(05.14.07) The used music CD market has been unintentionally caught up in legitimate efforts to both make it harder to sell and easier to track stolen goods. While such laws may make sense in tracing many stolen goods of relatively high value and which have identifying features, applying such laws to music CDs will have little or no effectiveness in identifying a CD thief, but will be cheered by professional copyright infringers offering illegal copies to consumers at a fraction of the cost of a new CD.

For the following reasons, the National Association of Recording Merchandisers (NARM) calls on lawmakers to exempt secondhand sales of music CDs from regulation under secondhand dealer laws.

Secondhand CD sales are encouraged by federal copyright law. The Copyright Act gives the owner of a lawfully made CD the absolute right to sell it without the permission of the copyright owner. The idea is to encourage broad redistribution of creative works of authorship to people who may not have been in a position to make the first purchase. Regulation of used CDs suppresses that freedom.

Secondhand CD sales are protected by the First Amendment. Courts have repeatedly held that sales of expressive materials are entitled to full First Amendment protection. This includes the right to speak anonymously. Because our taste in music is often associated with our values, laws that require anyone selling a CD to disclose their identity directly abridge that freedom to choose whether to be associated with ownership of a particular work.

Secondhand CD sales benefit the local economy. Used CDs may be sold on the Internet, traded, sold at yard sales, given away or thrown away without regulation. Retailers who purchase and sell used CDs, in contrast, are contributing tax revenue and employment to the economy. But because used CDs are so inexpensive, the burden of complying with a secondhand dealer regulation will create costly logistical considerations that will outweigh the commercial value of the transaction.

Secondhand CD sales benefit creative artists and their audiences. Just as Abraham Lincoln learned law from used books, millions of Americans must rely on secondary markets for used books, used shoes, used clothing, and used CDs simply because they do not have the financial means to buy everything new. Many of our nation’s finest recording artists were influenced by music acquired in secondary markets, and millions of Americans can discover new artists and new music that might be cost-prohibitive for them if the market for used CDs is suppressed.

Secondhand dealers hurt pirates. Consumers unwilling or unable to purchase their music on new CDs have two commercial options available: Secondhand sales and illegal copies. Secondhand CDs and pirated CDs are both available at a fraction of the cost of a new one, but if secondhand sales are suppressed due to burdensome recordkeeping and identity disclosure, the pirates will have the market to themselves. Record companies, artists, retailers and consumers all benefit when low cost but non-infringing copies can fill a demand that would otherwise stimulate piracy and illegal copying.

Regulation of used CDs is unlikely to aid law enforcement. Music retailers are more than willing to assist law enforcement in prosecuting theft of any kind. They, themselves, are too often the victims of theft. Yet the CD itself is a commodity, in that it is virtually impossible to distinguish a stolen CD from a used one. A stolen $20 bill has a serial number, but a stolen CD does not. If the CD of a particular title is reported stolen at one end of town and a used CD of the same title is sold at another, it would be highly unlikely that prosecutors could prove a match in court. Moreover, the thief who steals a hot new release CDs is more likely to sell it casually on the street than try to sell it back to a store, where the profit margin will be lower. In short, while secondhand dealer laws may prove effective when applied to used products that can be traced back to and identified with a particular theft, they are not rationally related to a legitimate state interest in law enforcement when applied to low cost, fungible commodities such as CDs.