In the law relating to intellectual property rights, there are few doctrines which controls or limits the rights of the owners of the copyrighted works. In this category, can be placed the Doctrine of First Sale. This doctrine tries to balance the claims of owners of IPR and the general welfare of the society in the long run. The doctrine of first sales is a common law doctrine, though not codified, but the doctrine has been inferred through the combined reading of various provisions of the Copyright Act.

Though the goal of the Copyright law is to reward the creators, thinkers for their works, the law however does not provide them a monopoly over their works. It cannot be blind to the social realities and the societal interest. Hence a niche is carved for giving effect to societal interests through the doctrine of first sale and a judicious balance is achieved between the rights of the creators vis-a-vis the general consumer public.

B. Section 14[1]

In the case of copyright, it covers wide varieties of work in its contours. Some of them include artistic works, dramatic works, films, literary works, academics, etc. The owner of copyright has bundle of rights in respect of the works. For example, he has the right to sell the books or restrain others from making copies of it, assign certain rights to others for a specific period of time and for a particular purpose.

These bundle of rights can be traced in the Indian Copyright Act, 1957 under Section 14[1]. From Section 14 it is clear that, irrespective of the kind of work, it is the exclusive right of the owner to issue copies of work to the public or communicate to the public.

Understanding the Doctrine of First Sale

The question which becomes pertinent is what happens when the book is sold in the market for the second time and subsequently thereon. Does this sale amount to infringement of copyright? It is then that the ‘Doctrine of First Sale’ steps in, which indeed forms the heart of the article. The law through this doctrine controls the rights of the owners to sell the issued works indefinitely. The doctrine of first sale results in the exhaustion of the right of second sale of the copyright owners.

Thus on the sale of copy of the work, the owner cannot retain control over the copy by virtue of his being owner of the copyright. Thus for the subsequent sale, no authorization or consent is required from the owner. This doctrine has wide spread implication because it legitimizes secondary market. The development of the doctrine, however, has taken place differently in different fields of Intellectual Property law. The basic question which arises is that- Once a copy has been sold legally, to what extent will the owner of a protected work, continue to exercise power over any subsequent sale or any distribution thereof?

Application of Doctrine with respect to different work

Since the impact of the doctrine is not the same in different works, it is necessary to analyze various works separately.

1. Literary, Dramatic, Musical and Artistic Works.[2]

From a bare reading of the Section 14, it follows that the owners of, artistic, dramatic, musical, literary works enjoy a common right. This right is to issue the copies of their works to the public, as long as these copies are not already in circulation. The explanation attached to Section 14 clarifies the meaning of the phrase ‘already in circulation’.

A copy which has already been sold once, shall mean a copy already in circulation. Section 14(a)(ii) of copyright act is pertinent to the present theme. This latter part emphasis that once the copy is circulating in the market the rights of the owner in that book is exhausted. Hence there is legal bar in the resale of this copy.

The issue which emerges is with regard to the place where the rights of the owner are deemed to be exhausted when the first lawful sale takes place.

1. Is it exclusive to a certain territory?
2. Are they exhausted only in India?
3. Can the rights be exhausted anywhere in the world?
4. The rights are strictly construed to be exhausted in the place where the owner intends that specific copy to be sold?[3]

There are several interpretations available to that effect.

The Copyright Act, implicates that a copy is understood to come in the circulation as soon as the first sale takes place. However, there is no indication about the place of circulation. If it were deemed to be in circulation in India, it would have been explicitly stated in the Act that the copies are to be first sold in India. The direct implication of this would be that the owner would have exhausted the right to resale the copy only in India and this would open several loopholes. Confining the silences in the law narrowly, would thus revive the right of the owner to re-issue the copies anywhere apart from India, since the rights have only been exhausted within the territory of India. This was clearly not intended by the legislators. The fact that the Copyright Act extends only to territory of India, cannot be overlooked.

The Indian Courts have tilted towards a second interpretation which upholds that the rights of the copyright owner are exhausted in those places where they intend their work to be sold. However, no clear reasoning has emerged out, in order for the Courts to adopt such an interpretation.

A third interpretation would mean that as soon as a legal copy is sold, the copyright owner loses all the rights with regard to the copy, all throughout the world. It could be understood as a Right in Rem and it is territory neutral as the rights would be exhausted in the entire world. This can be reasoned from the fact that section 14 does not state whether first sale would result in bringing the copies in circulation only in India. There is no restriction in the section to narrow the scope of circulation.

Even as regards the infringement defined under Section 51 of the Act[4], the import of infringing work is not allowed. The provision does not talk anything about the export of such work. Hence, it is safe to conclude that the exports of works in resale will be allowed. This would mean India would be follower of principle of international exhaustion with respect to the copyrights.

The above interpretation has not been followed by the courts fervently. The courts have considered the territorial divisions of rights and held that the doctrine of sale is applicable only within the territory in which the copyright owner intended that the work should be sold. The doctrine of first sale would not apply to rest of the territories and he will have the right of resale.

2. Uncertainty with respect to Computer programs and Rental rights[5]

The right of the owners of computer programs flows by virtue of Section 14(b)(ii). They enjoy a right similar to that of the owners of literary works to the extent that it relates to the issuance of copies of their software, not already in circulation. In addition, they also enjoy a right to rent the program to the extent that it is an essential object of the rent and also right to sell. The Indian Copyright Act was amended multiple times because of the concerns emerging from the commercial renting of the software.

On several occasions, those who were rented the software were see to replicate them illegally. The copyright owners would thus lose their value in the software. Their revenue would infact go down and they started losing interest in authoring new works or coming up with anything creative. Concerns like these were responsible for the Commercial Rental right to be covered under the purview of the Indian Copyright Act.Prima facie it appears that the doctrine of first sale does not apply because the right to sell and to give on commercial rent is so clearly spelt out in Section 14(b)(ii)[6]. However, the first part i.e. 14(b)(i) possess problem because it gives the same rights to the computer software owners as the literary owners.

Hence, a need for interpretation arises to ward off this contradiction. This can be interpreted in the following way. The owners of the computer programs have same rights as the owners of literary works. This is because section 14(b)(i) incorporates the provisions of 14(i) However, the next part of 14(b)(ii), specifically spells out the right to sell or give on commercial rent, etc. This being a particular provision will override the provision of clause(a) in so far as it relates to the rights of resale. Therefore, in the case of computer programs owners have the right to sell or give on commercial rent and therefore it constitutes exception to doctrine of first sale.

3. Exception: Films and Sound Recordings[7]

Under the Indian Copyright law, both the categories are an exception to the Doctrine of First Sale. The plausible reason is to increase the Return on Investment of the owners. A certain special position is construed for both the categories. This is concerning the rights of the primary copyright owner especially with regard to revenue. To prevent the creation of a second hand market running lawfully, the rights of the copyright owner are not exhausted subsequent to the first sale in case of films and sound recordings.

The owner exercises complete power and control over any subsequent sale or hire of their works in circulation. This is further validated by Article 11 of TRIPS[8] which recognizes the Rental right with regard to computer programs and films. In India, there is a close interplay between the film and music industries and thus we see the Rental Rights being extended to sound recordings as well.

Indian Jurisprudence through Case Laws:

Penguin Books Ltd. v. India Book Distributors and Ors.[9]

The plaintiffs, Penguin Books Ltd of England brought a suit for perpetual injunction against the defendants, M/s. India Book Distributors, restraining them from infringing Penguins' territorial license. Admittedly India Book Distributors, Bombay were importing, distributing and offering for sale in India 13 out of these 23 titles, most of them being well known. The main argument of the defendant was that those imported copies were not infringing copies under Section 51 of the Act.

What the section prohibits is importing of infringing copies and these copies were legally published and imported following all proper laws. The Delhi High Court granted the Penguin Books permanent injunction and restrain the defendants from importing and selling the books. The Court came to the conclusion that the copyrights of the plaintiffs is defeated by acknowledging that it is necessary for the foreign publishers to import them in India. Only after it is imported in India can it be said to be issued to public. The Court held the exclusive right of the Penguin to print, publish and sell these titles in India would extend to the exclusive right to import copies in India.

Warner Bros. Entertainment Inc. and Others v. Santosh V. G.[10]

The Plaintiffs who carried on the business of film production alleged that the defendants were giving films on hire without the copyright owner’s license and without any rental license. Thus clearly infringing the copyright under Section 51 read with Section 14(d)(ii) of the Copyright Act. The Court held that there was copyright infringement and distinguished the rights available in case of cinematographic works from literary, dramatic works. The doctrine of first sale is not applicable. As far as import of cinematographic works is concerned the court interpreted that under section 51(b)(iv)[11] import for commercial, non private use would amount to infringement.

John Wiley and Sons Inc. and others v. Prabhat Chander Kumar Jain and ors.[12]

The Defendants, Indian businessmen were selling the Low Price editions of plaintiffs books all over the world through their websites, while the low price editions were meant for sale only in certain territories. The defendants argued that since LPE were purchased in India in accordance with law and thereafter exported, no infringement is committed within the meaning of the Copyrights Act. The Court observed that the doctrine will not apply because there was a licensing agreement between the plaintiffs and their licensees. The Doctrine of first sale would not affect the rights of copyright owners though it may partially exhaust he rights of the exclusive licensee. The court held the doctrine applies only qua the exclusive licensees and not qua the owners. Hence, there is infringement of the copyright of the owner.

Advantages and Disadvantages

There are various advantages associated to the Doctrine of First Sale, making it all the more important to cover. Doctrine of first applies to only secondary sale. If a particular book is out printed, the two possible options would be to either reprint the work or look for second hand book. Reprinting can only be done by the publisher because he owns the rights over it, so this option is not available.

They may print or cease it forever. The second option is to look for second hand book. If the doctrine will not apply, then even the market for second hand books would be eliminated. Therefore, the intellectual content will be lost. If this book is of great importance, the next generation will be deprived of our cultural heritage.

Since a copyright owner’s permission is not required to sell a product in the secondary market, this gives a boost to the consumer base. They will be more accepting to retail in the secondary market considering their opportunity costs are lower. Also, the risk of investing in an Intellectual property is reduced. The free flow of goods is maintained in the market. In the absence of Doctrine of First Sale, a work which is protected under copyright could not have been sold second time.

The owner in this case would have no option but to abandon the goods when it is no longer desirable to keep them. This would lead to a lot of intellectual waste with very few end users to it. There is a societal dimension attached to it. Such works which could be used to impart knowledge to the public is easily bought and sold in the secondary market.

Thus, the shadow of the doctrine is used to enlighten the world and impart knowledge. Even after the copyright owner terminates production and distribution, the secondary channels act as effective carriers of information of cultural significance.

However, there are certain limitations to the Doctrine too. Thus, it is prudent to view it holistically. There is a loss of revenue to the new writers who are not yet established and want to earn revenue out of this profession. They will be disheartened as they are not able to enjoy the fruit of their effort entirely. The uncertainty in law puts the doctrine in gray area and open it to several interpretations. There is confusion regarding import of works abroad. If the doctrine is applied internationally, India will lose out on the foreign exchange and thus it would not be in the national interest. The doctrine is not uniform and discriminates between the films, sounds and the owners of literary works.

G. Conclusion:
It is clear from the above analysis that the Indian Perspective on the Doctrine of First Sale is work specific and varies in its applicability. The literary, dramatic and artistic works are covered by the doctrine. Films and sound recordings are an exception to it. The status of Doctrine of First Sale’s application to computer programs is not clear due to contradiction created by the provisions of section14(a)(ii)[13] and 14 (b)(i)[14].

Thus, the Doctrine of First Sale is not uniform in its application due to classification of works into different kinds. This differential treatment has led to several gray areas as the position on several categories is debatable. The Doctrine appears to be limited in its scope.

This becomes clear in light of the Amendment Bill proposed in 2010, which in order to give recognition to the principal of international exhaustion, would affect only the films and sound recordings and not venture into the rental right. The Doctrine thus is devoid of its rigidity as it beacons the hope of learning through its operation in the literary area and at the same time it gives a fillip to the entertainment industry by recoiling its tentacles.

End-Notes

1. Indian Copyright Act 1957, Section 14
2. Saikia N, 'The Exhaustion of Rights and Indian Copyright Law' (2018)
3. Saikia N, 'The Exhaustion of Rights and Indian Copyright Law' (2018)
4. Indian Copyright Act 1957, Section 51
5. Saikia N, 'The Exhaustion of Rights and Indian Copyright Law' (2018)
6. Indian Copyright Act 1957, Section 14(b)(ii)
7. Saikia N, 'The Exhaustion of Rights and Indian Copyright Law' (2018)
8. Article 11, TRIPS: Rental Rights
9. [1985] AIR (Delhi High Court), p.29.
10. [2009] Delhi High Court, 2 (Delhi High Court)
11. Indian Copyright Act 1957, Section 51(b)(iv)
12. [2010] PTC (Delhi High Court), p.675.
13. Indian Copyright Act 1957, Section 14(a)(ii)
14. Indian Copyright Act 1957, Section 14 (b)(i)

Written By Disha Jain, A 5th Year Student In Jindal Global Law School. She may be reached at [email protected]

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