A digital second-hand market, driven by NFTs?

The used textbook market has long been a source of envy for some publishers, who are somewhat frustrated by the fact that sales are being made without any resulting remuneration. The American school publisher Pearson intends to use NFT technology to control the resale of textbooks in digital format.

The second-hand printed book is easily exchanged and resold: according to the principle of exhaustion of rights, a right holder cannot oppose the sale of a work as long as it has already been the object of a first sale, with payment of the related rights.

The ebook has obviously reshuffled the cards: a few years ago, attempts to resell digital books emerged, before being quickly dismissed by the courts. In 2018, the U.S. Court of Appeals for the Second Circuit thus confirmed the illegality of selling used digital files.

“[I]n strictly applying the Copyright Act, the Court confirmed that reproducing a copyrighted work without permission and distributing it is not the same as reselling and transferring a used work, as in a used bookstore,” the American Publishers Association praised at the time. The Court ruled that the guarantees regarding the effective transfer of the digital work and its destruction – so that only a copy remains – were not sufficient.

However, the idea of a digital second-hand market is resurfacing with the emergence and development of NFT technology, for “non-fungible tokens”. In simple terms, a digital certificate of authenticity, linked to a file, guarantees its uniqueness.

“Participate in every sale”

This new setting opens up a very engaging prospect, according to Andy Bird, Pearson Group CEO. “In the analog world, a Pearson textbook could be resold up to 7 times, and we only participated in the first sale,” he reminded shareholders.

“The move to digital has reduced the secondary used market, and technology like blockchain and NFTs allows you to participate in each and every sale of a particular copy, throughout its life,” he continued. Here, “participate” obviously means taking a percentage of secondary sales of the book. The principle of exhaustion of rights would thus be conscientiously circumvented.

Bird, who came from the Disney Group in 2020, has taken Pearson, a historic school group that somewhat missed its conversion, in a digital direction. In just a few months, it has righted the ship: since last year, the Pearson+ app has offered a $14.99-a-month subscription to students to access a catalog of textbooks. This is not unlike audiovisual streaming services, including… Disney+.

This gradual disappearance of ownership in favor of perpetual rental would therefore be followed by another movement, where the digital opportunity would only be possible on the condition that the exhaustion of rights disappears. The limits fixed by the justice, because of an impossible control of the digital copies, would indeed jump with the possibilities of identification offered by the NFT.

In France, the Conseil Supérieur de la Propriété Littéraire et Artistique has addressed this particular issue, considering, in light of current law, that the NFT, or JNF, does not “constitute a tangible and material support” of a work: as such, the exhaustion of rights would not apply to this technology, which leaves the door open to the implementation of a system described by Pearson’s CEO.

“Under these conditions, the provision of a digital file via JNF, for permanent use, could fall under the “communication to the public” right provided for by Directive 2001/29, which is not subject to exhaustion of rights, which is not without impact on the development of JNFs in the music and publishing sectors, for example,” the CSPLA concluded quite rightly in its opinion.

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