September 26, 2004
Ongo Bongo’s CD Rental Service and First Sale
Robert Young, having tracked previous posts about digital first sale, pointed me to Ongo Bongo. Apparently, the company is a CD rental service. The exact scope is a little unclear from the website, which only mentions this service while noting in the FAQ that no such service exists yet. However, other sources have reported that the company will operate much like Netflix. (I couldn’t find any of that language on the site, but perhaps I just missed something in my quick look.)
Unless they have a license from the sound recording copyright owners (that is, the record labels), a CD rental service of this sort is clearly infringing. As I have discussed, the first sale doctrine is an exception to the exclusive right to distribute and generally allows people to sell, rent, loan, or give away lawfully made copies of copyrighted content; once Netflix buys the copy of the DVD, they can distribute that copy to others without it infringing the copyright. However, a few exceptions to first sale apply. The owner of a particular sound recording copy (a phonorecord) may not:
“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. Nothing in the preceding sentence shall apply to the rental, lease, or lending of a phonorecord for nonprofit purposes by a nonprofit library or nonprofit educational institution.”
So there you have it. First sale doesn’t cover music rental. I’m not sure what other sort of defense you could use. If Ongo Bongo is actually going through with this service, they better have a license.
Filed by Derek Slater at 12:30 pm under General news
6 Comments
Record and software rentals have been exceptions to the First Sale Doctrine (FSD)since 1984 and 1990 respectively, but I think you have it right when you say FSD is the exception.
Kamarck argued that the FSD’s time was coming back in an article way back in 1997. His theory was based on (1) the additions of soundtracks to DVDs and (2) the probable future prevalance of copying technologies. He stated, “Under Gatt, the United States must abolish the First Sale Doctrine for ‘cinematic works’ if there is evidence of widespread consumer copying*.” (above article).
Under that theory, ironically, suppression of DeCSS and DVDXCopy would have saved FSD (much to RIAA/MPAA chagrin).
Personally, I think it’s a matter of consumer knowledge/custom. Now that consumers are used to the idea of NetFlix and Blockbuster Game rentals, OngoBongo might have a fighting chance if they can get past the inevitably forthcoming injunction (OR unless their backers get wise to the Record Rental Amend. of 1984 and pull funding first).
*on the GATT theory: TRIPS Article 11 allows studios to stop Blockbuster to stop renting a movie if suffiecient copying by consumers is demonstrated. This will never happen. Why? studios sell more DVD’s when a movie is exposed via rental. This “should” demonstrate that renting is good for business. However, I guess MPAA would argue this is only true because their suppression of duplication technologies is working, and duplication methods for CDs are already widespread.
A careful reading of their FAQ suggests that Ongo Bongo’s position is that they are selling used CDs, with a very liberal return policy. It also sounds like anyone can buy a used CD from their website, but only members get the benefit of unlimited returns.
In their terms they say:
Credit Card Billing – Lost/Unreturned/Damaged CDs
You agree to allow us to charge your credit card for the listed purchase price of a CD in the following situations:
if anyone can come up with a way around this, I will pay a very nice fee for your genius. please contact me by e-mail.
damonlawner@earthlink.net
Want a way around this? Just charge a restocking fee, and you’re golden.