How the DMCA is turning ownership into ‘loanership’

by | May 5, 2015 | Policy & Law

The following piece was co-authored by R Street Innovation Policy Director Mike Godwin and was originally posted on the website.

During the Great Depression, farm-equipment giant John Deere Co. famously refused to repossess tractors it had sold to American farmers who were having difficulties keeping up with their payment plans. In a particularly ironic illustration of just how much that spirit of bonhomie has evaporated in the decades since, John Deere today asserts that it is the real, rightful owner even of the agricultural technology modern farmers have already purchased in full.

According to company lawyers, those who try to repair their own tractors, which sometimes requires tinkering with the software that makes them run, may be breaking the law. In recent startling comments to the U.S. Copyright Office, John Deere insists that people who purchase new John Deere tractors don’t actually own them outright. Instead, they receive “an implied license” to operate John Deere equipment with the software essential to its operation.

It doesn’t take an engineer to recognize that if farmers can claim only to own their physical tractors, but not copies of the operating software, the threat of “repossession” has been raised to a whole new level. The American Farm Bureau tells us that 97 percent of American farms are operated by families, and that only about 16 cents of every dollar Americans spend on food makes its way back to those family farms. Now, the company once seen as the family farmer’s best friend is threatening legal action against them under the Digital Millennium Copyright Act.

In drafting the DMCA, we don’t believe Congress intended the odd conclusion that farmers do not have a legal right to tinker with, repair, sell or lend out their tractors. Indeed, if the legal system recognizes ownership rights only in physical property, and not the operating software that is now both essential and ubiquitous for so many devices and pieces of equipment and machinery, something has gone terribly wrong.

While John Deere’s claims have attracted attention for being particularly outrageous, this episode is only the latest in a series of copyright law encroachments on ownership rights in the Digital Age. These sorts of claims are expected to multiply as more and more things we use in our daily lives incorporate computers to regulate their functions and integrate with what has become known as “the Internet of Things.”

That many other companies also now, in effect, “loan” rather than sell their products is merely the logical extension of the DMCA’s digital rights management provisions. DRM places digital locks on software to make sure the code, which qualifies as an original creative work, is not copied illegally. In principle, it is intended to preserve incentives in place for innovators to create new software and benefit from their creations.

But the current state of the law fundamentally alters the concept of ownership and sets a dangerous precedent. People are beginning to become accustomed to not owning their own devices. You may buy a smartphone, but the software on your phone does not belong to you. You legally cannot tinker with it or alter it. Those rights are reserved to the company that sold it. It is not exaggeration to predict most of our material possessions soon will be embedded with software. The confluence of these two trends in law and technology would mean almost none of the objects in our possession will actually be ours. They will be loaned to us under an “implied license” for life. This will have profound implications for everything from practice of inheritance to the enormous market for secondhand sales.

We can only imagine what the market for used tractors will look like as this trend continues, but a look at the conditions faced by libraries today may give us a clue about how badly things could turn out. Libraries are able to loan out physical books thanks to the “first sale” doctrine of copyright law. The doctrine is supposed to ensure that, once you buy a copy of a copyrighted work – whether it’s a book or a tractor’s software – you can loan or resell it, or even alter it, so long as you don’t infringe on the copyright interests.

But under today’s publishing and copyright regime, much of it shaped by the DMCA’s restrictions, libraries do not own the e-books they purchase. Instead, they receive a license to access the content, similar to the one John Deere claims applies to its software-embedded tractors. Therefore, contrary to long-standing practices, libraries cannot loan e-books at will. Instead, DRM licenses restrict how many times an e-book can be loaned, set expiration dates for the content and charge significantly marked-up prices.

Gradually, the status quo for e-books is being extended not just to tractors, but to nearly every object with a chip in it, which already is more of what you own than you may think. We are making the transition from an “ownership society” to a “loanership society.”

We can’t believe this is what Americans want. In every sphere of our lives, we have the expectation that we own what we buy. The jeans you’re wearing right now were someone else’s original design and creation, but you bought them. Which means you can paint them, cut them up and sew them into a denim patchwork quilt; loan them to your sister; or sell them to a friend. You can even deconstruct them and use them to create a pattern and sew a new pair of jeans that follow the exact same pattern. This is all consistent with our traditional copyright framework.

That traditional framework needs to be built into our 21st century understanding of copyright. That’s why lawmakers who understand the situation are working on a remedy. Fittingly for today, “May the Fourth,” Rep. Blake Farenthold, R-Texas, has introduced a bill called YODA, or the You Own Devices Act. It would amend Title 17 of the U.S. Code to protect our traditional understanding of legal ownership by updating this aspect of digital copyright for citizens in this century. As Farenthold puts it:

YODA would simply state that if you want to sell, lease or give away your device, the software that enables it to work is transferred along with it, and that any right you have to security and bug fixing of that software is transferred as well.

While Rep. Farenthold’s bill would specifically address the device-ownership issues, Sen. Ron Wyden, D-Ore., and Rep. Jared Polis, D-Colo., recently introduced the Breaking Down Barriers to Innovation Act, which calls for more comprehensive reforms to the DMCA, such as removing access controls and technological protection measures that restrict such activities as repairing a personal device or making e-books accessible to people with disabilities. In other words, it is legislative reform that would stop making obviously legitimate activities illegal under copyright law.

Now is the time to put legislation in place. Few people want to have to relicense their cars, phones and other devices every time they try to sell them, repair them or loan them to a friend. Rather than jump-start a crazy-quilt copyright framework of “loanership,” let’s reinforce American ownership rights – so that when we buy a book, or a tractor or anything in between, we have the same property rights and expectations our grandparents had.

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