The first-sale doctrine is an exception to copyright codified in the US Copyright Act, section 109. The doctrine of first sale allows the purchaser to transfer (i.e. sell, rent, or give away) a particular, legally acquired copy of protected work without permission once it has been obtained. That means the distribution rights of a copyright holder end on that particular copy once the copy is sold.
It is the principle that causes people to find the following example absurd:
- "If you purchase a Ford car, you may not drive it near a Chevy dealer, or trade it for a Chevy, because it was Ford's car."
The doctrine of first sale does not include renting and leasing phonorecords (recorded music) and computer software, although private non-profit archives and libraries are allowed to lend these items provided they include a notice that the work may be copyrighted on the copy.
As codified in section 117 (Limitations on exclusive rights: Computer programs) of US copyright law, consumers cannot make copies of computer programs contrary to a license, but may resell what they own.
Cases involving the first-sale doctrine
In 1979 Universal City Studios, Inc. et al. v. Sony Corporation of America Inc. et al. (often called "The Betamax Case"), resulted in a ruling that affirmed the First Sale Doctrine. This meant that Beta and VHS tapes could be purchased by video rental stores, and then rented out to the public, without permission from the copyright holders.
In 1983 the Consumer Video Sales/Rental Amendment of 1983 (1993, H.R. 1029/S. 33) tries to require anyone who wanted to rent out videotapes to obtain prior permission from the copyright owner. This was defeated.
In 1998 in Quality King Distributors Inc., v. L'anza Research International Inc. (1998, WL 9625)  (http://supct.law.cornell.edu/supct/html/96-1470.ZO.html) there was a unanimous ruling: in a case involving distribution of hair care products, the Supreme Court found that the doctrine does apply to importation into the US of goods which were made in the US, then exported. This is significant for grey market imports of software, clothing and other goods, where the price outside the US may be lower than the price inside. The importation of goods first manufactured outside the US under the copyright laws of other countries was specifically excluded from that decision, leaving US copyright holders free to take action against foreign distributors who sell products made in their region into the US market.
The first-sale doctrine and computer software
The first-sale doctrine as it relates to computer software is an area of legal confusion. Software publishers claim the first-sale doctrine does not apply because software is licensed, not sold, under the terms of an End User License Agreement (EULA). The courts have issued contrary decisions regarding the first-sale rights of consumers.
District courts in California and Texas have issued decisions applying the doctrine of first sale for bundled computer software in Softman v. Adobe (2001) and Novell, Inc. v. CPU Distrib., Inc. (2000) even if the software contains a EULA prohibiting resale. In the Softman case, after purchasing bundled software (A box containing many programs that are also available individually) from Adobe Systems, Softman unbundled it and then resold the component programs. The California District Court ruled that Softman could resell the bundled software, no matter what the EULA stipulates, because Softman had never assented to the EULA. Specifically, the ruling decreed that software purchases be treated as sales transactions, rather than explicit license agreements. In other words, the court ruling argued that Californian consumers should have the same rights they would enjoy under existing copyright legislation when buying a CD or a book.
In a more recent case involving software EULA's and first-sale rights [Davidson & Associates v. Internet Gateway Inc (2004)] (http://www.freedom-to-tinker.com/doc/2004/bnetd_30sep.pdf), the US District Court for the Eastern District of Missouri issued a ruling which appears to contradict the position of the Californian and Texan courts. The first sale reasoning of the California District Court in Softman v. Adobe was challenged, with the court ruling '"The first sale doctrine is only triggered by an actual sale. Accordingly, a copyright owner does not forfeit his right of distribution by entering into a licensing agreement.' In addition, the Court found the plaintiffs EULA, which prohibited resale, was binding on the defendants because 'The defendants .. expressly consented to the terms of the EULA and TOU by clicking "I Agree" and "Agree."' This runs counter to Softman v. Adobe. The difference in these rulings has yet to be resolved by a superior court.