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By Chris Meadows

Mike Shatzkin’s latest blog piece is on the license vs. sale conundrum of e-books. He points out that e-book sales are actually not sales but licenses—which most TeleReaders know already, but a lot of average e-book consumers don’t. Most people think when they buy an e-book, they are buying the e-book. But this runs up against the problems with first-sale rights that digital media present. (I have a bit of a problem with this, but we’ll get to that later.)

Then Shatzkin points out that the misperception is actually being promulgated by publishers, because they have a vested interest in making e-book transactions look like “sales”—if the publishers admitted they were actually rights transactions, they would be required by the standard boilerplate contracts they use to fork over 50% of their revenue rather than the 25% that they have lately adopted.

There is a sort of de facto gentleman’s agreement in place between agents and publishers on this score, Shatzkin says, as the agents know that any of them who tries to twist publishers’ arms over it will have problems finding any publisher willing to work with him after that. For similar reasons, publishers don’t go after authors who kept their e-book rights and publish them elsewhere, even though e-books arguably violate the “non-compete” clauses of authors’ contracts.

Even though authors don’t sell their copyrights to publishers (they license their use) and publishers don’t sell inventory or even production masters to ebook resellers (they license them to replicate and distribute the publishers’ ebook files), the fiction that Kindle or Nook or Kobo or Google or iBookstore is selling the book to you or me will persist. If we had truth in labeling here, it would make the restrictions comprehensible. It would even make consumers understand why Amazon was within its rights (and upholding its responsibilities) when it chose to “cancel” the licenses it granted erroneously for an edition of “1984″ a couple of years ago. We can all recall the high dudgeon among many observers when they infamously reached into people’s Kindles and erased a file they were given by somebody who did not have the rights to grant those licenses to it. But truth in labeling would also eliminate an ambiguity that works in favor of publishers’ margins today.

Shatzkin’s column is technically correct to be sure. But it seems to me that since he’s a publishing-industry insider, he’s coming across as rather tone-deaf as regards the concerns of consumers. If consumers don’t understand they’re being “licensed” an e-book rather than “sold” it, they certainly understand the differences between sales and licenses at least as far as “if you buy something, it’s yours, but if it’s licensed to you, the bastards can change the terms or revoke the license any time they feel like it.”

Amazon might have been “within its rights (and upholding its responsibilities)” to revoke the Orwell books, but it was widely perceived as an invasion of privacy. We don’t have book police to go around to people’s houses and retrieve copies of paper books that turn out to have been printed in violation of copyright. (If we did, one of the most famous American editions of The Lord of the Rings would have been confiscated from its owners shelves in 1993—almost 30 years after its publication!)

No matter whether publishers use the term “sale” or “license” when they talk about e-books, we’ve been conditioned to expect that when we buy a book, no matter what form it might be in, that book cannot be taken away from us. For someone to try invokes visions of book-burning and censorship, which are deeply-ingrained hot-buttons going back hundreds of years.

Indeed, the entire doctrine of first sale comes from a publisher’s attempt to impose a resale license on printed books. Much more recently, a similar decision was reached in a suit about record label promotional CDs stamped with prohibitions against resale. But in another case wending its way through the courts, involving resale of copies of the Autodesk software package purchased new and unopened, a court ruled against the reseller, Greg Beck, because of license restrictions on the sale of the software.

In an interview with AuctionBytes, Beck suggests that if he ends up losing, it could lead to publishers again being allowed to put licenses on their books.

AuctionBytes: how likely is it in your opinion that book publishers may decide to issue licenses for their books?

Greg Beck: In my opinion, it’s almost inevitable that it will happen. You’ll probably see it first in cases like textbook publishers where there is already a strong interest in limiting resale because they don’t like students selling textbooks to the next class that comes along. They’d much prefer if every student had to buy a new textbook.

So I can definitely see the textbook industry adopting a similar model based on this decision, and I don’t think that other kinds of publishers would be far behind.

So, Mike, we don’t like licenses on our e-books—not so much because we can’t resell them, which any sensible person would agree doesn’t work based on the nature of the medium (and, indeed, if e-book prices fall as you say they are, paying less for a non-resellable book sounds like a fair tradeoff). but because they mean that our purchase of them can be reversed at the licensor’s whim. The large print giveth, but the fine print means the publisher can do whatever the heck he pleases. (Not to mention what happens if the publisher goes out of business, leaving us without a way to access that content.)

This is simply not an acceptable condition for continued consumer confidence in e-books—the only reason most consumers have that confidence is they don’t know better than to assume that once they buy a book, it’s theirs for good (due in no small part to publishers couching them as “sales”). When and if publishers begin abusing license terms (as the record of licenses in other industries suggests they inevitably will) it could have some serious repercussions for e-book sales as consumers start to realize that fact.

So how can consumers’ rights to the continued use, if not “ownership”, of media that they have purchased from a legitimate vendor be safeguarded? Currently, it isn’t now in a lot of cases: if someone purchased music from one of the small music vendors such as Yahoo or Wal-Mart that required contact with a DRM server to authenticate, and the vendor got out of the music business and shut its servers down, consumers were out of luck. We can’t even (legally) crack the DRM because the Digital Millennium Copyright Act forbids it.

And nothing legally prevented Amazon from reaching into Kindle owners’ devices to remove content they had bought and paid for even if the publisher hadn’t been entitled to sell it. Yes, they refunded the purchase price, but that didn’t help people who had been doing school work based on those books, and it didn’t ease the feeling of violation over having a book they had purchased in good faith yanked away.

Perhaps Congress could enact some sort of compulsory license, similar to the licenses that allow performance of other peoples’ musical compositions, to state that someone who purchases an electronic media work from a legitimate vendor shall have the same right to make personal use of that work in perpetuity as if he owned a copy of it on a physical medium. Maybe there are reasons that would not work, but at least it’s an idea.

 
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