Ken Fisher via Ars Technica; Why Amazon went Big Brother on some Kindle e-books:
"As it turns out, the books in question were being sold by Amazon despite being unauthorized copies. The works weren't legit. It was all copywrong. In other words, Amazon was selling bad books. Hot letters. Pilfered paragraphs.
MobileReference, the publisher in question, formats and sells public domain books on Amazon. The only problem is that George Orwell's Animal Farm and 1984 are not yet in the public domain, at least not in the US. According to Amazon's statement to Ars Technica, "These books were added to our catalog using our self-service platform by a third-party who did not have the rights to the books." When the publisher informed Amazon of this, Amazon moved to rectify the situation. The two books are no longer listed on MobleReference's website, either.
But does Amazon's Terms of Service even allow for this kind of “rectification”? Peter Kafka examined the ToS and believes that there is no backing for this move. The ToS makes it sound as if all sales are final:
Upon your payment of the applicable fees set by Amazon, Amazon grants you the non-exclusive right to keep a permanent copy of the applicable Digital Content and to view, use, and display such Digital Content an unlimited number of times, solely on the Device or as authorized by Amazon as part of the Service and solely for your personal, non-commercial use. Digital Content will be deemed licensed to you by Amazon under this Agreement unless otherwise expressly provided by Amazon.
One possible loophole would be in the licensing: Amazon cannot license to you something for which it has no rights to license. Also, we suspect that some indemnification clauses in the third party contracts also put the publisher, not Amazon, on the hook for possible infringement problems."
http://arstechnica.com/tech-policy/news/2009/07/amazon-sold-pirated-books-raided-some-kindles.ars
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