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12B first sale
1909 Act: §41
1947 Act: §27
1976 Act: §§109, 202
“[T]he copyright is distinct from the property in the material object copyrighted, and the sale or conveyance, by gift or otherwise, of the material object shall not of itself constitute a transfer of the copyright, nor shall the assignment of the copyright constitute a transfer of the title to the material object but nothing in this Act shall be deemed to forbid, prevent, or restrict the transfer of any copy of a copyrighted work the possession of which has been lawfully obtained.” (1909 Act, §41; almost verbatim, 1947 Act, §27)
“Ownership of a copyright, or of any of the exclusive rights under a copyright, is distinct from ownership of any material object in which the work is embodied. Transfer of ownership of any material object, including the copy or phonorecord in which the work is first fixed, does not of itself convey any rights in the copyrighted work embodied in the object; nor, in the absence of an agreement, does transfer of ownership of a copyright or of any exclusive rights under a copyright convey property rights in any material object.” (1976 Act, §202)
Bobbs-Merrill Company brought suit against Isidor Straus and Nathan Straus, partners as R. H. Macy & Company “to restrain the sale of a copyrighted novel, entitled The Castaway, at retail at less than $1 for each copy.”
Bobbs-Merrill “is the owner of the copyright upon The Castaway, obtained on the 18th day of May, 1904, in conformity to the copyright statutes of the United States. Printed immediately below the copyright notice, on the page in the book following the title page, is inserted the following notice:
“‘The price of this book at retail is $1 net. No dealer is licensed to sell it at a less price, and a sale at a less price will be treated as an infringement of the copyright.’
“‘The Bobbs-Merrill Company.’”
The Supreme Court reported:
“The defendants have sold copies of the book at retail at the uniform price of 89 cents a copy, and are still selling, exposing for sale, and offering copies of the book at retail at the price of 89 cents per copy, without the consent of the complainant… .
“The copyright statutes ought to be reasonably construed, with a view to effecting the purposes intended by Congress. They ought not to be unduly extended by judicial construction to include privileges not intended to be conferred, nor so narrowly construed as to deprive those entitled to their benefit of the rights Congress intended to grant… .
“What does the statute mean in granting ‘the sole right of vending the same?’ Was it intended to create a right which would permit the holder of the copyright to fasten, by notice in a book or upon one of the articles mentioned within the statute, a restriction upon the subsequent alienation of the subject-matter of copyright after the owner had parted with the title to one who had acquired full dominion over it and had given a satisfactory price for it? It is not denied that one who has sold a copyrighted article, without restriction, has parted with all right to control the sale of it. The purchaser of a book, once sold by authority of the owner of the copyright, may sell it again, although he could not publish a new edition of it.
“In this case the stipulated facts show that the books sold by the appellant were sold at wholesale, and purchased by those who made no agreement as to the control of future sales of the book, and took upon themselves no obligation to enforce the notice printed in the book, undertaking to restrict retail sales to a price of $1 per copy.
“The precise question, therefore, in this case is, Does the sole right to vend (named in 4952) secure to the owner of the copyright the right, after a sale of the book to a purchaser, to restrict future sales of the book at retail, to the right to sell it at a certain price per copy, because of a notice in the book that a sale at a different price will be treated as an infringement, which notice has been brought home to one undertaking to sell for less than the named sum? We do not think the statute can be given such a construction, and it is to be remembered that this is purely a question of statutory construction. There is no claim in this case of contract limitation, nor license agreement controlling the subsequent sales of the book.
“In our view the copyright statutes, while protecting the owner of the copyright in his right to multiply and sell his production, do not create the right to impose, by notice, such as is disclosed in this case, a limitation at which the book shall be sold at retail by future purchasers, with whom there is no privity of contract. This conclusion is reached in view of the language of the statute, read in the light of its main purpose to secure the right of multiplying copies of the work,—a right which is the special creation of the statute. True, the statute also secures, to make this right of multiplication effectual, the sole right to vend copies of the book, the production of the author’s thought and conception. The owner of the copyright in this case did sell copies of the book in quantities and at a price satisfactory to it. It has exercised the right to vend. What the complainant contends for embraces not only the right to sell the copies, but to qualify the title of a future purchaser by the reservation of the right to have the remedies of the statute against an infringer because of the printed notice of its purpose so to do unless the purchaser sells at a price fixed in the notice. To add to the right of exclusive sale the authority to control all future retail sales, by a notice that such sales must be made at a fixed sum, would give a right not included in the terms of the statute, and, in our view, extend its operation, by construction, beyond its meaning, when interpreted with a view to ascertaining the legislative intent in its enactment.”
The Hamptons, operators of the Silent Movie Theater in Los Angeles, scheduled and showed Paramount’s 1923 movie The Covered Wagon without contract from Paramount. Hampton bought a 16mm print of the film from a Kodak subsidiary on February 21, 1938. “This print bore a notice of Paramount’s copyright on the runner or leader film immediately preceding the film of the photoplay itself.” Hampton was told by a Paramount attorney April 21, 1954, not to show it (after Paramount became aware of previous unauthorized showings, which Paramount decided not to prosecute). Hampton did show it in his theater April 27, 1955, and despite protest from Paramount, showed it the remainder of the week.
The film print had been sold outright, but specifically for nontheatrical exhibition (such as in homes). “The 1927 agreement between [Paramount] and [Eastman Kodak/Kodascope] did not operate as an assignment of [Paramount]’s right of public performance for profit [17 U.S.C. § 1 (d)], so the right of commercial exhibition has at all times remained vested in [Paramount].” Copyright notice (“in proper form”) was on the 16mm print on “the runner or leader film immediately preceding the photoplay itself”.
When Hampton was sued by Paramount, he sued against both Paramount and Kodak, owner of the Kodascope subsidiary which had sold the print, contending that Kodak was at fault for selling him a print with limited rights. The appeals court found Paramount and Kodak blameless. “Paramount had the right to assume this printed assertion of right [the notice], which was flashed on the screen every time the film was shown, provided ample notice to Hampton of Paramount’s interest in the film… .
“The real cause of Hampton’s trouble was not his lack of knowledge of Paramount’s interest. Rather, it was his unwarranted reliance on the assertion of a third party [presumably Eastman Kodak’s not indicating restrictions] and his failure to use the means at had [he made no phone call to Paramount] to ascertain the extent of the interests asserted.”
“About 1930 silent films were considered obsolete for general commercial exhibitions. From that time on Kodascope rented and sold 16mm (‘substandard’) prints of these films without restriction. They were openly advertised in catalogs of Kodascope and many other distributors, and were openly sold and traded by Kodascope and other dealers, all without restriction.” (EDITOR’S NOTE: The decision does state “About 1930”, yet the argument would make more sense (and been accurate) had it read, “After 1930, silent films were considered obsolete for general commercial exhibitions.”)
The defendant said that he legally obtained his prints of copyright movies. The studios sued for “selling, leasing and trading [film prints] without their consent.” The finding was that there was infringement, the judgment being harshest against the plaintiff having rented his prints to several institutions named within the decision. Nonetheless, there were judgments that the defendant “sold or traded” prints, “All of this without plaintiffs’ permission and in violation of their rights under copyright laws.”
Even with the verdict against the collector, the decision does indicate grounds on which the collector might have prevailed had it not been for his renting and reselling: “In presentation of their claims of copyright infringement, the plaintiffs each presented one witness from their corporate structure. These witnesses testified that it was the established policy of their corporations not to sell or give away prints and that their distribution systems for prints were designed to effect this policy. However, the testimony consisted primarily of generalities, and there were significant gaps in the experience and knowledge of each of the plaintiffs’ witnesses. No comprehensive system of accountability for the control of plaintiffs’ motion picture prints was ever established by the plaintiffs’ evidence. In defense, the defendant presented evidence of numerous transactions entered into by the plaintiffs transferring control of prints to other parties under conditions which the defendant claims makes these transfers ‘first sales’ within the interpretation of Section 27 of the Act.”
A collector and reseller of 16mm prints of copyrighted movies was sued by the studios who owned the copyrights. The studios contended that these movies had never been offered for sale. (At the time of this case — before homevideo came into being and when few films were sold outright to home users on 16mm, 8mm and Super 8 — it would be possible for a studio to argue that its films had only been made available to theaters and television and then only by lease.) The defendant prevailed because he had proof that at various times the studios had sold prints of the films (thus, there had been “first sale”) and therefore a private individual could own these particular copies of the films just as legally as millions of readers own copies of books. (EDITOR’S NOTE: Books owned by private individuals must be copies authorized by the rights-holder to be legal, and owners of these copies may not create further copies from them. The same principle applies to legal copies of movies. Please note that all parallels to book ownership within this paragraph are interpolations of the website editor and do not appear in the judge’s decision.)
“Each of the plaintiffs claims that it has never sold or given away any print of any of the motion pictures on which infringement is alleged or on which it claims copyright and that it has never authorized the defendant to acquire or sell any such print. The defendant, on the other hand, argues that these seven plaintiffs have, in transactions which constitute ‘first sales’ under §27 of the Copyright Act, placed thousands of 16mm feature length motion picture prints into legitimate commerce. Essentially he argues that such a vast number of ‘first sales’ together with the presumed lawfulness of his possession of the film prints in question, entitles him to judgement absent a showing that one of the prints which he sold had been stolen, lost or illegally duplicated.
“Each plaintiff produced one witness who testified that to his or her knowledge no 16mm feature length print of a motion picture on which it claimed copyright had ever been sold or given away. The Court finds that there were significant gaps in the experience and knowledge of each of the plaintiff’s witnesses which substantially detracted from the persuasiveness of their testimony. Many of the motion pictures on which infringement was alleged were first released years prior to the dates the various witnesses commenced employment with their respective companies. Many films were first distributed in the 1930’s, years before some witnesses had any involvement with these plaintiffs whatsoever. While this fact does not disqualify such witnesses’ testimony, it does effect the persuasiveness of such testimony. Most of the witnesses had little or no experience in syndicated television distribution. While this would not necessarily render incompetent any testimony they might give as to television distribution practices, the persuasiveness of such testimony is again effected. The defendant’s evidence indicated that nearly half the prints in circulation among film collectors nationwide were formerly television prints… .
“The Court further finds that the plaintiffs, in distributing or in otherwise disposing of 16mm feature length motion picture prints have employed a variety of methods. American International Pictures, Inc. (AIP), for example, has distributed great numbers of prints to television stations throughout the country. These distributions frequently are governed by instruments which, in legal effect, give the recipient stations much greater rights with regard to the prints distributed than a mere lessee of the prints would have. Many of these instruments which were received into evidence did not use the term ‘lease’ but, rather, used the term ‘purchase’ in referring to the station’s acquisition of a print.”
The Court cited a passage in an AIP contract with a television station:
Upon the completion of the term of this agreement, we shall offer all prints purchased by us to you, and you may purchase said prints at terms to be mutually agreed upon.
“In its annual reports to stockholders for the last four years, AIP has listed revenues from the ‘sale of prints’”.
“[S]ales of 16mm feature length prints of motion pictures on which Columbia claims copyright are sold to the general public by a large New York City film library which, according to the testimony adduced at trial, is authorized, not only by Columbia but by all the plaintiffs in this action, to sell prints on which they claim copyright… . Thus, by dealings with salvage companies and through the activities of its authorized sales representative in New York, Columbia has effected sales of 16mm feature length motion picture prints on which it claims copyright.
“Metro-Goldwyn-Mayer, Inc. (MGM) has likewise effected sales of 16mm feature length motion picture prints through this same film library and has utilized television distribution agreements similar to those used by AIP… . Many MGM television contracts also provide for the purchase of prints by stations for prices which vary according to the expense involved in manufacturing the print. The ‘Price Per Print’ paid by the station is always in addition to the fee paid to MGM for the right to exhibit the motion picture imprinted on the film.
“Twentieth Century Fox Film Corporation (Fox) utilizes many of the distribution procedures used by other plaintiffs but also … delivers film prints to various other companies under terms which go far beyond those of a mere lease. For a number of years, Fox has had a contract with a company known as National Telefilm Associates (NTA) under the terms of which Fox, for a consideration, has delivered to NTA a considerable number of master duplicating prints from which negatives of 16mm feature length motion pictures are made. From these negatives, positives are made. The prints thus made belong to NTA. From the evidence adduced, it would appear that Fox retains no possessory or proprietary interest in them whatsoever. Fox’s Director of Global Print Operations testified that neither NTA nor the manufacturing laboratory accounted to Fox for the disposition made of these prints.
“Similarly Fox has authorized other companies to order prints from an independent laboratory to which negatives of motion pictures on which Fox claims copyright have been delivered. The authorized companies, for a consideration, then have the right to order unlimited quantities of positive prints from the laboratory. No accounting is due Fox for these films.
“Walt Disney Productions (Disney) has distributed films on which it claims copyright in much the same manner as the other plaintiffs. For instance, a contract between Disney and Radio Pictures, Inc. (RKO) dated April 13, 1953, relating to The Sword and the Rose was received into evidence. Under the terms of this contract Disney was to deliver a 16mm negative of this film to Technicolor Laboratory with authorization for RKO to order prints of the film. RKO was to advance the cost of the prints so ordered and was to be subsequently reimbursed from the proceeds of the contract. The contract also provided that unserviceable prints could be junked.
“Film prints on which Universal City Studios, Inc. claims copyright are also sold with authorization by the same film library in New York City mentioned above. Indeed catalogs and brochures received in evidence at the trial of this cause listed for sale some thirty separate titles of 16mm feature length motion pictures on which this plaintiff claims copyright.
“The same is true of United Artists Corporation (UA). But in addition to sales of motion picture prints which it releases by the same film library, it has engaged in the business of openly selling 16mm feature length motion pictures to the general public and has actively encouraged the hobby of film collecting. These sales have customarily been termed ‘life-of-print’ leases but a review of those transactions leaves little doubt but that, in reality, they are nothing more than sales. The customer makes but a single lump sum payment to UA and, in return, receives a 16mm print which he is not obligated to return. Frequently in correspondence soliciting such purchases, UA officials have advised prospective customers that they could ‘own films’ or that ‘we can sell you a good used black and white print’ (Emphasis added). In explaining the ‘life-of-print’ lease to one customer, a UA official wrote that:
“‘In the event of your death, the print will become the property of your heirs as provided for in your will.’”
What it came down to was that the studios had authorized prints to be made which could legitimately be acquired by collectors. “The plaintiffs have failed to show that these specific prints did not enter commerce legitimately (i.e., that they were stolen, lost or illegally copied).” The burden of proof was on the studios to prove this, which they didn’t.
Author Ken Weiss, commenting on the case of American-International [and five other studios] vs Evan H. Foreman [dba 16mm Filmland] (1975) in his book The Movie Collector’s Catalog, added from his own knowledge to the documentation provided by the Court decision:
Most of these studios, in years past, offered their films for outright sale to collectors, or anyone who would pay for them. For many years Warner’s, for example, had almost their entire black and white library for sale through Dominant Pictures Corporation, a subsidiary of United Artists Associated, Inc. All the “Gold Diggers” and Busby Berkeley films, the [Bette] Davis’, the Bogarts, the [Errol] Flynns, were for sale at prices ranging from $75 to $500. For original prints. I still have a brochure, distributed by United Artists Associated, which offered “used black and white” prints at $125 each, “life of print, collectors only.” Among the films being sold at $125 were “Jezebel,” “Sergeant York,” “King’s Row,” “They Died With Their Boots On,” “Maltese Falcon,” “Captain Blood,” “The Sea Hawk,” “I Am A Fugitive [From a Chain Gang],” “Little Caesar,” “Adventures of Robin Hood,” “Treasure of Sierra Madre,” “Yankee Doodle Dandy” and many others… . Other studios offered similar deals. And today [1970s] the studios have the gall (and the influence) to send FBI agents around like Keystone Kops asking collectors where and how they got their films.
Commenting on his layman’s understanding of the decision, Weiss writes: “So the message seems to be that as long as the collector is buying old original prints, he should be reasonably safe from harassment. Dupes (unless of public domain material) and reductions are an obvious no-no.” (EDITOR’S NOTES: The last sentence is important. “Dupes” are prints made from negatives that were made from a print. The source print might be presumed legal, but the duplicate not. “Reductions” are positive prints made from other positive prints without an intermediary negative. The aforementioned original prints are the most desirable because they come closer to the pictorial caliber of the camera negative.) (Quotation from Ken Weiss, The Movie Collector’s Catalog, Cummington Publishing, Inc., New Rochelle, NY, © 1977 Kenneth H. Weiss.)
Sullivan & Williamson own and operate a restaurant (Codfathers) in Kennebunkport. They showed “motion pictures publicly by means of video cassettes.” (The videocassettes were commercially-sold ones intended for showing in homes and to be rented to be shown in homes. The studios which made available the films did not intend for the cassettes to in any way compete with theatrical exhibitions.)
The restauranteurs were ordered liable to pay fines of $250-$10,000 per incident. The studios “sought no more than to accept the minimum award” so the 21 incidents cost the restaurant $5250, plus investigation and prosecution costs of $5335.58.
The defendants were a small computer company that installed Microsoft’s MS-DOS operating system on personal computers. The copies were not authorized to be sold stand-alone, yet were. Microsoft “traced a unit of MS-DOS 6.0 that Harmony sold… back to Amax Engineering, a Microsoft licensee that was authorized to distribute MS-DOS 6.0 exclusively with the sale of its personal computer systems.” Four units of MS-DOS 6.2 “seized from defendants’ premises” were traced “back to Arche Technologies, a Microsoft licensee that was authorized to distribute MS-DOS and Windows only with its computer systems.” The defendants, as purchasers, “were subject to the same licensing restrictions under which those licensees operated.” Microsoft was known within its industry (at that time) not to sell stand-alone operating systems, aside from upgrades.
“Defendants argue that even though they sold Microsoft products without a license, they are immune under the first sale doctrine from liability for copyright infringement. Defendants fail to prove that the first sale doctrine applies because they do not trace their purchase of Microsoft products to a ‘first sale’ by Microsoft or any party authorized by Microsoft to sell the products… .
“In civil actions for copyright infringement, the defendant has the burden of proving that the particular pieces of the copyrighted work that he sold were lawfully made or acquired… .
“Although a sale of a copyrighted work by a party authorized by the copyright holder may constitute a ‘first sale’ for purposes of the first sale doctrine, defendants have the burden of tracing the chain of title to show that their authority to sell Microsoft products flows from the copyright holder… . The fact that defendants bought their Microsoft products from another party does not by itself establish a first sale… .
“Plaintiff’s counsel declares that Microsoft only licenses and does not sell its products. Entering a license agreement is not a ‘sale’ for purposes of the first sale doctrine. Moreover, the only chain of distribution that Microsoft authorizes is one in which all possessors of Microsoft products have only a license to use, rather than actual ownership of the products.”
And, “even assuming that Microsoft sells its software to its licensees on a stand-alone basis, this does not change the fact that when the licensees in turn distribute the software, they are restricted by the license agreement in a way that the copyright holder itself is not… . [I]f defendants purchased their products from Microsoft licensees who were acting outside the scope of their licenses by selling the products stand-alone, any distribution of the products by defendants, whether within the scope of plaintiff’s license agreement or not, would constitute copyright infringement… . Not being parties to any license agreement with Microsoft, defendants are ‘complete strangers’ to Microsoft, and their violations of the licensing agreement must of necessity be seen as claims arising under the copyright laws rather than the law of contracts.”
Cases Summarized in Other Sections
|RCA Manufacturing Company, Inc. vs Paul Whiteman, et al (launch this) involved objections over the playing of commercially-sold recordings on radio.
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