Will individuals soon be able to buy and sell “used” digital media such as apps, ebooks, and music downloads? And if so, will they only be able to do this through Amazon? These are among the questions being asked after Amazon, Inc. was awarded a U.S. patent for an “electronic marketplace for used digital objects.” (U.S. Patent No. 8,364,595, available online at www.uspto.gov). The patent, which traveled a nearly 4-year journey from application to issuance, would permit users to create “personalized data stores”—presumably through Amazon—which would house digital media files and permit the files to be moved from one person’s store to another through a secure system. The granting of the patent, however, does not mean that Amazon will actually establish the marketplace, or that the use of the marketplace would be legal.
Sales of digital media now rival—if not exceed—their traditional analog counterparts. The Fifty Shades trilogy sold an estimated 20 million copies, roughly split between trade paperback and ebook formats. Published projections suggest that revenues from downloaded music—encompassing both individual downloads and streaming access—will exceed revenues for compact discs within the next 2 years. According to IHS Screen Digest, more movies are now watched online than are purchased on DVD or BluRay. However, up until now, a combination of technical and legal limitations have prevented individuals from reselling their digital content in the same way that they have been able to resell their books, DVDs, and CDs. The Amazon patent attempts to address both the technical and legal issues.
From a technical side, the proposed “electronic marketplace” would contain a system of processors, storage media, and software. The system would create a user’s “personalized data store” space to store “digital object(s) obtained from an authorized source.” These digital objects can include images, ebooks, audio and video recordings, apps, and other digital content. (The patent is silent on whether the system would require the content to be provided by Amazon.) If users wanted to sell, lend, give, or trade a digital object from their data store, the proposed recipient would also have to establish their own personalized data store. On receiving a request to move the digital object from one data store to another, the system would evaluate the request according to a series of rules, including the authorization for moves, the number of moves the digital object has already completed, and ultimately authorize or deny the move.
The patent allows the digital object transfer between the two users to be either in the form of streaming, downloading, or moving. Streaming under this patent is the same as currently recognized: allowing the transfer of the object without maintaining a permanent copy by the recipient once the stream is completed. The distinction between downloading and moving is more critical, however. Downloading transfers a digital object from one user to the other but maintains the object in the original data store as well as the new data store. Moving, however, transfers the digital object but then deletes it from the original store. As such, “moving” is the closest analogy to the sale of a physical object such as a book or CD.
The system for “moving” a digital object from one data store to another and deleting the original object will be a critical element in determining whether the electronic marketplace is legal under federal copyright law. Copyright’s First Sale Doctrine (available online at Title 17, Section 109 of the U.S. Code) permits individuals to “sell or otherwise dispose of” their particular copy of a copyrighted item, such as a physical book, CD, or DVD.
It is uncertain if and how the First Sale Doctrine applies to digital content. First Sale refers to “a particular copy” of a copyrighted work. Digital works don’t conform to the “particular copy” standard as the process of digital transmission involves the making of identical copies whether downloaded or streamed. “Moving,” as described by the patent, still would involve making a new copy in the new data store, even though the deletion of the original copy leaves the same net result of one “copy."
Additionally, most digital content is licensed rather than sold. Since the First Sale Doctrine requires ownership, most courts have held that the doctrine does not apply to content that is licensed. In addition, many content licensors use Digital Rights Management (DRM) techniques to control access to and/or further distribution of their content. The Digital Millennium Copyright Act (DMCA) prohibits circumvention of DRM systems.
The Amazon patent seeks to work around these issues through its “moving” system, as well as language in the patent that looks to “access rights associated with” the original digital object. This would seem to suggest that the system may only allow the transfer of content when the copyright owner gives permission through the use of access rights, or possibly when the copyright owner does not forbid transfer through its DRM. The former would be unquestionably legal under copyright law; however, the latter would be less certain.
The granting of the patent would seem to suggest that Amazon will set up its electronic marketplace in the near future. That is not Amazon’s only option, however. The company can license the patent for use by other digital content vendors such as Apple, eBay, or Barnes & Noble and take royalty income. They could also do both, set up their own marketplace for Amazon content, such as Kindle ebooks and apps, and other digital downloads, plus license the patent to other vendors for their specific content. Amazon could also opt not to pursue an electronic marketplace for “used” digital content and use its patent over the system to prevent others from setting up such marketplaces. This could serve to preserve Amazon’s market for “new” digital content.
New Virtual Currency—Amazon Coins
Preserving and/or enhancing their market may be a factor in another new development from Amazon: Amazon Coins, a virtual currency to be used exclusively for Kindle Fire apps, games, and in-app items. In a February 2012 press release primarily targeted toward app developers, Amazon indicated that it will be giving away “tens of millions of dollars” worth of Amazon Coins to customers during the expected May launch. The coins, which will have a value of $0.01 each, can only be used for Kindle Fire-related purchases.
The press release was silent on other mechanisms for obtaining or earning Amazon Coins beyond the initial promotional use. It would be expected that customers would be able to both purchase Amazon Coins through Amazon and likely could earn Amazon Coins through various promotions. Writing for CNET News, commentator Stephan Shankland compared Amazon Coins to airline frequent flier miles, describing the miles as “in effect, virtual currency,” that are earned in exchange for flying on the providers’ airline and “spent” on future flights and services. Shankland’s article expresses a couple of cautions about virtual currencies, noting that frequent flier miles have often been “devalued” when the number of miles needed for a flight is increased. Also, by limiting the buying power of the Coins to a limited product line, virtual currencies can be far less flexible than real money. Amazon Coins is set to launch in May.