Why License Agreements Do Not Control Copy Ownership: First Sales and Essential Copies

In this paper I argue for an analytic approach that courts should employ when determining ownership of a tangible copy of a copyrighted work. Courts are surprisingly divided on this apparently simple question, as I will detail several distinct and conflicting approaches, sometimes adopted within the same Circuit.

I argue that a correct approach to determining copy ownership must be logically correct, must respect precedent, and must respect congressional choices. To be logically correct, a court's approach must not equivocate with respect to the ambiguously used term "license" and must not conflate ownership of a copy with ownership of a copyright. It also must not look to factors that are wholly orthogonal to resolving the issue.

To respect precedent, a court's approach must consider the lessons of the few relevant Supreme Court cases – which are now rarely cited at all – and should not needlessly create Circuit conflicts. These precedents suggest that the Supreme Court is hostile to boilerplate attempts to use contract to thwart the first sale doctrine and has repeatedly rejected contract restrictions that attempt to expand the monopoly granted by Congress beyond its intended scope.

To respect congressional choices, a court's approach should recognize how the careful enumeration of a copyright owner's rights in 17 U.S.C. § 106 and the limitations on and exceptions to those rights in sections 107 through 122 act together to create federal policies, embodied in the Copyright Act, that achieve the purposes and objectives of Congress. Once these sections and their interaction are properly understood, courts must at least ask whether the enforcement of un-negotiated contracts of adhesion between parties of unequal bargaining power is statutorily or constitutionally preempted.

In presenting the approaches taken by courts and in arguing for a correct approach I will conclude that a right to perpetual possession of a copy is the primary, if not the dispositive factor, in correctly determining copy ownership. I conclude by applying this approach to the facts of MDY Industries LLC v. Blizzard Entertainment, Inc. in order to illustrate why the district court's holding on copy ownership was erroneous.