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This Article examines both the forces undermining copy ownership and the important functions it serves within the copyright system in order to construct a workable notion of consumer property rights in digital media.

Part I begins by examining the relationship between intellectual and personal property. Sometimes courts have treated those rights as inseparable, as if transfer of a copy entails transfer of the intangible right, or retention of the copyright entails ongoing control over particular copies. But Congress and most courts have recognized personal and intellectual property as interests that can be transferred separately. Although the better view, this approach frequently overstates the independence of copyrights and rights in copies. Those interests interact; each helps to define the boundary of the other. The exhaustion principle, though historically associated with a clear distinction between copy and copyright, is in fact the primary tool in copyright law for mediating the somewhat indistinct line separating the copy and the work.

Part II begins to outline the breakdown of this once stable equilibrium, focusing on the erosion of the notion of consumer ownership. In recent decades, courts have created two distinct regimes for resolving questions of copy ownership: one that applies to software and one that applies to everything else. The software regime endorses rightsholders’ efforts to “license” particular copies of their works, in contrast to the general skepticism with which courts regard such efforts. This dichotomy is driven in part by software exceptionalism—the notion that for a variety of reasons software should be treated differently. But the growing acceptance of the licensing model also reflects changing views of property. Those shifts opened the door to the substitution of statutory property rights with unilateral contract terms. As the line separating software from other media becomes increasingly blurred, the thinking reflected in the software cases suggests a creeping erosion of copy ownership.

But as Part III details, the erosion of ownership is only half of the problem. The copy, once the uncontroversial locus of consumer property rights, has transformed as well. Copies were once persistent, valuable, readily identifiable, and easily accounted. But the days of the unitary copy are numbered. Today, copies are discarnate, ephemeral, ubiquitous, and of little value in themselves. In part these changes reflect shifting consumer demand. But more importantly, they signal the increasing disconnect between copyright law’s conception of the copy and today’s technological reality. We are witnessing a blurring of the formerly clear distinction between the intangible work and the tangible copy, a distinction that has been central to copyright law’s approach to balancing intellectual and personal property rights.

In light of the challenge of squaring the existing doctrinal framework for exhaustion with these developments, we turn in Part IV to an examination of the functions served by copy ownership. With a better understanding of the role of copy ownership within the copyright system, we will be better positioned to craft an approach to consumer property rights in the post-copy era. We identify three primary functions of copy ownership. First, locating consumer rights in a particular copy helps preserve the rivalry that distinguishes real property from intellectual property, thus preventing consumer rights from unduly interfering with the ability of the copyright holder’s to exploit the work. Second, copy ownership encourages consumers to participate in copyright markets rather than rely on unauthorized sources of content. Third, a stable and reliable notion of copy ownership reduces information cost externalities by eliminating idiosyncratic transfers of rights in copies.

Part V argues that while these three functions historically have been bound up in the single, unitary copy that defined distribution in the nineteenth and twentieth centuries, the copy is not essential to achieving those goals. Instead, the copy served as a token, signaling that each of the three functional concerns at the heart of exhaustion was satisfied. With this new understanding of the place of the copy, we outline the structure of a new exhaustion doctrine that more carefully and transparently interrogates exhaustion’s underlying policy concerns, rather than using the unitary copy as a proxy for consumer rights.


Work published when author not on University of Michigan Faculty. © 2015 Aaron Perzanowski & Jason Schultz. Individuals and nonprofit institutions may reproduce and distribute copies of this Article in any format at or below cost, for educational purposes, so long as each copy identifies the author, provides a citation to the Notre Dame Law Review, and includes this provision in the copyright notice.