Are Microsoft's preowned plans illegal?

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Are Microsoft's preowned plans illegal?

Post by Killswitchmad on Fri 24 May 2013 - 22:21

Could the Xbox One be getting itself into a spot of bother with its used-game system? We take a look at the legality of it all.

Unless you have been living under a rock for the last few days, you will have probably heard about the rumoured Microsoft plans that charge customers for the privilege of playing pre-owned games.

The rumoured plans include taking a cut of used games sales at high street retailers as well as charging a fee of up to £35 to activate a game on your own system if the game had been previously activated else where.

This news has rightfully caused quite a stir and Microsoft have done nothing to stem the flow of criticism, only confirming their intent to “enable our customers to trade in and resell games at retail” but “beyond that, we have not confirmed any specific scenarios.”

After getting a bit of a bee in out bonnet about it, something didn’t sit quite right with us, so we decided to do a bit of research in the legality of these rumoured plans.

The copyright laws of the US and Europe grants a copyright owned the exclusive rights ”to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.”. This is refered to as the ”distribution rights” and allow a copyright owner to prevent the distribution of goods that infringe the copyright.

There is also a piece of law called the “First-sale doctrine” which causes a basic exception to a copyright holders distribution rights. this doctrine outlines that when something is lawfully sold, the copyright holders rights over this object ends and the new owner, the person who just bought the item, is free to do with it what he or she desires. This is called the “exhaustion rule”.

To give an example, a customer, lets call him Bob, walks into a publishing house looking to purchase a book. The publisher agrees to sell Bob a new book for £20. Money is exchanged and the Bob walks out £20 lighter and carrying the new Stephen King novel. It is at this point that the copyright holders rights, in this case Stephen King and his publishing company, end and Bob is now free to do what he likes with this book within the rights of copyright law.

If Bob gets home and decides that, after reading 5 pages of the book, it’s not his cup of tea, he is well within his rights to sell his copy of the book on to somebody else, give it to away as a gift or even throw it in the garbage. Obviously, the law is a lot more complicated than that, especially around digital good re-sale, but this is the basic premise.

Now lets apply Microsoft’s rumoured plans to Bobs situation.

Bob walks into a branch of GAME. He likes the look of the new Forza 5 game and purchases it for £35 for the Xbox One. He rushes home, registers the game online with the “Xbox Cloud” so that he can play it and away he goes. After a few days, he is getting a bit bored of it. He decides that he wants to sell it on to a friend, only none of his friends want to buy the game from him because if they do, they will also have to pay a fee of up to £35 to register the game with Microsoft’s cloud.

The “First-sale doctrine” dictates that Microsoft’s interest in the game should have ended when Bob first purchased the game. Their rights over its resale ceased as part of the “exhaustion rule”.

Why is it then that Bob cannot sell on his copy of Forza 5 to somebody else without Microsoft getting involved? After doing a lot of research, we can not find any legal loop-hole which the American company could use to force these fee’s up on customers who purchase the game from somebody who has already exhausted Microsoft’s distribution rights. Even the Digital Rights Management (DRM) schemes should not apply in this situation because at no point has anybody tried to create a copy of the software.

If the rumours are true, the legal team at Microsoft must have found some way around the “First-sale doctrine”. If not, the company are setting themselves up for a fall as they would be exceeding their right as copyright and distribution right holders and could get landed with thousands of court cases.


This seems like it's very much a grey area currently but for my money if this ever went to court I reckon Microsoft would argue that their fee covers the unlocking of digital content only rather than covering the physical product itself
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Re: Are Microsoft's preowned plans illegal?

Post by HomerRamone2084 on Sat 25 May 2013 - 1:51

I recall the european court ruled not so long back that its perfectly legal for someone to sell a digital copy of software. Whilst that sounds impossible its not. Doubtless many have bought XBL games. You cant really sell them can you .. well sort of.. it means selling the profile that bought them. So if you care about yer profile (and score) youd probably not do that - but if its matterless to you then ....

http://www.joystiq.com/2012/07/03/eu-court-rules-its-legal-to-resell-digital-games-software/
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Re: Are Microsoft's preowned plans illegal?

Post by Duke on Sat 25 May 2013 - 16:26

Can they not get round it by saying you are licencing the game rather then owning it - rather like the itunes music policy?
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Re: Are Microsoft's preowned plans illegal?

Post by Killswitchmad on Sat 25 May 2013 - 16:42

Duke wrote:Can they not get round it by saying you are licencing the game rather then owning it - rather like the itunes music policy?

I'm not to sure as there is a physical product involved here where iTunes is digital, The law is different....
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Re: Are Microsoft's preowned plans illegal?

Post by Duke on Sat 25 May 2013 - 20:36

Maybe they will try and claim you own the game but you are licencing the online content (hence why it needs to connect every 24hrs)

Anyway I predict that after numerous lawsuits nothing will change - unless there is a significant drop in sales for MS?

At the moment the PS4 looks the better gaming option - Hell even XBMC with some emulators looks like the better gamiing option at the moment. Feels like the new GTA will be my last concole hurrah
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Re: Are Microsoft's preowned plans illegal?

Post by FWG MARKY FWG on Sat 25 May 2013 - 20:51

This has become more about microsoft skinning the already strapped customer out of as much money as possible. If this becomes fact then I'll end my console life with the 360.
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