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How Apple and Amazon learned to share

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Both Apple and Amazon this week unveiled plans to allow limited sharing of digital media files purchased through their respective online storefronts. Apple calls its system “Family Sharing” and it’s enabled in iOS 8, which is also rolling out this week. Amazon calls its plan “Family Library” and it will be available at the end of October on Kindle devices and apps.

Under the programs, when a husband downloads an ebook on a Kindle, for instance, his wife will be able to download the file as well to her Kindle Fire tablet or the Kindle app on her phone. Both programs include restrictions meant to ensure the files don’t go beyond the immediate household members.

The timing of the two announcements is not likely a coincidence. In fact, both companies have been working on the idea in parallel for several years, and the first public hints of the plans surfaced within a month of each other in early 2013 in a pair of matching patents. For those interested in the history, here are excerpts from a pair of reports I published at the time for the newsletter Content Licensing (no longer published).

On Amazon:

Ever since engineers first worked out how to transfer digital files from one computer to another over a network the legal status of downloaded ebooks, music, and movies has been the subject of controversy. Debates among copyright owners, technologists, and legal scholars over whether the first sale doctrine does, or should apply to digital “copies” have at times resembled theological disputes in their intensity. So when word surfaced recently that Amazon had been issued a patent for an “electronic marketplace” in used digital goods, many in the technology and copyright industries braced for imminent resumption of the religious wars.

Those preparations may be premature, however. While the system described in U.S. Patent No. 8,364,595 is indeed ambitious, it was applied for in 2009 and Amazon has said nothing in the four years since about when, or even whether it intends to launch such a marketplace…

More to the point, though, the system described in the Amazon patent doesn’t really rest on the first sale doctrine. Rather, it’s more like an elaborate work-around, designed to preserve “scarcity” of digital copies and for Amazon to potentially negotiate a license directly with
content owners. Here’s how Amazon describes the goal of the system in the patent application:

  • While a physical object such as a copy of a paperback book only exists in one place at a time, easy and inexpensive copies of a digital object without loss of fidelity are possible. Thus, easy copying and repeated sale of the same digital object is possible, potentially eliminating scarcity of the digital object. Because of this, many owners implement digital rights management to prevent such impermissible transfers. Furthermore, the digital object as originally transferred to the initial purchaser may have license restrictions or other limitations on permissible use or further transfer. For example, a license to use a free download of a popular song may expire after a few days.
  • A secondary market which allows users to effectively and permissibly transfer “used” digital objects to others while maintaining scarcity is therefore desired. A “used” digital object is one to which a user has legitimate rights… and to which the user may permissibly transfer to another user.

The patent doesn’t fully define what constitutes a “permissible” transfer. But it’s clear from the technical description of the system that such permission could well come with strings attached:

  • Thresholds may be set which limit transfer of a used digital object after the occurrence of certain events. For example, a threshold may limit how many times a used digital object may be permissibly moved to another personalized data store, how many downloads (if any) may occur before transfer is restricted, etc. These thresholds help to maintain scarcity of digital objects in the marketplace and/or to comply with licensing requirements of the digital object, by putting conditions on when and how many times used digital objects may be transferred. These limits may be set for a specific digital object, a digital object type (such as a particular title of book), a digital object category (such as all movies), etc.

That’s not a broad assertion of the user’s rights under the first sale doctrine. It’s a description of a closed and metered ecosystem in which users have certain limited rights to trade in used movies and ebooks. It’s a value-added feature designed to make Amazon-world more fun to play in than Apple-world or Google-world.

On Apple:

One month after news broke that Amazon had been issued a patent for an electronic marketplace for used digital goods, Apple has filed an application for one of its own. The system described in Apple’s application, which was published by the U.S. Patent & Trademark Office, is broadly similar to the one patented by Amazon, covering e-books, digital movies and music, computer software, and other e-goods, although they differ in some technical particulars.

The Apple application references two earlier patents it received as far back as 2011 on elements of the used marketplace it envisions, so the new application cannot be said to be prompted specifically by news of Amazon’s patent. But the timing of its filing generally comports with our view that the Amazon patent was more about competing with Apple than about any broad assertion of consumers’ legal rights to resell digital content Like Amazon’s marketplace, the system envisioned in the Apple application is a closed ecosystem, in which Apple users would be able to sell, swap, and load digital content to other Apple users via an exchange managed by Apple.

An account in good standing with Apple would be a prerequisite for engaging in the exchanges. According to a summary of the claims in the
application:

  • Techniques are provided for allowing authorized access to (or ownership of) a digital content item to be transferred from one user to another. 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. [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…

Most important, both the Amazon and Apple systems would be compatible with the exchanges being licensed by rights owners and with
rights owners establishing the business rules and being compensated in some fashion for the movement of digital goods.

With a few tweaks, the systems described in the 2013 patents are more or less what we’re seeing in this week’s announcements.