Audiobooks can be rented without publisher's consent: first sale exception does not apply
January 26, 2007
Today the Sixth Circuit considered an issue that has not yet been addressed by any other United States Court of Appeal: whether the record rental exception to copyright law's first sale doctrine codified in 17 U.S.C. § 109(b)(1)(A) applies to all sound recordings or only to recordings of musical works. A divided panel held that the exception only applies to musical recordings, not audiobooks, potentially clearing the way for more widespread rental of audiobooks. More details of the case after the jump.Brilliance Audio, a producer and seller of audiobooks, sued a competitior, Haights Cross Communications. Haights was buying Brilliance's audiobooks and repackaging them for rental, lease, and lending at libraries and other locations. Brilliance sued, claiming copyright and trademark infringement. The Sixth Circuit affirmed the lower court's dismissal of the copyright claims. Generally, under copyright law's first sale doctrine, once a copyright holder sells a copyrighted work, the purchaser may dispose of the work in any manner he or she sees fit. There are exceptions to this, enacted in 1984, for sound recordings and computer programs. The court analyzed this exception (found in 17 U.S.C. § 109(b)(1)(A)), and found it to be ambiguous as to whether it was intended to exempt all sound recordings from the first sale doctrine or just certain classes of sound recordings. The text of the statute is as follows:
(b)(1)(A) Notwithstanding the provisions of subsection (a), unless authorized by the owners of copyright in the sound recording . . . and . . . the musical works embodied therein, neither the owner of a particular phonorecord . . . may, for the purposes of direct or indirect commercial advantage, dispose of, or authorize the disposal of, the possession of that phonorecord . . . by rental, lease, or lending, or by any other act or practice in the nature of rental, lease, or lending.
Because the statute first refers to "sound recordings" in general, but then identifies the "musical works embodied" in the sound recordings, the court found that it was not clear whether Congress intended to exempt all sound recordings or only those embodying musical works. Turning to the legislative history of the statute, the court found that the statute was enacted to protect the music industry, and accordingly found that the statute only exempts sound recordings of musical works, not other sound recordings. As a result, because an audiobook is not a sound recording of a musical work, it does not gain the benefit of this exception. The dissent believed the statute was not ambiguous, and the exception to the first sale doctrine should apply to audiobooks as well as musical recordings. The end result is that a lawful purchaser of an audiobook can now rent, lease, or loan the audiobook to anyone he or she would like without the author's consent. The question now becomes what effect this will have on the audiobook and rental industry. Will businesses that currently have a rental-based business model (such as Blockbuster or Netflix) begin renting audiobooks? Time will tell. Haights is not totally off the hook, however, as the court reinstated Brilliance's trademark claims against it based on its repackaging of Brilliance's products. The copyright portion of the decision, while only binding in the Sixth Circuit (Michigan, Ohio, Kentucky, and Tennessee), will likely have persuasive effect in other circuits because it is the first case addressing the issue. Hat tip: Decision of the Day blog.
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