From Copyright and Technology:
Seventeen years ago, the U.S. Copyright Office — Congress’s official advisor on copyright issues — published an opinion for Congress on whether there should be a first sale right for digital content: a right for consumers to alienate (sell, lend, rent, or give away) digital files, like the one that exists for physical items like books, CDs, and DVDs. In the so-called Section 104 Report, the Copyright Office considered the idea that digital first sale could be supported with a “forward-and-delete” mechanism that ensures that if you send a digital file to someone, the file no longer exists on your device.
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[A]fter last week’s hotly anticipated Second Circuit Appeals Court’s ruling in Capitol Records v. ReDigi, the Section 104 Report continues to be the last word on the subject. The appeal’s court’s narrow ruling affirms the lower court ruling — more than five years ago — that a digital resale service that tried diligently to implement a forward-and-delete mechanism was liable for contributory copyright infringement.
ReDigi is a Boston-based startup that had a marketplace for “used” music files. If you bought music files from Apple iTunes for 99 cents, you could register them in the ReDigi marketplace for resale. When you sold one of your files (for less than 99 cents), ReDigi took a cut of your proceeds, and its software deleted your copy from your PC or other device. ReDigi’s technology was carefully designed to make sure that two copies of the file (one on the seller’s device, the other on the buyer’s) never existed simultaneously, but instead that the buyer’s copy was built up while the seller’s copy was being erased.
The ReDigi system took various steps to curb abuses. It tried to ensure that you weren’t keeping copies of files after resale by monitoring your device’s hard drive. It also checked to make sure that the files you wanted to resell were legitimately purchased on iTunes. If ReDigi found that you were trying to circumvent the system, it would suspend your account. ReDigi limited its service to files purchased on iTunes, presumably because they believed that iTunes’ end user license agreement (unlike Amazon’s) gave just enough wiggle room to allow users to resell their files. (Apple never weighed in on this one way or another during the course of the litigation.)
In other words, ReDigi tried hard to implement a forward-and-delete system of the type contemplated in the Section 104 Report. It even tried claiming that the Section 104 Report was obsolete because of various new Internet technologies that have been developed since 2001; the appeals court didn’t find that argument relevant to the ReDigi case.
In fact, the Copyright Office’s predictions on forward-and-delete turned out to be right in many respects. ReDigi’s mechanism had two flaws that turned out to be fatal, despite what the appeals court found to be a “good faith [effort] to achieve a goal generally favored by the law of copyright.” First, the abuse detection apparatus wasn’t foolproof: for example, a user could make copies of her files and store them offline (such as on a USB thumb drive) before reselling them, or could restore the files after resale from an Apple iCloud account. And there were probably ways for users to create fake file header metadata designed to fool the system into thinking that (for example) a track from a ripped CD was purchased on iTunes.
Second — and most fatal in terms of the legal argument — was that the file had to be copied at all in the process. The nuance that the Second Circuit seized on in its opinion — written by Judge Pierre Leval, a highly respected authority on copyright law — was that the first sale right (Section 109 of the copyright law) applies to distribution, not reproduction. Under first sale, a consumer has the right to redistribute a copy of a legally-obtained work with no involvement from the publisher, but not the right to reproduce it. (When you alienate a book or DVD, you don’t make a copy of it.) Yet the way ReDigi’s system was designed, it couldn’t avoid making reproductions (copies) of users’ files, and those copies weren’t authorized.
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The court also ruled that the copies made in the ReDigi system weren’t fair use, after an analysis that was more extensive than that done by the lower court. Unsurprisingly, its analysis leaned heavily on the fact that ReDigi offers a commercial market for resale of digital music files that are identical to those sold in the “new” marketplace at higher prices and “do not deteriorate the way printed books and physical records deteriorate.” The appeals court’s fair use analysis seemed intended to support the court’s holding — mainly in a lengthy footnote on p. 19 of the opinion — that while digital content technologies make many “innocuous copies” in the course of their normal operation, the copies made in the ReDigi system are different because the former are fair use while ReDigi’s aren’t.
Link to the rest at Copyright and Technology