charge fees for the sale.  Furthermore, I couldn’t loan out a game that I find particularly engrossing to friends to let them see if they like it under the current Subscriber Agreement.  I may really enjoy that Kerbal Space Program game (and it really is a lot of fun…just for the record) but there’s no real mechanism at the moment for me to lend my Steam copy to a friend who’d be interested in giving the game a try.

I’m interested to see how these issues get resolved.  I’d expect there to be a lot of push-back from various parts of the entertainment industry, since those guys have never been particular fans of the various used content market (as the Software and Information Industry Association’s amicus brief in Kirtsaeng indicates).  The answer, ultimately, lies with the courts.

Feel free to leave any questions, comments, or corrections.

   

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