Amazon Wants to Get Into the Used E-Book Business — Or Bury It
Photo: Ariel Zambelich/Wired 
Last week, Amazon patented a way to sell “used” e-books, music, videos, apps and other “digital objects.”
The marketplace described in the patent would let such exchanges take place by cutting off the seller’s access to a piece of digital content once the buyer paid.
If the world’s largest online retailer opens the door to digital yard sales, the result could upend the business models of already struggling book publishers and record companies, not to mention thriving digital marketplaces like iTunes, Google Play, and Amazon itself. That is, if Amazon ever really intends to make used digital sales a reality.
Here’s how Amazon has sketched out the way it would work in the patent. The proposed used marketplace would work similarly to Amazon’s Kindle e-book lending process. Currently if a publisher grants Amazon the rights, when a Kindle customer “buys” a book, they have the option to loan the access rights to that digital file to friends or family that are also Kindle users.
While the book is on loan, the original owner of the book is unable to access the e-book on any Kindle device. It’s still on those devices, but the access rights to the book have been transferred temporarily to the person with the loaned e-book.
The proposed used digital marketplace would take that one step further. Instead of loaning the access rights of an e-book, music file, video or application, in exchange for some cash, the original owner of the digital file would transfer the rights to use that file to another party permanently.
If the file were downloaded to a device, after the sale, the original owner would be unable to access the file. the data would still be on the device until deleted by the original owner, but access to the contents of that file would be turned off.
Amazon’s lending feature has become popular among Kindle users, and adding sales seems a natural next step, but financial and legal complications may still stand in the way, all stemming from the key differences between the virtual and the physical.
First, digital content is infinitely reproducible. No technological limit exists to how many times a single digital original can be copied and resold. Amazon’s patent doesn’t describe any breakthrough technology. Instead, it secures Amazon’s right to a technique for what the patent calls “maintaining scarcity.”
Second, every digital copy is a perfect copy.
“There are no dog-eared pages or scratches or nicks or cuts or highlighter marks or whatever,” says Bill Rosenblatt, a consultant and expert witness in digital content patent cases. “It’s the same exact product.”
In other words, a customer given the choice between a “new” e-book and a less expensive “used” e-book will buy the used copy every time. The extra expense of “new” won’t get you anything better. So why would Amazon want to get into a business that would seem to undercut the business they’re already in?
Rosenblatt believes that a digital resale marketplace wouldn’t ultimately make Amazon a lot more money on books or music, at least not at first. But he thinks it would move much more of Amazon’s digital content business beyond the interference of publishers, just as publishers can’t dictate the terms of, for example, the sale of used physical books on Amazon.
Just as with physical books, publishers would only have a say — or get a cut — the first time a customer buys a copy of an e-book. The second, third and fourth sales of that “same” e-book would be purely under Amazon’s control.
Such an arrangement could also give Amazon’s growing business as a publisher itself a boost, Rosenblatt says.
“If Amazon is allowed to get away with doing resale transactions without compensating publishers, then what they can do is say, ‘hey authors, sign with us and we’ll give you a piece of the resale,’” he says. “That could attract authors who might otherwise sign with traditional publishers.”
At the same time, Amazon’s patent leaves room to head in a different, more cooperative direction.
Buried in the patent is language spelling out that the technology Amazon intends to use will have the ability to limit the number of times a digital good could be resold or loaned out. Amazon could use that constraint to strike bargains with publishers and authors to cut them in on used digital sales, which doesn’t happen with used physical media.
Here’s your take the first time it an e-book or game sells, the second, the third, etc.
Any arrangement where authors and publishers also make money could be useful leverage for Amazon to head off legal challenges bound to result otherwise.
As always, the question of copyright infringement comes into play whenever there’s a transfer of digital goods. If Amazon’s reseller marketplace ever comes to fruition, we don’t know whether Amazon will acquire the permission from rights holders to enable the loaning or reselling of digital goods at scale.
(Amazon declined to comment for this story.) But whether permission from rights holders is even required is another issue.
In federal court in New York, Massachusetts-based startup ReDigi is facing off against Capitol Records, which called the young company a “clearinghouse for copyright infringement.”
ReDigi lets people buy and sell all kinds of copyrighted digital content residing on their computers. ReDigi founder and CEO John Ossenmacher argues his company’s technology actually preserves the copyright status quo by moving “used” digital content bit by bit from a seller’s computer and into the cloud before the new owner can access it.
As he reads it, Ossenmacher says Amazon’s patent skates closer to the copyright edge by using a technique he describes as “copy and delete,” by which a copy of the seller’s cloud-based content is made and placed into the buyer’s cloud before the first version is deleted. That copying, he says, sets Amazon apart from what his company is doing, and he thinks could get Amazon into more trouble with rights holders.
“From the dawn of time people have been able to buy and sell goods regardless of the form they were in,” Ossenmacher says.
But some doubt whether Amazon really intends to uphold that commercial tradition.
Mike Shatzkin, a publishing veteran who now works as a consultant focused on the industry’s digital future, doubts Amazon really does want to get into digital resales.
“I would not leap to the conclusion that the fact that they have this patent means that they intend to go into this business,” Shatzkin says. “They may be patenting it to keep it off the market.”
But some intellectual property experts don’t believe the patent is written in a way designed to quash other digital marketplaces from getting under way. Amazon may simply be striking first in what promises to be the inevitable battle among the expected players — Apple, Google, eBay, Facebook — over used digital content.
“There is no way as I read this that this could be used to block somebody else,” says Robert Aronoff, managing partner at Pluritas, a San Francisco-based investment bank that advises companies on intellectual property transactions. “It’s just the evolution of the marketplace,” Aronoff says. “You empower and develop a market which allows users to trade. It’s electronic eBay.”
Additional reporting by David Kravets, Michael V. Copeland and Roberto Baldwin.
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