Most people know you can’t take embroidery designs and sell them as your own. Copyrights protect the digitizer’s rights. However, there is a lot of confusion as to who actually owns the embroidery files.
With any purchase, the sales contract controls what you can do with item and lists who owns the item. When you buy a home in a subdivision with a home owner’s association, you contractually agree to abide by the association’s terms. The property may come with deed restrictions. Similarly, buying embroidery designs also come with restrictions. When you purchase a digital file, you are actually purchasing the licensing rights and not ownership rights.
According to the United States’ Department of Justice website, “Most computer software is distributed through the use of licensing agreements. Under this distribution system, the copyright holder remains the ‘owner’ of all distributed copies.” The purchaser buys the rights to use the embroidery files but does not actually own the embroidery files. The files can not be sold or given away, as the files are owned by the digitizer.
United States’ Law regarding the First Sale Doctrine and digital items:
https://www.justice.gov/archives/jm/criminal-resource-manual-1854-copyright-infringement-first-sale-doctrine
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To help clarify how digital products work, here are a few terms to understand.
Copyright – protects all works with some ‘artistic merit.’ (A copyright does not protect functional items like spoons or clothing or things like a list of ingredients for a recipe.) Thus a book is protected by a copyright and software is protected by a copyright. You can not copy either.
Licensing – A contractual agreement between the purchaser and the seller that limits how the item is used. Licensing agreements state that the ownership of the embroidery file remains with the digitizer. The purchaser buys the rights to use the embroidery file in specific ways spelled out by the sales contract terms. The purchaser can’t give away or sell the embroidery file, as the digitizer remains the owner of the embroidery file. Digital products include a licensing contract which must be agreed to during purchase. The purchaser is bound by the licensing agreement contract, and the terms include that the embroidery files are only to be used by the original purchaser. A contract can limit how a product is used and overrides the First Sale Doctrine, because the contract is between the original purchaser and the seller (in this case, the digitizer).
First Sale Doctrine – The concept that a purchase contract is between the original purchaser and the seller (the first sale). The original purchase contract can only be enforced between the original buyer and seller. The First Sale Doctrine states that physical products can be resold (if there are no contractual limitations agreed to at the time of purchase), as physical products can not be easily reproduced. The First Sale Doctrine does not apply to embroidery files, as there is usually a licensing contract between the original purchaser and the digitizer which states that the digitizer retains ownership of the files. The sale terms limits how the embroidery file will be used.