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Used eBooks 101: How Amazon Can Legally Resell eBooks

February 21st, 2013 by · 19 Comments · tips and tricks

Ever since the news broke earlier in February that Amazon had a patent to sell used digital content there’s been a heated discussion on what this means for the ebook market and authors as well as whether it is right/wrong/ unethical/immoral to sell used digital content in this way.

Unfortunately, in the midst of the debate I have also been encountering a fair amount of misinformation. A number of people (including at least one blogger) don’t understand exactly what it means to sell a used ebook. One blogger writing over at TeleRead believes that it is illegal to resell an ebook:

Amazon has patented a means to sell used e-books within the Kindle system. A book will be branded within the system when it is bought, and when the buyer puts it up for resale at the Kindle store, it will be removed from his account and transferred to the buyer’s account. Amazon will receive a small fee for each sale. A limited number of sales of each book may or may not be included in the system.

According to copyright law, specifically the first sale doctrine, this is illegal because digital goods aren’t physical things so they can’t be resold. (See my article, “The First Sale Doctrine and eBooks,” for more details.)

She’s wrong (though her post on first sale doctrine isn’t completely off base). It’s a little complicated to explain why, so I’m going to have to take things all the way back to the beginning and work from there.

Let’s start with the author.

Someone writes a book and they decide to sell it in the Kindle Store. They upload it to KDP, negotiate and agree to Amazon’s contract, and the ebook is listed in the Kindle Store.

And then Amazon sells the ebook.

Well, no, they don’t.

I know that we are all used to saying that we buy ebooks but the legal relationship of exchanging your money for a Kindle ebook is not a purchase. What happens is that you agree to a contract. Amazon takes your money and grants you the right to use the ebook under certain conditions.

Those conditions are defined by amazon in the TOS. The terms of use for the Kindle Store are rather lengthy, and you can find them here. If you are not familiar with what’s in that contract then I suggest you go read it.

The transaction is a license, not a purchase. The exact difference between a license and a purchase is still a thorny legal issue, and it is not clear what rights you have outside of the terms of use, but there is a difference.

I suspect that people who say that the act of selling used ebooks is illegal due to copyright law don’t seem to have realized that Amazon does not sell ebooks. That means that copyright law does not necessarily forbid the reselling of Kindle ebooks.


Sidenote: The blogger mentioned above believes that you lease an ebook instead of buy it. You could phrase it that way if you like (a lease is indeed a type of contract) but she is still wrong in saying that selling a leased ebook is automatically illegal. She missed the fact that under certain conditions you can legally buy and sell a lease. It happens all the time.

Here’s the thing.  When or if Amazon resells ebooks, my guess is that what they will actually be doing is transferring a license from one customer to another while also cutting off access to the ebook for the seller and enabling access to the ebook for the buyer.

When it comes to reselling Kindle ebooks, the contract between the author/publisher and Amazon is probably going to matter just as much as copyright law,  and that is because Amazon arguably cannot resell a Kindle ebook if the author/publisher does not give them permission.

Earlier in the post I specifically call out the negotiation step because when an ebook is uploaded, the author/publisher is presented with a number of options like price, market availability, and whether the ebook should be added to KDP Select.  The author/publisher is able to decline or accept these conditions.

I also expect that when Amazon decides to start selling used ebooks, authors and publishers will be presented with the the decision of whether they wish to allow Amazon to resell their ebooks.

I am basing that assumption on the text of the patent (and Amazon’s past behavior). The patent includes a provision where the copyright holder can decide to prohibit the reselling of an ebook in much the same way that an author/publisher can decide not to put their ebook into KDP Select, the source of ebooks loaned via the Kindle Owners Lending Library.

In fact, this patent appears to cover both the reselling of ebooks and the Kindle Owners Lending Library. That detail leads me to conclude that Amazon will ask for permission to resell ebooks.

Or at least that is what I think. I could be wrong but I expect that I will end up being closer to the truth than the folks who say that reselling ebooks is illegal.

P.S. If a lawyer shows up and wants to present a counter argument, please do. I like learning why I might be wrong, and the legal issues surrounding this situation are far from settled.

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19 Comments so far ↓

  • Tom Semple

    As one data point, this is O’Reilly’s policy concerning lending and resale (not sure if these terms carry over if you purchase from Amazon or elsewhere):

    “Usage

    Lending: If you buy an O’Reilly ebook from oreilly.com, you may lend it to another person, provided that you do not retain any copies of the book after you lend it. This is the same as the situation when you lend a used print copy—when you lend the copy, you deliver it to the buyer and no longer have a copy in your library. If you have bought a hard copy/ebook bundle, you may of course retain the hard copy, if you lend the ebook.

    Resale: If you buy an O’Reilly ebook, when you are done with it you may resell it, provided that you do not retain any copies of the book after you sell it. This is the same as the situation when you sell a used print copy—when you sell the copy, you deliver it to the buyer and no longer have a copy in your library. If you have bought a hard copy/ebook bundle, you may of course retain the hard copy, if you sell the ebook.

    By the way, because the lifetime access is a special benefit available only to those who purchase ebooks directly from us, the lifetime access benefit is not transferable to the recipient of your used ebook.

    Full text here: http://shop.oreilly.com/category/customer-service/ebooks.do

    Note that you can also purchase the ebook from any retailer and pay OReilly $4.99 to add it to your account there (to get other formats, ‘lifetime access’, discounts on new editions, etc).

    Anyway, if only all publishers had similar policies.

    • fjtorres

      Ah, but O’Reilly’s primary business is IT books. Which are quickly superceded by newer editions and subjects. So there is minimal value in their backlist: a 5 year old book on Windows tips or Photoshop is hardly generating sales whereas a 5 year novel might be selling better in ebook now than it did upon release.
      Different business, different revenue profiles. A good part of the attraction of ebooks for authors is the long tail revenue. Used ebooks detract from that.
      Legal or not I doubt it’ll come without a big and noisy legal fight.

  • SteveH

    The ‘license to use the thing’ is almost just like Steam’s agreement for downloadable games. You don’t really buy the game, you’re just paying to have a account thru Steam that only lets you have access to them thru their service, by their rules… And if you have a problem with it no refunds whatsoever. (And if you do a credit card or Paypal chargeback due to a problem that is not your fault they cancel your entire account & access to anything you bought from them previously- in retaliation, but that is another story)

    I’m guessing that KDP authors/publishers will not get a choice in the re-sale matter, but rather I think they will say if you want to get a 70% royalty for your books you’ll allow re-sales OR you can opt-out and get 50% royalties instead. I hope I am wrong though, else it will just be again a race to the bottom while Amazon reaps more cash from the re-sales.

  • the rodent

    In these days of broken DRM, does anyone honestly think this reselling notion will work in any significant way? What’s to prevent Jane User from buying a book from Amazon, downloading it, breaking the DRM, making a DRM-free copy, then reselling the e-book on Amazon? (OK, in the old days I could buy a book, photocopy it for my collection, and then re-sell it, but that process was “difficult” and “expensive”, so it was less attractive.)

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  • Juli Monroe

    Your point Nate on Amazon and negotiation with authors sound right. As an author, I’d be okay with giving them that right. I know lots of authors cry about “lost sales” but I really think the problem is lots smaller than they think. The more people who have and have read my books, the more likely they are to buy the next one. I want people reading my books, and I’m not as concerned about how they got it in the first place.

  • Tymber Dalton

    I could be wrong, but I know with our older Kindle, or our Nook, we can download the books from the store site, save a copy to our computer, and if we ever need to restore (a la the deleted book fracas a couple of years ago on Amazon) simply turn off the wireless and reload the file to our device and read it unmolested.

    Sooooo….? How do they honestly expect to police this? And as another commenter said, breaking DRM is now and will continuously be ridiculously easy. I know Amazon continues to think they’re the only game in town, but surveys by ARe and others show readers are increasingly irritated by DRM. Are they going to institute some ridiculousy convoluted practice and step backward in terms of accessibility and shoot themselves in the foot? Or piss off publishers and authors and drive them to B&N, Kobo, and others?

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  • Void

    I still maintain that someone should go sue everyone over the use of the word “Buy”, since yo in fact are not buying anything in the conventional sense of the work. It is false advertizing in order to prevent the general public from realizing that they are paying for a license instead of a book. If you aren’t actually selling the item, you should HAVE to say you are licensing it.

  • Marilynn Byerly

    As the un-named author of the article you critique, I’m sorry to see that you didn’t get into the discussion at Teleread with me.

    As to your points, I was sloppy in that I used “lease” when I meant “license,” but I wrote the original article for writers, not legal types. I know exactly what a license is, and nothing I wrote is wrong in that sense.

    As I said in the comments section of one of my articles, the license explains what you can and can’t do with a digital book. Some licenses are extremely strict, and others are not, but the person who “buys” the digital book must follow those license terms.

    The exemption of digital products like ebooks from the “The First Sale Doctrine” which allows the sale of used paperbacks is part of copyright law. I suggest you read
    http://www.cendi.gov/publications/04-8copyright.html It clearly states that physical items are only covered by “The First Sale Doctrine.”

    Right now, Redigi is fighting a lawsuit to prevent them from creating a used market for digital items through a closed sales system, and the ORI is trying to change “The First Sale Doctrine” to include digital goods.

    If Redigi wins this lawsuit, I imagine Amazon will start its own closed system. If it is not an opt-in system, I would not be surprised to see publishers and authors pulling their books out of the Kindle system.

    If the ORI manages to change the definition of “The First Sale Doctrine” to included digital items, the horrible sound you hear will be death screams of the publishing industry.

    • Nate Hoffelder

      Hi Marilynn,

      First, your post was eaten by my spam filter and I had to go rescue it. Sorry about the delay.

      You’re still wrong. Amazon isn’t going to resell ebooks; they’re going to resell the licenses that govern a users right to use the ebook. That’s not the same thing, so it doesn’t matter that copyright law blocks you from selling an ebook. And it’s pretty clear that you can legally resell software licenses, a digital product similar to ebooks, so there is no reason that the ebook licenses cannot be resold.

      That ReDigi lawsuit not necessarily relevant to this issue. You can already resell software licenses, that much is certain – assuming the licensor allows it. ReDigi was sued because a record label didn’t want to admit that the same applied to mp3 licenses. Please note that the judge didn’t issue an injunction forcing ReDigi to stop operating while the lawsuit was going on. That tells me that the judge accepts that selling mp3 licenses is not obviously illegal.

  • Bill Smith

    This post hits on the main point I have been wondering: Amazon MUST have the author’s permission via a sales agreement to do this since this ebooks are licensed, not sold.

    (The whole “this is deceptive, it is presented as a sale” potential for litigation is a whole other can of worms.)

    Amazon cannot simply resell any old ebook that is offered to them by a customer without verifying it is a legitimate legal copy…the problem is publishers and authors will have to play “Whack a Mole” to get every illegal copy taken down, just as counterfeit products are a pain to chase on Ebay.

    The real potential for damage to ebook authors is if the Supreme Court rules that the Doctrine of First Sale applies to digital goods (ie, you can buy and then resell digital files, MP3s, ebooks, everything). This may come about (indirectly) as a result of the current Monsanto seed trial that is getting so much publicity.

    IMHO, selling ebooks without the authors and publishers EXPRESS permission is counterfeiting and subject to all kinds of nasty fines for those with the $$$ to fight Amazon…and you can be certain that the Big 6 will want to pounce on this if they see any opening at all.

    I can’t see any reason to agree to used ebook sales unless Amazon gives the author a significant cut of the sale…Once Amazon rolls out this program, I wouldn’t be surprised to see authorizing used ebook sales to be a requirement to get the 70% royalty rate going forward; if you refuse, your royalty is cut to 35%.

    But if Amazon is obstinate, the real issue is “where do the authors go?” if they decide to pull their books. My hope is Smashwords and Kobo since they are the only ones IMHO who really get it…they could also sell direct via sites like Gumroad and Ganxy.com. The problem is educating readers…and getting them to buy on their PCs and then transfer to their kindles.

    This could be a really interesting moment in epublishing.

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  • Robert C. Storey Jr

    I wonder if Amazon resells ebooks by transferring licenses “to read” of purchased ebooks that Amazon would then do the same with free downloaded ebooks? It seems plausible that they could make a fee for ebooks downloaded free by one user and transferred (resold) to another user for reading on a kindle. Some might think that that is great because of the argument that “more people will read my book for free, so more people will buy from me.” That is a way of thinking that I believe is not as true as it use to be. If I give away 1000 ebooks and then leave the KDP Select program, I could find that another 1000 kindle users can now buy my ebook on Amazon’s ebook reselling program for a price that is less than what I am offering, essentially undercutting me…just a thought…

  • Brandon

    Having read all of this, I am curious about something. I saw on Ebay that someone was selling copies of DVDS with THOUSANDS of e-books contained on said DVDS. I bought one, because it was super cheap. It came with a piece of paper saying that you now had reselling rights etc, and you could sell them for any price. So if I am reading these arguments properly, would this be considered illegal? Though, like it was stated, it would be very hard for them to go after each and every individual doing this, and also would then the authors would also not receive any sales from these being “sold”. I don’t want to get into any trouble of course, so I am not doing anything “selling”-wise with them until I at least know if this is actually legit or not. Opinions on this?

    • Nate Hoffelder

      It might be illegal. There are some books that are sold with resale rights, but they’re usually shit. None of the mainstream or even indie ebooks are sold with that kind of license.

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