 Hello. I'm Terry Fisher. This is the eighth of 12 lectures on copyright. In the preceding lecture, I examined two of the four major economic rights associated with a copyright, specifically the right to control reproduction and the right to control modifications of a copyrighted work. In this lecture, I'll examine the other two major economic rights, the right to control distribution and the right to control public performances and displays. As usual, I'll spend most of the time discussing the law in the United States, but we'll also indicate various issues on which the law in other countries differs. As always, I'll be illustrating the presentation with the various audio-visual materials, one of which is a map of copyright law, the current version of which can be found on my home page, tfisher.org. We'll begin with the right of distribution. This aspect of copyright law is characterized by a clash between two powerful sets of impulses. On one side are strong economic interests of copyright owners. On the other side is an equally powerful set of attitudes hostile to the copyright owners yearning for continuing control over embodiments of their works. The tension between these forces has generated and will continue to generate strife and periodic doctrinal eruptions. The interests of the copyright owners are, as I say, strong. For three reasons, they want to be able to control what purchasers and possessors of copies of their works do with those copies. The first and least important of those reasons is that such control supplements the copyright owners right of reproduction, specifically by enabling the owners to attack intermediaries who do not themselves make unauthorized copies, but who traffic in unauthorized copies. In this sense, the distribution right is analogous to the rules and criminal law penalizing the receipt of stolen property. The second and more important reason is that copyright owners would like to suppress, if possible, resales and lending of copies of their works. In other words, they would like to prevent the first purchaser of a copy from passing it on to others. Why? Because the result would be to increase demand for copies and, thus, to enhance the copyright owner's income. For example, novelists would like to be able to prevent sales of used copies of their books. Movie studios would like to prevent or to charge for resales or rentals of DVDs embodying their works and so forth. Third, copyright owners would like to prevent arbitrage, which corrodes their ability to engage in lucrative differential pricing. This last point is both complicated and important. I touched on it very briefly at the end of lecture number four. I now want to discuss it in more detail. The following analysis consists of a condensed version of an argument deployed in much more fine grain in an article I wrote some years ago on this topic. If you're curious about this phenomenon, you might wish to follow the links on my home page. Differential pricing, otherwise known as price discrimination, consists in the core case of charging different consumers different prices for access to the same good or service. A more subtle form of differential pricing involves charging different consumers different prices for different versions of the same good or service when the variation cannot be explained by differences in the costs of the versions. A familiar example of the core case of differential pricing is when a bus company or museum charges lower entrance fees to students or senior citizens than it does to middle-aged non-students. A familiar example of the more subtle form is the practice of airlines to charge vastly more for a business class seat than for a coach class seat for a given trip. Suppose, for example, that I want to fly from Boston to Los Angeles in the afternoon of June 1, 2014, roughly three months from right now. I prefer American Airlines, so I visit the website of the company and check for available flights and prices. Flight 143, which departs at 4.30 in the afternoon, suits my schedule well. I now have to choose a class. As you can see, there are various options, but the major choice involves where in the plane I will sit. Flight 143 uses the Boeing 757-200 aircraft, which is configured as follows. So if I want to sit in what's known as the main cabin, I will pay $400 or $500. If I want to sit up front in first class, I'll pay more than three times as much. The difference between these prices cannot be explained on the basis of the extra costs associated with a wide seat, better food, and more attentive service. Rather, it reflects primarily the airline's shrewd effort to capitalize on differences in the price sensitivity of the two types of passengers. If I'm wealthy or I'm able to rely on the generous business expense account, I'll choose first class. If neither, I'll choose the main cabin. Price discrimination usually increases the profits of the firm that engages in it. Why then is it relatively uncommon? Because with rare exceptions, the practice of price discrimination is feasible only when three conditions coincide. First, the firm ordinarily must have market power. In other words, there must exist no readily available equally satisfactory substitutes for the good or service the firm is selling. Otherwise, customers from whom the firm seeks to extract a high price will defect to competitors. Next, the firm must be able to differentiate among its customers on the basis of the values they place on the firm's product or service. There are several ways in which this could be achieved. In what economists refer to as first degree price discrimination, the firm gathers information about individual buyers and attempts to charge each one the most that he or she is able and willing to pay for the good or service in question. In so-called second degree price discrimination, the seller does not know how much buyers are able and willing to pay, but induces them to reveal their resources or their preferences through their purchasing decisions. Among the techniques of this sort are volume discounts and versioning, such as the practice I mentioned a minute ago of differentiating business class and coach tickets and then charging radically different prices for them. In so-called third degree price discrimination, the seller does not know the purchasing power of individual buyers, but is able to separate them into groups that correspond roughly to their wealth or eagerness. The student discounts and senior discounts I mentioned previously are examples. Opportunities to engage in first degree price discrimination have traditionally been rare, but opportunities for second and third degree discrimination abound. One area in which they're proliferating especially rapidly are the kinds of informational products to which copyright law applies. Take software, for example. One of the ways in which software firms seek to enhance their revenues is by selling identical or versioned copies of their products to students for vastly different prices than the prices they charge professionals. Here's an illustration. As you can see, as of today, February 23, 2014, Adobe's Creative Suite 6 is ordinarily priced at $1,700, but is available to students and teachers, groups that tend to be poorer than average, $4,590, a huge markdown. As I hope you recognize, this is an example of third degree price discrimination in which the copyright owner uses a criterion to separate the set of potential customers for its product into two or more subgroups, which differ roughly in their price sensitivity, and then charges the members of the two groups very different prices. An example of second degree price discrimination is the way in which book publishers typically package and release their products. In the usual case, a hardcover edition is sold at a substantial price, and then, a few months later or a few years later, a much cheaper paperback version is released. For example, right now I'm reading Scott Turow's novel Identical, the newest in a series of excellent legal thrillers. I bought a hardcover copy of this book about a month ago from Amazon.com for $28. I could have obtained from Amazon a paperback copy for a much lower price, but I would have had to wait until July of this year to get it. The cost of manufacturing a hardcover copy of a book is not double the cost of manufacturing a paperback copy. Rather, the sharp price difference is a form of differential pricing. More specifically, this common marketing practice, used by book publishers, combines two distinct price discrimination schemes. The first is known as versioning, just as was the case with respect to business class versus coach airline tickets. Publishers expect price insensitive consumers, like me, to buy the premium, in other words, hardcover editions, and poorer consumers to prefer the economy model. The second strategy is sometimes known as intertemporal price discrimination. The reason that publishers do not ordinarily release the paperback editions at the same time as the hardback editions is that they don't want buyers who care little about price but find paperbacks perfectly acceptable to opt for paperbacks. So they wait until the market, consisting of wealthy consumers, has been pretty well exhausted through sales of hardbacks before putting the cheaper versions on the shelves. The same composite strategy underlies the so-called windowing system through which most Hollywood movies, at least until recently, were marketed. Typically, a firm was first licensed for performances in American movie theaters. Roughly three months later, it was released both in foreign theaters and through pay-per-view channels. Three months after that, DVD copies were made available for sale and rental. After three more months, it was released to premium cable television channels. A year later, it was shown on television in countries outside the United States and then on network television inside the United States. Finally, after another three years, it was licensed to local television syndicators. The price per viewing paid by consumers in each of these windows was lower than in the preceding window. Again, we see here a combination of versioning, which prompts consumers to sort themselves by format and inter-temporal discrimination, whereby the most price-sensitive consumers have to wait the longest. There are many more examples of price discrimination by copyright owners, some of which we'll encounter later in the course. But there remains one more condition essential to this strategy. To engage in effective price discrimination, a copyright owner must be able to prevent, or at least to limit, arbitrage. In other words, must be able to stop customers to whom it sells copies of its work at a low price from reselling them, either directly or with the aid of intermediaries, to customers from whom the firm is seeking to extract a high price. If it can't do so, then the copyright owner forfeits its high-margin customers, which is disastrous. This is where the right to control distribution comes into play. What copyright owners would most like would be a legal right to prevent altogether any resales of copies of their works, not just for the reason we've already seen, namely that such a right would increase demand for their products, but also for the more subtle reason that it would enhance their capacity to charge different customers, different prices without worrying that poor customers who bought the copies for low prices would resell them to rich customers for intermediate prices and thus corrode the high-end market. To summarize, for three reasons, copyright owners would like strong rights to control distribution of copies of their works. First, it would help them to attack intermediaries who traffic in unauthorized copies. Second, it would enhance demand for copies of their works. And third, it would enhance their ability to engage in differential pricing. Opposed to these interests are not only the obvious economic interest of consumers in reducing the amount they have to pay for access to copyrighted works, but also three widely shared attitudes hostile to the kind of control the copyright owners seek. First, copyright owners who seek to prevent resales or lending of copies of their works are often seen as greedy. They've already been paid once when a copy of their works was first sold. They're not morally entitled to more. This sentiment is loosely tied to the principle of proportionality that figures so prominently, as we saw in lecture number two, in the fairness theory of copyright. Copyright owners is widely thought do not deserve to collect more revenue than they receive from the first sale of copies. Exactly why not is unclear, but this attitude is very common. Second, many people and many lawyers in particular are skeptical of attempts to control a thing after you have sold it. Viewing the same issue from the other side, a widely shared attitude is that once you have bought an object, you're entitled to do with it whatever you want. Among the manifestations of this sentiment in the law is the bias against restraints on alienation of real property, in other words, land. And the impediments I mentioned once before to servitudes, longstanding restrictions on what people who buy land can do on or with it. The same sentiment figures in the debate over the Monsanto case, which was decided last year by the United States Supreme Court, which concerned the right of a purchaser of seeds that contained genes, subject to patent protection, to grow crops from that seed, save some of the seeds produced by those crops, and then use the saved seed to grow more crops. The Monsanto case involved patent and contract law, not copyright law, so the complex legal issues at issue in that case are not pertinent to our subject here. But one of the general sentiments expressed often in the public debate over that case is that the farmer, Vernon Bowman, having bought the seed should be able to do what he wants with it. The same sentiment tilts against the interests of copyright owners to control redistribution of copies of their works. The third attitude is skepticism concerning differential pricing. Now, this attitude is not universal. Some forms of differential pricing, for example, the practice of US private universities of charging students very different tuitions depending on the financial resources of their families, are accepted without much grumpiness. But other forms, even trivial in amount, can provoke rage. Here's just one example. In the fall of 2000, amazon.com began to adjust the prices of a few DVDs depending on the status of the purchasers. It seems, although most Amazon representatives denied this, that repeat customers, identifiable by the Amazon cookies on their computers, were quoted higher prices for films than were new customers. Presumably, Amazon thought the new customers might shop around, and so offered them lower prices to induce them to buy. When this practice was revealed on an online DVD talk forum, the response of most participants was fury. Quote, I will never buy another thing from those guys, declared one consumer. Surveys confirm the prevalence of the sentiment that underlies this reaction. For example, in 2005, the Annenberg Center asked 1,500 adult internet users some questions concerning their views of online marketing practices. 87% disagreed with the proposition that, quote, it's OK if an online store I use charges different people different prices for the same products during the same hour, end quote. The way this attitude bears on our subject today is that, to the extent copyright owners seek increased control over the distribution of their works in order to more effectively engage in differential pricing, they face strong, though not universal, popular resistance. The tension between these competing forces has managed, to some degree, by a set of interlocking statutory provisions to which we'll now turn. The financial interests of copyright owners are protected by sections 1063 and 602A of the US statute. The first of these, as you can see, gives copyright owners the exclusive right, quote, to distribute copies or phono records of the copyrighted work to the public by sale or other transfer of ownership or by rental lease or lending, close quote. 602A gives copyright owners analogous rights to control importation and exportation of copies of their works. Now, if these were the only relevant statutory provisions, they would reflect total victory by the copyright owners. But each of these provisions is qualified by others. The right granted by 1063 is curtailed quite sharply by 109A, which, as you can see, provides that, quote, the owner of a particular copy or phono record lawfully made under this title, or any other person authorized by such owner, is entitled to sell or otherwise dispose of the possession of that copy or phono record, close quote. This provision is widely known as the first sale doctrine. The basic idea underlying that doctrine is that once a copyright owner has sold a copy, he cannot control resales, gifts, et cetera. We'll return to the precise meaning of this provision in a minute. The right to prevent unauthorized importation of copies is also qualified in various ways. Three specific exceptions are listed on your screen. In addition, the way in which 602A is phrased leaves open the possibility that it is qualified, not just by these specific exemptions, but also by the much broader first sale doctrine embodied in 109A. How might this work? Well, you'll notice that 602A refers to unauthorized importation as, quote, an infringement of the exclusive right to distribute copies under section 106, close quote. Section 106, in turn, makes all of the rights it grants to copyright owners, quote, subject to sections 107 through 122, close quote. Included in that list is 109A, which we've already seen. Through this chain of connections, it's possible that the first sale doctrine qualifies the importation right, as well as the right to control domestic distribution of copies of the work. We'll return to this textual nuance shortly. The first sale doctrine embodied in section 109A is itself subject to exceptions, specifically to the provisions of 109B1A. The key language is, quote, neither the owner of a particular phono record nor any person in possession of a particular copy of a computer program may, for the purposes of a direct or indirect commercial advantage, dispose of that phono record or computer program by rental, lease, or lending, close quote. The primary purpose of this provision was to shut down stores that, at the time of its adoption, were renting audio CDs to customers, would then copy the sound recordings on those CDs to the hard drives of their computers, return the CDs to the stores, and thereby avoid the cost of buying CDs of their own. As you can see, this exception is subject to exceptions of its own. So graphically, the relationship among these various provisions might be represented as follows. 106.3 and the primary portion of 602A advance the interest of copyright owners. 109A and 602A1 through 3 establish limits on those rights, giving expression to the sentiments opposed to the copyright owner's interests. 109B1A reinstates a portion of 106.3 with respect to some categories of works. 109B1B tempers that reinstatement. As I hope you can see from the diagram on your screen, this combination of statutory provisions seeks to manage the deep tension between the competing forces that shape this field of the law. But the statute is not precise enough to resolve all issues. The result is that there is lots of litigation along this fault line. I'll describe two sets of cases of this sort. Others are likely to come up in the discussions that accompany this lecture. The reason why the relationship between 109A and 602A is so important is that it determines the power of copyright owners to engage in international geographic price discrimination. In other words, to sell copies of their works at high prices to customers in the United States and at lower prices to customers in poorer countries. In lecture number three, I mentioned one among the many companies that engage in this practice, Omega Watch. Here's a brief reminder. Omega has obtained a US copyright on the design shown on your screen. Omega engraves a version of this logo on the underside of its watches. Omega sells those watches all over the world. Typically, it sells them for lower prices in poor countries than in the United States. Some years ago, Costco, a discount retailer using an intermediary, purchased some of the watches that Omega had sold cheaply outside the United States, imported them into the United States, and then began selling them in its US stores for prices lower than those used by Omega's authorized US dealers. Omega brought suit against Costco, contending that this so-called parallel importation violated Omega's copyright in the logo. Now, Costco had a seemingly strong defense. In an earlier case, called Quality King versus Lanza, the United States Supreme Court had held that 109A did indeed limit the reach of 602A, the result that a copyright owner could not block importation of copies that he or it had sold outside the United States. However, Quality King involved so-called round trip parallel importation. In other words, a situation in which the copies of the work in question were lawfully manufactured in the United States, shipped overseas, sold at low prices there, bought overseas by an arbitrageur, and then imported by the arbitrageur back into the United States, where they were sold for prices lower than those charged by authorized US dealers. Omega, relying on a concurring opinion by Justice Ginsburg in the Quality King case, pointed out that its situation was different. The watches that bore its copyrighted logo and thus the copies of the logos themselves were not first made in the United States. They were manufactured in Switzerland. As a result, Omega argued 109A did not bar its claim against Costco because 109A only applies, as you can see, to copies, quote, lawfully made under this title. The phrase, this title, refers to title 17 of the US Code, namely the US Copyright Statute. Omega argued that because the watches were not made in the US, they were not made under the US Statute, and thus the provision did not apply, and thus Omega had a right under 602 to block unauthorized importation of the watches bearing the logo into the United States. It's a clever argument, and it worked. The Court of Appeals from the Nice Circuit agreed with Omega, ruling that the first sale doctrine applies to copies manufactured outside the United States only if an authorized first sale occurs within the United States. Costco asked the Supreme Court to review the case, which it did, but the Supreme Court was unable to resolve the question. Four justices sided with Costco, four with Omega, and Justice Kagan recoups herself. The result is that the lower court's ruling stood. In other words, Omega won, but the main issue had not been definitively resolved. Last year, in the Kurtzang case, the Supreme Court was provided a second opportunity to address this issue. The essential facts of that case were straightforward. Supepp Kurtzang was born in Thailand but educated in the United States. In 2007, he was studying for a PhD in mathematics at UCLA. Like many students, he had discovered that copies of English-language textbooks could be purchased more cheaply abroad than in the United States. Kurtzang decided to capitalize on this fact in order to finance his graduate education. He asked his relatives in Thailand to buy their large quantities of textbooks of various sorts and ship them to him in California. He then resold the books to US students for prices below the rates that the publishers were charging in the United States, but well above the prices in Thailand. He was thus able to repay his relatives and keep a substantial amount of money for himself. This system enabled him, in short order, to earn roughly a million dollars, enough to finance his graduate education and then some. At this point, you're probably wondering, wasn't Kurtzang aware of the legal risk he was running? After all, the copies of the books he was importing bore clear warnings that his conduct was unlawful, like the warning shown on your screen. He might have thought that he, like many students, could avoid the wrath of the publishers if he operated on a small scale. But did he think that he could sell a million dollars of books with impunity? Apparently, yes. In making that judgment, he relied on advice from his relatives in Thailand and upon the website Google Answers, which assured him that he could legally resell the foreign editions in the United States. In the short term, Kurtzang's reliance on that advice proved foolish. One of the publishers, John Wiley, brought suit against him, contending that unauthorized importation of the books constituted copyright infringement. Because all of the books in question had been manufactured and first sold by Wiley's wholly owned subsidiary outside the United States, Wiley could indeed point to the omega decision for support. Wiley prevailed in the trial court and then the Second Circuit Court of Appeals. Kurtzang asked the Supreme Court to review the case, which agreed. The stakes were very high. Not just book publishers, but the sellers and buyers of all copyrighted materials distributed at different prices in different countries would be affected by the outcome. As one might imagine, the Supreme Court was deluged with briefs from organizations with stakes in one result or another. This legal battle was paralleled by a struggle for dominance in the so-called Court of Public Opinion. Here's one foray into that war, sponsored by the groups supporting Kurtzang. I think that once you've bought an item, you should be able to do with it what you want. If you want to resell it, that should be up to you. Because I paid money for it, and gosh dang it, I should be able to do whatever I want with it. I don't own anything. I'm just borrowing things from a company for a long time, which seems to be outrageous. How can they tell you that you don't own when you bought and you use your own money to buy that? I think that would be totally unfair against capitalism. I would say it would be important to everybody because that's just the way of America that we buy, we sell, we trade. Country boundaries aren't what they once were. So, of course, I mean, you should be able to buy and sell things regardless of where you get them from. Of course, of course, because most of the things I got on there are made from someplace else. I'd be very highly upset and pissed off due to the simple fact that they're trying to tell me what to do with an item. It'll affect everybody. You know, anybody that has a power to purchase now will be impacted by this. For one thing, in college books, it would be a killer. It's already so expensive to go to college that we should be able to use whatever textbooks we want, you know, wherever we got them, without having the threat of the government telling us that that's not appropriate to use. It really hurts the consumers on that site. I really could, I really concerned about the consumer because I'm a consumer. That seems to add a whole new level of administration. This is going to cost millions and millions of dollars. And that's just all that money going into having to ask someone if you want to sell your own things. That seems silly. What you would do, just thinking of kind of the gravity of what that would mean, it would piss me off a little bit. If I want to buy it, I'll buy it. If I want to sell it, I'll sell it. It's my right. Perhaps moved in part by sentiments like these. The Supreme Court, in the Kurtzang case, somewhat to my surprise, reversed the ruling of the lower court, holding that one-way parallel importation, like round-trip parallel importation, is privileged by section 109. The heart of the court's rationale was that the statutory phrase, quote, lawfully made under this title, quote, quote, is not a geographic limitation. So long as copies of a work are made with the authorization of the copyright holder, they are, and the Supreme Court's judgment, lawfully made under this title. The decision by the Supreme Court is widely and rightly regarded as a win for at least some consumers in the United States, whom, A, as a result of the ruling, be able to obtain copyrighted materials more cheaply. On the other hand, the decision disadvantages the residents of poor countries. The reason is that the sellers of copyrighted materials are likely in the future to find it somewhat harder to engage in international geographic price discrimination. If so, how will they respond? One option, of course, will be to reduce the prices of their goods in the United States. If their markets in poor countries are large enough, they may do that. But it's at least as likely that they will increase the prices of their goods in poor countries, thus, disadvantaging consumers there. So returning to our chart, the ruling in omega has now been superseded by the ruling in Kurtzang. The struggle over this issue is probably not finished. Copyright owners, most of whom are unhappy with this outcome, are already seeking to change the law, either through an amendment of the US Copyright Statute or through adoption of a treaty provision that would compel the United States and all other members of the treaty to amend the statute. Indeed, they are likely to seek not just to return to the omega rule, which would forbid unauthorized one-way parallel importation, but elimination or qualification of the earlier ruling in Quality King, which, as you'll recall, authorized round-trip parallel importation. Stay tuned. But for the time being, here's where the law stands. OK, that's one of the zones of ongoing litigation on this fault line. Here's another volcano. Autodesk makes CAD software, in other words, computer-aided design programs. Its main product is known as AutoCAD. It distributes AutoCAD in the old-fashioned way, namely on CD-ROMs. Just as we saw with Adobe, AutoCAD engages in explicit price discrimination. As you can see from this slide, it sells the program to commercial users, presumably architects, for very high prices. It then uses various techniques to sell the program to other groups, such as students, for much lower prices. One of those techniques is versioning. For example, as you can see from this slide, a student edition, presumably a detuned edition, of the program is available for less than 5% of the commercial version. Another technique that Autodesk employs to facilitate price discrimination is contract. In other words, the company seeks to impose upon customers various restrictions on what they're permitted to do with the copies of the programs they buy. In the 1990s, those restrictions included the following. First, Autodesk retains title to all copies. Second, Autodesk grants the customer a non-exclusive, non-transferable license to use the software. Third, the purchaser agrees to refrain from various activities, including reverse engineering the software or using it outside the Western Hemisphere. Fourth, the purchaser agrees to destroy copies of the software within 60 days of the time the purchaser upgrades it. Among other things, these restrictions sought to destroy the secondary market for copies of Autocat. In 1999, a company called CTA acquired through legitimate channels 10 copies of the 14th release of Autocat. Some months later, CTA paid a modest fee for an upgrade to obtain the 15th release of the program. But instead of destroying its copies of the 14th release, CTA sold them to a man named Werner, who, in turn, offered them for sale on eBay. Werner was a pure intermediary. He signed no contract with Autodesk and never installed or used the software. His only ambition was to resell the copies at a profit. Autodesk got wind of this plan and sought to block the eBay sales on the ground that they would violate Autodesk's exclusive right under 1063 to distribute copies of the program. Werner contended that the sales in question were privileged under 109A. So here's how the competing parties told their stories and described their legal implications. Werner conceded that Autodesk had a valid copyright in Autocat. Exercising its exclusive right under 1061 to reproduce the software, Autodesk made a copy on a CD-ROM. Exercising its exclusive right under 1063 to distribute that copy, Autodesk then sold it to CTA. CTA then exercised its privilege under 109A to resell the validly acquired copy to Werner, who similarly relied on 109A when seeking to resell the copy through eBay to another buyer. As Werner told the tale, every step in this process, including the last one, was lawful. Autodesk, not surprisingly, saw things differently. Steps one and two were just as Werner described them. But instead of selling the copy to CTA, Autodesk contended that it merely leased the copy to CTA in return for various promises. CTA then purported to sell to Werner a copy it did not own. Because 109A only applies to, quote, the owner of a particular copy, close quote, it did not shield this transaction. The purported resale thus violated Autodesk distribution rights under 1063. For the same reason, this last transaction was not shielded by 109A. Werner was no more an owner of the copy than with CTA. Thus, selling the copy on eBay also violated 1063. In sum, according to Autodesk, both this transaction and this one were unlawful. The key issue in the case thus became whether the relationship between Autodesk and CTA had been a lease or a sale. Werner, of course, preferred the latter, Autodesk, the former. In 2010, the Court of Appeals for the Ninth Circuit ruled in Autodesk's favor. Here's the decisive portion of the court's opinion. We hold today that a software user is a licensee rather than an owner of a copy where the copyright owner, one, specifies that the user is granted a license, two, significantly restricts the user's ability to transfer the software, and three, imposes notable use restrictions. The way in which this decision fits into the overall landscape of the law governing distribution rights is indicated on the map. It's reasonably well settled that, using Nimmer's typology, a transaction involving a copy of a copyrighted work is covered by 109A and thus a lawful, if and only if four conditions are satisfied. A, the copy was lawfully manufactured with the authorization of the copyright owner. B, the copy was transferred under the copyright owner's authority. C, the defendant qualifies as the lawful owner of that particular copy. And D, the defendant thereupon disposed of that particular copy, as opposed to, for example, reproducing it. When software firms provide customers copies of their programs in return for money, requirements A and B are more or less automatically satisfied. However, if the software firm adds to the transaction enough conditions to make the deal appear to be a lease of the copy, and thus not a sale, then requirement C is not satisfied. And as a result, the customer does not have a privilege to resell that copy. This option is highly beneficial to software firms for two reasons. First, by suppressing resales of copies, it enables the firms to sell more original copies. Second, it helps the firm suppress arbitrage of copies sold cheaply to students and so forth, and thus protects the firm's primary markets, consisting of adult or commercial users. The result, as you might expect, makes the software firms happy, but makes their customers much less happy. Again, a highly technical ruling, which locates this particular transaction on one side rather than the other of the fault line, has large economic implications. This concludes our analysis of the rights of distribution. After the break, we'll turn to the even more intricate set of rules governing public performances.