The resale of used digital games might never be as successful as the resale of physical games. Not only has there been an attempt to restrict used games of all types by the publishers, it also remains unclear whether a used digital game market would even be legal in the United States.
Used disc sales are protected in the United States under the longstanding “first sale doctrine,” codified in section 109 of the Copyright Act. But the next generation of consoles is poised to reduce (if not eliminate altogether) the user functionality of pre-owned discs. Microsoft is rumored to be planning implementation of single-use online game activation codes in its next Xbox generation. A Sony executive recently told Eurogamer that used discs will be playable on the next PlayStation console, although further details have not been announced.
It’s argued that digitally-distributed content falls outside the scope of the first sale doctrine. Vernor v. Autodesk held that section 109 does not protect unauthorized transfers of software user licenses. Still, two recent developments suggest that a market for used digital content may not be so legally or commercially tenuous—at least outside the United States.
First, in Germany, a consumer advocacy organization has sued Valve Corporation over Steam users’ purported right to resell the games that they “purchase.” Games delivered via Steam are linked to individual user accounts. Like single-use activation codes, access to games may not be shared between users.
However, the Court of Justice of the European Union (CJEU) ruled in July 2012 that used licenses for downloadable software were freely transferable by purchasers without the permission of the software publisher. That case, UsedSoft GmbH v. Oracle International Corp., also implicated Germany’s adoption of the European Union’s copyright exhaustion doctrine. A spokesperson for Germany’s Federation of German Consumer Organizations tells PC Advisor that the CJEU ruling provides a sufficient basis for a new claim against Valve. (The organization lost a similar suit against Valve in Germany in 2010.)
The second development comes from outside of the videogame business. ReDigi, Inc., which sells “pre-owned” digital music in the US, announced in January that it will soon expand into Europe. The expansion comes as the company is awaiting judgment in a copyright infringement action brought against it by Capitol Records in the U.S. District Court of New York.
A decision of Capitol Records, LLC v. ReDigi Inc. could help those in the videogame industry better ascertain whether the first sale doctrine applies to digital content licenses. But in Europe, where first sale principles appear to encompass both downloadable and physical software, ReDigi could help legitimize the used digital content market.
ReDigi is not the only company interested in selling used digital content either. In late January, Amazon Technologies, an Amazon.com subsidiary, was granted a U.S. patent for an “electronic marketplace for used digital objects” such as “e-books, audio, video, [and] computer applications.” As the Washington Post notes, the patent does not mean that Amazon has any immediate plans to sell used digital content. However, as paidContent points out, ReDigi will now have to make sure that its site avoids patent infringement as well as copyright infringement. The same goes for any company looking to create a similar marketplace for used digital games.
Historically, retailers like GameStop have not shared revenue from used game sales with publishers. If a used digital games market gained legal recognition in the U.S., game publishers and distributors could stand to lose sales—similar to how used game discs have impacted sales of new physical copies. This could lead to publishers asking for a cut of used digital game sales or a more persistent effort to eliminate the resale of their games without purchasing an additional license. Meanwhile, companies like GameStop, Amazon, and eBay could see new business opportunities as marketplaces for used content licenses. Such a model may be without precedent in the video game business, but it has long been a facet of content licensing deals between movie studios and video distributors like Netflix.