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Wednesday, February 08, 2012

ReDigi and the Purpose of First Sale

For now, at least, ReDigi lives. Judge Sullivan denied the preliminary injunction, but according to the transcript, on irreparable harm grounds rather than a lack of likelihood of success on the merits. The case is set for rapid progress towards trial, quite possibly on stipulated facts.

I'd like to take up one of the central questions in the case: first sale. Whether you think ReDigi ought to win certainly turns on your view of what first sale is for. So too, may the legal merits. How you interpret statutory text like "owner" or "sell" may depend on on your theory of what kinds of transfers Congress meant to protect. And even if ReDigi's particular form of transfer falls outside of the text of first sale itself, the arguments for and against fair use can draw on first sale principles. Here, then, are some competing theories:

  • Conservation of copies: Copyright is fundamentally copy-right: the ability to prevent unauthorized copying. Practices that don't increase the total number of copies in existence don't fundamentally threaten the copyright owner's core interests. First sale blesses one of those practices: moving a copy for which the copyright owner has already been paid from one set of hands to another. On this theory, ReDigi is okay because it forces sellers to delete their copy of the music, thereby keeping the number of extant copies constant.

  • Freedom of alienation: First sale protects the rights of owners of personal property against copyright claims that might interfere with their right to use their property as they wish. This idea is sometimes described in terms of "servitudes on chattels" or "exhaustion" of the copyright owner's rights. We could also think of it as a negotiability regime promoting free transferability of personal property, given the information and transaction costs involved in allowing third-party copyright claims. On this theory, ReDigi is in trouble because it deals in information, rather than in tangible objects.

  • Copyright balancing: First sale is one of a cluster of doctrines that shape the level of control copyright owners have over the market (economic and cultural) for their works. If that balance changes over time, the doctrines should be recalibrated to restore it. Since the reproduction right has expanded to cover all sorts of computer-based uses such as loading a file into memory, the first sale defense should expand to maintain the same rough level of control. On this theory, ReDigi should win, because it would preserve roughly the same levels of freedom for users and control for owners as they had in an analog era.

  • Copyright balancing: Or wait ... if the goal is balancing, then perhaps ReDigi should lose. First sale used to be practically restricted by the facts that physical copies wear out and that exchanging physical objects takes time and money. ReDigi would blow those practical limits away, disrupting the first sale balance in the direction of too little control for copyright owners. In the face of rampant illegal file-sharing, why should a court, in effect, legalize the process by allowing ReDigi to serve as a super-low-friction intermediary?

What I love about this case is that it pushes and pulls our intuitions about copyright in so many different directions. It brings up fundamental questions not just about unsettled corners of doctrine, but also about what copyright is for. It offers grist for every mill, food for every kind of thought.

Posted by James Grimmelmann on February 8, 2012 at 03:21 PM in Intellectual Property | Permalink


Two quick responses.

Jake, I think it's hard to say precisely what falls within the common law of copyright exhaustion. It's a question very few people have bothered to ask since the 1909 act embraced Bobbs-Merrill. Redigi fits pretty comfortably into the exhaustion rule Jason and I have tried to put forward in our work in this area: users who own copies are creating reproductions to facilitate transfer of their limited ownership interest in those copies. Of course as James points out, those particular copies are not transferred as a practical matter, but I don't see why that has to fundamentally alter the role free alienation plays. Their ownership interest move transitively along the chain of copies leading from buyer to seller, but the end result is the same as a more traditional transfer of a physical artifact. We start with one copy possessed by seller and none by buyer, and we end up with the opposite. If we get copies transfered to multiple parties, or we get the seller keeping one of her copies, we don't have exhaustion, we have infringement.

James, the DRM is certainly a point in Redigi's favor here. But given the uncertain state of the law, it's an advantage in terms of optics at least as much as doctrine. We can certainly imagine a regime that allows for the creation of multiple copies of a work, the transfer of one or more of those copies,and the deletion of any remaining copies - all without requiring a stitch of DRM. Just look at 117.

Posted by: Aaron Perzanowski | Feb 10, 2012 9:15:39 AM

Jake, you're bringing out something interesting and surprising about this case: the duality between first sale and DRM. ReDigi's position depends, as you observe, on the practical efficacy of their DRM. So if users had an unlimited circumvention right (both legally and practically),then ReDigi's argument that first sale applies here would look a lot weaker. On the other hand, ReDigi can do what it does at all only because iTunes AAC files now come without DRM of their own. It would be ironic if the music companies' "reward" for removing DRM from iTunes files is being subjected to the rules of ReDigi's DRM.

Posted by: James Grimmelmann | Feb 9, 2012 2:15:17 PM


I think ReDigi's memo in opposition to preliminary injunction does a clever job of trying to separate the customer's reproduction of a music file from the distribution of that music file. If you can convince the court that ReDigi is just a remote storage device, like a virtual iPod, then the copying done by your customers seems more like the space shifting personal use that Kozinski approved of in Diamond. The subsequent distribution then seems like an entirely different transaction, and a court is more likely to conclude that the consumer is selling a copy or phonorecord "lawfully made under this title," insulating her from liability for infringing the distribution right. 17 U.S.C. 109. If consumers are not liable for making the copy, or subsequently selling the copy, then there is no basis for ReDigi's secondary liability.

I don't agree with the characterization. I would be very surprised if more than a de minimis fraction of users are uploading to ReDigi for the purpose of streaming their own content back to them. Instead, the songs are being uploaded to resell. Thus, the copying done seems less to me like space shifting and more like copying to sell, which does not fall within a reasonable reading of 109 or the common law exhaustion principle.

Having not used ReDigi yet, I can't tell how easy it is to keep a copy of my music in an exterior drive so that I can sell the song on ReDigi and keep a copy for my subsequent enjoyment in a format that ReDigi cannot reach. My comfort level with ReDigi would be siginficantly higher if there was a mechanism in place to prevent the same user from selling the same song more than once in a twelve-month period, or to keep stripping a song from iTunes if the seller tries to reload it into the iTunes library after the sale.

It may also be fair to say that even if every ReDigi customer is selling a copy and keeping a copy, ReDigi is not responsible for that, any more than a retail outlet is responsible to verify that you didn't make a digital copy of the CDs that you are now trying to sell to them, so they can be resold to consumers.

I have little sympathy for the argument that digital files are not "material objects" subject to the distribution right, for the reasons laid out by the court in London Sire Records v. Does, and by Nimmer et. al, in The Metamorphosis of Contract into Expand, 87 Cal. L. Rev. 17, 39-40 (1999). It's also an unstated premise underlying the Cartoon Network case. The consumers there were making "copies" of digital files. They weren't copies that anyone could lay hands on, but they were copies nonethess. While material object is a clumsy term in today's world, Congress was doing its best to be forward thinking in how it described a copy or phonorecord (the alienable embodiment of the work) from the work itself.

In my mind, your last three factors collapse. Whether you think the balance favors copyright owners or resellers and their intermediaries may well come down to whether you think resellers are really divesting themselves of the original when they resell it, which is the fundamental premise of the exhaustion doctrine (your conservation of copies point). If you think that's the case, this is an easy call. ReDigi wins, because we assume that what consumers are doing is above board, and ReDigi is doing what it can to police that. If you don't, you will be reasonably skeptical, and might prefer a world where the copyright owner (eventually?) licenses out a resale market for digital files.

Posted by: Jake Linford | Feb 9, 2012 8:50:27 AM

Agreed - it's a fun case for testing intuitions. Theory 1 has always seemed awkward to me, since it requires people to act somewhat artificially to preserve the illusion of an older distribution model. Theory 2 seems like the best explanation, though as you point out, it leads to the effective elimination of the first sale doctrine for many digital works. Theories 3 and 4 seem to require a somewhat quixotic attempt to maintain balance in the face of fast-changing technologies and markets.

I would also add a possible fifth theory: Distributed Access to Information: the first sale doctrine historically supported secondary markets for copyrighted works, which allowed for decentralized access to such works. In an online world without a first sale doctrine, the danger exists that access to works will be centralized and concentrated.

Posted by: Joe Liu | Feb 8, 2012 9:18:02 PM

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