Weekly Update

Managing digital resale

If Apple and Amazon get their way, the ability to resell digital media will be a feature, not a right.

One month after news broke of a patent issued to Amazon for an electronic marketplace for used digital goods, Apple has filed an application for a patent on a system to create a used-digital marketplace of its own.  The application was published Thursday by the U.S. Patent & Trademark Office.

The two proposed systems are not completely identical. Some implementations described in Apple’s application, for instance, would result in a more distributed system than the centralized marketplace described in Amazon’s patent. But they are similar in one critical respect: neither seeks to enable a actual free market in used digital goods. Instead, both Amazon and Apple envision a system in which the ability to transfer, trade, and resell digital goods is a value-added feature of buying those goods from Amazon and Apple in the first place, and of using their respective platforms.

As I noted in previous posts (see here and here) the system envisioned in the Amazon patent is a carefully managed service, in which the business rules, up to and including pricing, would be set by Amazon and/or the rights owners, and which would be restricted to Amazon customers. Though differing in the details, the system described in Apple’s patent application is similarly restricted:

A first user purchases a digital content item, such as a digital book, from an online store. The first user later decides to sell the digital content item to a second user. The first user and/or the second user notify the online store of this arrangement. The online store determines whether one or more criteria are satisfied in order to allow the transfer in ownership to take place. If the one or more criteria are satisfied, then the online store stores data that reflects the transaction and updates authorization data that authorizes the second user to access the digital content item and prevents the first user from accessing the digital content item. Alternatively, instead of a third party determining whether one or more criteria are satisfied, the first (or second) user’s device makes the determination and may be responsible for preventing the first user’s device from further consuming the digital content item. In some embodiments, the online store and/or the publisher of the digital content item may receive a portion of the proceeds of the transfer [emphasis added].

The highlighted sentence is the key. Like Amazon, Apple is not asserting that its users have a right independent of their being Apple customers to resell digital goods, as they would with physical goods. It’s describing a service that allows them to transfer digital goods among themselves under Apple’s supervision.

Nor is Apple looking to settle the long-standing question of whether “purchasing” digital goods actually confers ownership.

The following description includes the phrases “authorized access to”, “authorization to access,” and “authorized to access” a digital content item. Such phrases are used interchangeably with phrases “ownership of,” “owns,” and “owner of” a digital content item. In other words, a user that is “authorized to access” a digital content item is referred to herein as the “owner” of the digital content item, regardless of whether the terms of the agreement by which the user acquires access characterize the user as an actual owner [emphasis added].

The Apple application also describes at length the restrictions that could apply to transfers, including:

  • When (Resales could be windowed to limit the impact of used sales on sales of new goods.)
  • To Whom (Only those with an account with the intermediary, i.e. Apple.)
  • How Often (Resales could be metered.)
  • Amount (Minimum prices for transfers may be set by the rights owner.)

The right of consumers to resell digital movies, music, ebooks and games they have purchased continues to be a hot-button issue in the industry. And it could soon get hotter still, with the court hearing the ReDigi case expected to hand down its decision any day now. But what Apple and Amazon are up to here has less to do with used-goods per se than with their competing device-content ecosystems.

The distinction is a critical one for rights owners as well as consumers. Neither Amazon nor Apple has an interest in under-cutting sales of new digital content on its own platform by offering used goods at a discount. Rather, their interest is in keeping their users inside their own walled gardens. One way to do that is to enhance the value of being in those gardens by adding features to them, like the ability to trade the goods you purchase there.

Clearly, both Apple and Amazon are trying to strike a balance by offering users a limited ability to swap their digital goods with other users. That need gives rights owners leverage in negotiating the scope and terms of that swapping. If they’re smart, rights owners will work with Amazon and Apple to develop a robust but carefully managed market in used digital goods rather than letting a thousand ReDigi’s bloom beyond their control.