October 17, 2006
Restricted Fabrics: Cutting against the grain of personal property

Cory BoingBoings use-restricted fabric:

Copyrighted fabric: no selling the stuff you make from it
Reprodebot sells fabric that comes with a "license agreement" that prohibits you from making commercial goods out of the material. What this means, at the end of the day, is that they're not selling you anything at all -- instead, they're licensing the fabric to you, and it isn't your property, and you can't do with it what you want.

fabricPool Party

Please note: This fabric can be purchased for personal sewing projects only. This print cannot be used for items made for resale.

I can hear the law-and-economicians gearing up arguments about the efficiency of price discrimination: Suppose the creator of this fabric pattern wants to sell it for commercial use, and finds that commercial re-sellers are willing to pay her $35/yard. If she sold the fabric uniformly at that price, a few interested personal users would be unable to afford it. She could sell it to those personal users at $24.95/yard (or $12.95/yard) (still above her marginal cost of manufacturing the fabric), but she'll do that only if she can prevent commercial use and arbitrage -- pretend-personal users buying the fabric just to re-sell it commercially at $25/yard -- by those who've paid only $12.95. So, either we permit use restrictions (what you can buy for $12.95 is not an unencumbered bolt of cloth), or the seller will sell only at $35 and some people will miss the opportunity to buy something that was worth $12.95 to them.

But the perfect price discrimination story has several holes, some correctable, others not.

  • Some people don't know they're buying use-restricted fabrics, so they end up with something worth less than $12.95 to them. The first buyer could be given a clear warning on the purchase site, but what if he later decides he can't use a whole bolt of fabric, and wants to dispose of some?
  • It's difficult to track the use-restrictions. Do we make people leave the mattress tags on even after buying the mattress, or do we make every subsequent purchaser investigate the chain of fabric-title for restrictions? Can a gift recipient sell an old blanket at a tag sale? (The transaction costs of tracking the restrictions burden the public more than allowing the price discrimination benefits.)
  • The economics might be wrong. If the designer couldn't put use restrictions on her product, perhaps she'd sell it somewhere between $35 and $12.95, and public welfare would increase because more people would be getting more value.
  • The seller is trying to lock up something she doesn't have the legal right to: Copyright grants artists the right to prevent reproduction of their original works, but not to prevent resale of a lawfully obtained copy (first sale doctrine). Moreover, that doctrine represents a policy choice about the amount of incentive needed to induce creative work. Though the copyright holder has the choice whether or not to make fabric, she shouldn't get further control over the market for pillows and tents made from matching fabric.

    Clarifying the terms in a purchase contract solves only some of these problems. It doesn't, in particular, address the concern that the seller might be using the powers of copyright to exclude more than copyright was intended to control -- and more clearly in areas of interoperable products or expressive speech, to control a market or a debate beyond that which is healthy for society.

    Posted by Wendy at 11:31 AM