When I was a kid, I owned a rather substantial record collection.  It included The Who, Dylan, Simon and Garfunkel, and other groups popular in the late ’60’s early 70’s.  I owned books including my father’s Funk & Wagnall’s encyclopedias, and games including Risk and Strat-o-Matic.  Increasingly, these will be seen as remnants of a past society – a quaint reminder of what used to be.

In a profit-driven culture, combined with the Internet of Things, we can expect to “own” less and less of what we use, and rather we can expect to “license” everyday items from companies that retain rights – and therefore control – over things as diverse as our cars, our appliances, our clothes, and even our light bulbs.  Legal concepts of “ownership” of tangible property will change as this tangible property is intermixed with software and other proprietary code.

You download the latest video game for your Xbox One.  You “own” your copy of Halo.  Not so fast.  You actually have a license to use the game, provided that you continue to adhere to the conditions of the Software License Agreement.

Try to play your game on your PS4 in Scotland, and you have “exported” the product in violation of the SLA, and therefore no longer have the right to use the game.  Come back to the US and use the game again, and guess what?  That’s a civil or criminal copyright infringement.  All for using the game you bought.

Same thing is true for most intellectual property.  While you THINK you are buying the Kindle book, the Amazon video or the iTunes music, you aren’t.  At least not in the sense that I bought an LP in 1964.  So the software is owned by the developer, the music by the distributor, and the video by the studio.  They reserve the right not only to limit your use or distribution of their intellectual property, but the reserve control over HOW you use the product/service.

Amazon knows how much of your Kindle book you have read, and how quickly.  Apple knows what music you listen to, where, and in what order.

All well and good for “pure” intellectual property.  But almost everything has intellectual property embedded in it in one way or another, and that gives manufacturers and producers rights to control (and to revoke ownership rights) to those things.  A garage door opener contains software code that gives the manufacturer the right to prevent you from cloning the opener to replace a lost device.  A print cartridge has embedded code that allows the manufacturer to prevent you from refilling the printer with cheaper ink.

An Omega watch contains a printed logo that represents a trademark and can be used by a manufacturer to prevent the purchaser of the watch from reselling it.  Your television has a Software License Agreement.  Your “Hanes” briefs belong – at least in a tiny way – to Michael Jordon. Manufacturers use this embedded IP as a hook to extract additional profits, to prevent competition, to ensure obsolescence, and generally to make more money.  Increasingly, you “own” less and less of what you think you “own.”  When you purchase a ticket to ride the subway, not only don’t you have a “right” to ride the subway (it’s a revocable license) you don’t even own the fare card; you license it.

And it’s going to get worse.  Much, much worse.

With the Internet of Things, more and more everyday products will have embedded Intellectual Property.  Everything from appliances to devices, light bulbs and lamps, refrigerators and their contents, pharmaceuticals, wearables, and even “smart” clothing will have embedded code.  You “buy” a John Deere tractor, but you don’t own it.  What you receive is a revocable license to “use” the tractor.  Fixing your car, modifying your PS4, or putting in a different light bulb doesn’t just vitiate the warranty; it means that you violate copyright law.

That means that you have committed a crime.  So you may think you “own” that gallon of milk, but the low power RFID chip on the carton gives the dairy the right to know how often you use it, and they may revoke the license to the software on the chip if you switch to Soy.  Not only will every device and product have its own privacy policy, but also it will have its own Terms of Use.  Breach those terms, and your right to use the product expires. Your license is revoked.

The copyright laws, including the Digital Millennium Copyright Act (DMCA) have been inconsistently applied in this area.  In general, intellectual property agreements like webpage terms of use and Software License Agreements have been held to be mostly enforceable – even when these have an anticompetitive effect.  So if you buy a Keurig coffeemaker, you can’t legally put in a no-name coffee filter.

If you get a phone, it contains a software “lock” that prevents you from using that phone on another carrier, even though you are under no legal obligation to use the carrier with whom you are under contract.  (You DO have a legal obligation to pay them or pay back the subsidy, but you aren’t required to use them or their really expensive roaming services overseas.)  In fact, they put in a software lock to prevent iPhone users from using the FM radio built into the device (a radio that the consumer paid for) because their business model relies on them charging for data streams rather than allowing free transmission.

We already see car manufacturers denying consumers access to the diagnostic trouble code information necessary to repair their own cars because the code is “proprietary.” Instead we get a simple “check engine” light – which means a $100 visit to the dealership to remind us to screw the gas cap on tighter.  Great $$ for the dealer!  Imagine such proprietary code in the “smart home” or “smart clothing” or any other IoT device.

The conditions of the purchase agreement, and therefore the license itself, will not necessarily be available to the purchaser.

So if you go to The Gap and buy a sweatshirt which has embedded code on an RFID chip, the license agreement may be with The Gap, with the manufacturer of the garment, with the manufacturer of the chip, or with the software designer.  Anyone in the supply chain can claim both “ownership” and licensure of the intellectual property embedded in the Internet of Things.

The Intellectual Property licenses embedded into the software which is embedded into the Internet of Things gives the IP owner the ability to control far more than the use and distribution of their intellectual property.  By embedding IP into a thing, the copyright, trademark or patent owner can extract an agreement from the licensee (that is, the consumer) that goes far beyond that contemplated by copyright law.  Just as software developers can put in “no-disparagement” or “no benchmarking” agreements in their SLA’s the licensor of an RFID chip can insist that the “licensee” of a T-shirt not wear it inside out, or not cover up the logo in public.

Just as the New York Yankees can put a term into its employment contracts that employees not speak ill of management they can also put the same clauses into the “license” on the back of the ticket (you don’t own the seat and you have to “right” to use it) just like they currently force you to waive liability for things like getting hit by a baseball.  A manufacturer can put into the license agreement a condition that the purchaser… um … licensee not post a bad review on Yelp!, or not complain about the quality of the product or service.

Those terms are conditions of having the authority to “use” the intellectual property, and violation of those terms are not simply a breach of contract – they then make the use of the IP unauthorized, and therefore subject the user to federal statutory copyright infringement damages and potential criminal copyright infringement liability.  The SLA terms embedded in the “thing” can also subject the user to the jurisdiction of a foreign court, limit the “licensee’s” liability for things like product liability, can limit the time and place you can sue, and otherwise waive the rights of consumers.

If the “license” to the IP is not transferrable, the thing into which it is embedded is likewise not transferrable.  So just as you (mostly) can’t lend your Kindle book to a friend, you will not be able to lend your favorite sweater to a friend because of the embedded RFID chip.

These restrictions may also apply to things that have no embedded software or IP in them at all.  If you create an item with a 3D printer, the software license agreement of the printer, or the license for the design that you downloaded off the Internet may contain conditions or terms of use, granting the IP owner rights with respect to the product created.  Just as an architect may have certain rights with respect to the building built with her plans (if she has reserved such rights) fabricated materials may come with a catch.

As we become more dependent upon the Internet of Things, manufacturers will realize the power that they have.  Already, for lower income or installment purchasers of cars, if they fail to make timely payments, the lender (the car owner) can electronically repossess their car, and essentially “brick” it.  Same with TV leasing or furniture rental companies.

It’s a short distance from lessors of products to licensors of embedded IP.  Your shirt, pants, dress or socks will have embedded RFID chips with an SLA granting rights AND REMEDIES to the manufacturer. The terms of these agreements can be found conveniently on their website – all 65 pages.

That is, if you can even determine who owns the IP.   And no negotiation!  Although the Supreme Court recently ruled that what is called the “first sale” doctrine permitted a purchaser of cheap foreign textbooks to resell those textbooks for a profit in the US without the permission of the publisher (they WERE his textbooks, after all) the result might be different if, as a condition of purchasing the textbooks, the purchaser agreed NOT to resell them, and further agreed that the publisher had the right to seize any textbooks resold in violation of the agreement.  As everyday objects become infused with someone else’s IP, they become subject to such agreements.

They also become subject to monitoring and metering.  The IP owner can get your agreement to allow them to monitor how you use their IP.  They can “allow” the purchaser to “use” the IP a limited number of times before the license is revoked.  No more wearing your jeans 11 days in a row (it passes the “sniff” test, right?)  It violates the software license agreement on the RFID chip.  If you gain 20 lbs., you lose your “privilege” to wear spandex.  Companies can sell more products more often at higher prices.

And that’s one of the things that worries me about the Internet of Things.  Now where’s my copy of Chutes & Ladders ® (a registered trademark of Milton Bradley)?

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