What Did I Just Buy?

By Lydia Pallas Loren

We all do it. Click on that little button—the one that says “buy”—to purchase digital books, music, movies, and software online. What many of us don’t realize is that US courts have been concluding for some time that the simple act of clicking that button means you’ve entered into a contract, you have “manifested assent” under the jargon of contract law, which is a necessary step in forming a binding contract. That contract you’ve just agreed to purports to govern what it is you’ve actually bought. In other words, forget your assumptions about ownership: read the contract if you want to know what you’re getting when you click “buy.” And, frankly, who does that?

We buy digital goods with these contracts all the time. Increasingly we also are buying physical goods that have digital components embedded in them (think: the internet of things), and these purchases also have contracts associated with them, along with technological capabilities that make ownership of these things quite different from traditional concepts of ownership. With the expansion of broadband, we are also streaming content over the internet without ever owning a copy of the work that is streamed. The nature of our relationship to the products we buy is undergoing a tectonic shift that few realize is occurring. That shift carries with it a host of unsettling consequences.

Aaron Perzanowski and Jason Schultz’s new work, The End of Ownership, masterfully explores this new reality. That thing we think we just bought: often we don’t own it, but are merely licensing it under the terms set out in the terms of use. We are no longer in the old world, in which the limits on what we can do with the things that we own were governed by laws, decided on collectively by individuals elected by the population at large. Instead, we have entered a world in which the limits on what we can do with the things we buy are defined by a contract drafted by those who are selling us access and use rights—but not ownership. Without ownership rights, our ability to resell purchased objects, or even just lend them, is being eliminated. Add in the technological protection measures embedded in products, and our lack of control over the objects we buy doesn’t resemble ownership at all.

After explaining the differences between the four types of property (real, personal, intellectual, and intangible), Perzanowski and Schultz recount the transition from the analog era to the digital era, highlighting the benefits to consumers that made the transition appealing. At the same time, the authors clearly explain the legal doctrines that have allowed producers to use their copyrights to define in the purchase agreement the rights obtained when someone “buys” something. And it’s not just that we don’t bother to read these agreements, it’s that the agreements are hard to read, filled with legalize, and long. After all, what iTunes users in their right mind would read a 19,000-word agreement before purchasing a 99-cent song? We just keep buying and manifesting our assent to these terms without really understanding what we are buying.

Perzanowski and Schultz offer a sensible test that courts should use to determine when a purchase amounts to a sale, rather than a license. They suggest courts examine three considerations: “(1) the duration of the consumer possession or access; (2) the payment structure of the transaction; and (3) the characterization of the transaction communicated to the public.” If the court determines that a sale has occurred, any attempt by the seller at shaping the permissions granted to the consumer through a contract would be ignored. Instead, purchasers would own the items that they purchased with the permissions generally associated with ownership and defined by law.

The authors spend a chapter exploring the third consideration: the characterization of the transaction. Recounting their previous studies of how to clearly communicate what is really being sold, insisting on clear notices would certainly be an improvement over the current state of the law that allows a “buy now” button to really mean “license now.” This informative exploration of the role clear notices play is instructive and demonstrates just how easy it would be for sellers to do a much better job of clearly communicating what it is they are offering for sale.

The authors also interestingly trace how streaming content is another step down the path to a world without ownership. As they experience explosive growth, streaming services such as Netflix and Spotify have tapped into consumer demand that values access over ownership. A major benefit of the access model is much-reduced prices for consumers, and Perzanowski and Schultz acknowledge the positive distributional effects of reduced prices. They point out, however, that if everything is streamed and no one owns copies anymore, there is a risk that the physical and legal infrastructure necessary to support ownership will disappear. If that happens, works can disappear as well.

For example, if a publisher decides that a work has become too controversial and therefore a liability, the publisher can just remove it from the database of available content. Effectively the work would no longer exist: there would be no untethered, freestanding copies in the world preserving what once was. Though libraries might be thought of as a bulwark against such erasure of collective memory, increasingly libraries are buying into subscription-based purchasing models as well. The authors’ chapter exploring “The Promise and Perils of Digital Libraries” is both intriguing and scary.

The End of Ownership uses the tools of law and economics to highlight transaction cost problems, such as reading the 19,000-word license for a 99-cent sale, and the negative externalities that have yet to be internalized through regulation. But it also uses insights gained from behavioral economics to emphasize the genuine lack of understanding that consumers have of what it is they are actually buying. Perzanowski and Schultz persuasively articulate the consequences people may face in a world without ownership. The book is most valuable in pulling together the related strands of legal doctrines to sound the alarm so that more consumers and regulators will pay attention to what is happening in today’s purchasing transactions.

As the authors explore, it is not just the legal details of whether we own or merely license the things that we pay for that are causing this enormous shift in our relationship with those things. The other driving factor in the end of ownership involves the technologies of control embedded in everything from ebooks to coffeemakers, from printer cartridges to tractors. Yep, that’s right: tractors. Digital rights management (DRM) permits manufacturers to physically constrain what uses are allowed with the products you purchase, and federal law makes it illegal to manipulate the DRM. Though there is a way to obtain three-year exemptions from that federal law, it involves a lengthy process overseen by the Librarian of Congress. For example, in 2015 farmers sought a DRM exemption to be able to repair, modify, and upgrade their tractors without violating federal law. The exemption was granted, but its implementation was delayed for 12 months, effectively consuming one of the three years of the period of exemption. In 2018, farmers will again need to make their case that an exemption is needed. As Perzanowski and Schultz point out, these exemptions are hardly a permanent response to the problems that DRM technologies cause.

Perzanowski and Schultz conclude their book with suggestions for reform that could safeguard ownership. They are not suggesting a ban on streaming services or a ban on licensing models. Far from it. Instead, they suggest some sensible reforms to intellectual property laws that would ensure the survival of ownership and the benefits that go along with it. Implementing the reforms necessary to secure the legal infrastructure that facilitates real choice in the marketplace, including the choice to own what you buy, is an important goal. Legal reforms alone, however, are unlikely to be sufficient; changes in technology are also necessary. Perzanowski and Schultz explore the possibility that blockchain technology (a distributed digital ledger that is a core component of cryptocurrencies such as bitcoin) could be employed as a reliable ownership recording system for transferring copies of owned digital works. Though their technological optimism in pointing to blockchain technology may seem far-fetched to some people, this approach is provided to demonstrate that it may be possible to create a technological infrastructure that can support an ownership model in digital goods.

The book is filled with illuminating and memorable stories and examples. Beginning with the infamous (and highly ironic) time that Amazon remotely deleted Kindle copies of George Orwell’s dystopian classic Nineteen Eighty-Four, Perzanowski and Schultz go on to recount less well known cases such as the Hello Barbie that engages in conversations with children. Unbeknownst to most parents, the doll’s end user license agreement grants wide latitude to the managers of a cloud-based speech recognition platform to use information about the children’s conversations. You get the real sense that the proverbial tip of the iceberg has been spotted; the iceberg itself is on a collision course with our core understandings of ownership.

In the opening chapter the authors assert that “The most fundamental value at stake in the choice between ownership and licensing is autonomy.” Ultimately what Perzanowski and Schultz have done is provide a tour de force account of the current state of our relationships with the products we buy and how laws evolved to allow these relationships to be shaped this way. The authors have also teed up the conversation that we all must have about how these new relationships affect not only simple economic choices, but the ability of individuals to access and share information and knowledge and, ultimately, to facilitate human flourishing.