ReDigi Is Not About Consumer Rights

 
Source photo by jgroup

ReDigi is a business venture whose revenue model is based on brokering online transactions between sellers and buyers of “used” music files.  A prospective seller has a collection of legally-purchased digital files of songs purchased from iTunes that he will never access again, so he places these for sale via ReDigi, which connects him with a buyer. The buyer purchases the file(s) for less than the current retail price, and ReDigi takes a cut. According to their testimony, ReDigi’s software removes the file from the seller’s computer before copying it to the buyer’s computer.

It is understandable that consumers might look at this story on the surface and think it seems like a great idea; but ReDigi is in fact a classic example of yet another digital-market business venture trying very hard to get a court to conclude that the copyright law says something other than what it says.  In addition to the company’s multiple statutory conflicts, the business model itself would have a devastating effect on the primary market by creating a parallel market that is “secondary” in price only.  Moreover, despite its claims, ReDigi has no way of controlling whether or not its users would store files in offline devices while selling copies of the same files through the service.  And it goes without saying that the implications of this proposal would quickly affect digital books, movies, software, etc.

ReDigi has tried to argue its legality based on two limitations to copyright:  fair use (§107) and first sale (§109).   In March of 2013, the Court for the Southern District of New York soundly rejected all of ReDigi’s affirmative defenses after Capitol Records sued the company for infringement of the reproduction right (§106(1)), the distribution right (§106(3)), and the rights of performance and display (§106(4) & §106(5)).  ReDigi has appealed; amicus briefs have been filed; and a hearing at the Second Circuit Court is imminent.  Although the fair use defense in this case is infuriatingly funny, I think the defense argued by ReDigi that is most-widely reported, and which would gain the attention of most consumers, is the assertion that the business is covered by first sale doctrine.

First Sale is a Tangible Peg That Doesn’t Fit Into Intangible Holes

Like fair use, the principle of first sale has a common law lineage and was codified into the federal copyright law with the 1976 Copyright Act.  The seminal case involved a 1904 novel called The Castaway, written by Hallie Erminie, who was highly controversial for her pro-Southern views on race and the Civil War.  Publisher Bobbs-Merrill had set the retail price for this book at one dollar and notified retailers that any reduction of that price would be deemed an “infringement of copyright.”  When the R.H. Macy company sold copies at 89 cents each, the publisher sued; and in 1908, the Supreme Court unanimously held that Bobbs-Merrill had erred in its attempt to control the price via copyright after having sold the books wholesale to Macy.  The opinion contains the following quote:

It is not denied that one who has sold a copyrighted article, without restriction, has parted with all right to control the sale of it. The purchaser of a book, once sold by authority of the owner of the copyright, may sell it again, although he could not publish a new edition of it.” [Emphasis added]

Bobbs-Merrill v Strauss is the case law precedent for the federal statute which today allows you to legally dispose of your physical copies of books, CDs, albums, and DVDs in any way you want—from reselling them to gifting them to making sculptural works of the materials and copyrighting those sculptures if you are so inclined.  The rights holders have no interest in the paper, plastic, and vinyl, even if these physical objects might later obtain intrinsic value far beyond their original purchase prices.  Copyright protects the intangible, or as the same court opinion stated …

“The copyright is an exclusive right to the multiplication of the copies, for the benefit of the author or his assigns, disconnected from the plate, or any other physical existence.  It is an incorporeal right to print and publish …” [Emphasis added]

This, by the way, is why that pro-piracy assertion that says, “copying isn’t theft because nothing physical has been taken” is absolute gibberish. Copyright grants exclusive rights to the author, and it is the rights which are stolen via piracy.  And on the subject of the rights ReDigi is infringing, it has two major problems with its defense under the first sale doctrine.

The first problem is that courts frequently take a dim view of corporations that attempt to “stand in the shoes” of their customers. In other words, even if first sale doctrine could ever properly apply for you and me in the digital market (and that’s a big if), that does not give a business like ReDigi the right to commit mass infringements in order to facilitate, and profit from, our individual exercise of that right.  This pretense that the for-profit business is acting on behalf of consumers is SOP for many contemporary ventures; and it’s usually the way the story is reported in the press because the actual legal issues are less sexy. But ReDigi really isn’t about our rights as consumers, it’s an attempted end-run around copyright to make millions on the backs of creators—again.

The second problem for ReDigi’s claim—and indeed with applying first sale in a digital market in general—is that the statutes in §109 only provide a narrow exception to the right of distribution (§106(3)) and not to the right of reproduction (§106(1)). You can sell your copy of Toni Morrison’s The Bluest Eye, but you may not make copies of the book. Because ReDigi cannot function without making copies—and the courts have held since Napster that this form of copying infringes the reproduction right—its attempt to assert a first sale defense to the restriction against reproduction is asking the courts to read something other than what the statute clearly says. In fact, ReDigi is seeking such a dramatic expansion of the law that it not only wants to “stand in the shoes” of the public, but it wants to claim a right the public doesn’t even have.

Either Digital is Different or It Isn’t

What I find amusing about stories like this one is that the tech-utopian, anti-copyright crowd loves to accuse copyright advocates of clinging to buggy-whip paradigms in a automobile world.  Yet when there is a potentially profitable outcome, these same pundits are happy to support “innovators” who whack cars with buggy whips all the time.  Copyrighted works that are fixed in physical objects are fundamentally different from works fixed as digital files, and contemporary copyright law must recognize this difference.  To be blunt, the intangible digital file obliterates the whole idea of a secondary market.

There’s no such thing as a “used” digital copy, which is more properly called a clone, because it is identical in every way to the original file and not subject to the degradation—or for that matter, the appreciation—associated with creative works that are fixed in physical objects like books, albums, etc. Nobody will ever enter a rare bookshop and sell her “first edition” ones and zeroes that represent the poems of Dylan Thomas. No father will pass along his digital file of Dark Side of the Moon to his son and feel the gift imbued with the same meaning as a vinyl album that has been lovingly preserved.

Both intrinsic and sentimental value is lost through digital, with works now “fixed” as intangibly as the copyrights that are supposed to protect them. This is why it is more essential than ever to understand what copyright protects:  because authors can no longer rely on the natural barriers to infringement created by physical objects.

What we consumers get in lieu of physical treasures—for better or worse—are more flexible ways to experience more works, and at very low prices. In fact, the idea that I can legally stream a large library of musical works on demand for about $9/month suggests that ReDigi’s proposal is kind of a buggy-whip concept itself—seeking to trade stored files in a world gone streaming. Ultimately, ReDigi does not provide the market with anything that justifies the scope of revision it seeks, in the service of its own short-term gain, to the copyright law.

The concept that is usually lost in these conversations, as people focus on the immediate ends they want to achieve, is that copyright’s exceptions must be weighed against its original purpose. And this has always been true as the law confronts each new technological change.  As the first sale principle was articulated a century and half ago in a world very much composed of physical objects, it is easy to imagine that the doctrine itself would simply never be considered in a market that looks like the one we have now.

While many consumers may feel that any price above zero for creative works is too high, the fact remains that there is a price threshold below which we can destroy the incentive to create and distribute, which is the reason we have copyrights in the first place. By making available identical, digital products for lower prices not negotiated by producers, the ReDigi model would further degrade one of the already-limited channels of distribution that actually compensate authors for their work.

© 2017, David Newhoff. All rights reserved.

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10 comments

  • You bring forth an interesting question when you use the example of a father passing on digital files to his son. The father has purchased the license to play this digital file. The purchase wasn’t the file, as you argue. The purchase was the license. Are you suggesting that there should be no way to pass the license to play the music to his son? That the perhaps substantial investment that the father has made in these licenses should vanish, for example upon his death?

    Why is the license to play a song or movie different when it is represented by a physical token, such as a CD or DVD than when it is a purely digital license?

    I’ll admit ReDigi has the potential for serious abuse, but it is the individual that sells the license repeatedly that is guilty of the crime.

    • David Newhoff

      Wheeels17, thanks for the question. To an extent, I discussed this topic in the post linked below, though I’m sure I’d at least write it differently today. The issue of inheritance is one that has been raised in this context, and my answer has often been that technological failure or obsolescence is a bigger challenge than the legal one you raise. There’s nothing illegal about handing your kid a drive or computer full of songs you purchased, but we know those machines won’t work in 10+ years, and copyright law can’t solve that. My point in this context was, of course, that even sentimental value is probably destroyed for most people in a digital-only exchange. Pass along a signed copy of a notable book, and you have a family treasure that just can’t be replicated by some digital files acquired through cyberspace. It’s one cost of progress.

      There’s an extent to which we share licensing right now. My iTunes enables 5 devices or whatever, and my kids’ devices are part of that group, but where are the files? On the devices or the cloud? Both actually. Aren’t we moving away from “owning” even the files at this point? If that’s the case, I suppose there’s no reason why my kid couldn’t “inherent” an account with access to the songs I licensed, but will those be more “our songs” than her using a streaming service where she can just queue up the same playlist? Certainly, it’s all changing faster than the speed of legislation.

      DN

      http://illusionofmore.com/confused-buy-button/

  • David, Great piece. It is more arbitrage and produces nothing except, as you point out, a secondary market for the same good in the same condition at a different price. Another product from the Silicon Valley echo chamber. Somebody would have a 2 minute pitch prepared about how this changes the world by re-using existing resources probably resulting in lowering everyone’s carbon footprint … or something. In reality, ‘the Internet’ does not follow the law already. Lawmakers didn’t realise they were building roads without passports and visas between countries allowing the free flow of everything except physical goods and people. That didn’t sound like a big deal probably at the time, but it turns out that lots of things that used to be physical are now virtual. ISPs and Telcos (who own the new transnational highway) take no responsibility for traffic. The shittiest most polluting vehicle imaginable can travel on these roads. Nobody checks, and there are no regulations. New monopolies now exist which are even more pervasive than the physical monopolies they replace. Silicon Valley aims for monopolies. Tech fills in all the spaces made by time-saving physical inventions in the last century with mostly entertainment some of which proves to be addictive and anxiety producing. Human relationships are less important than slaying virtual dragons … who could have imagined this was possible. Are we happier due to the developments of the past 30 years? Are we smarter? We are less grateful, intellectually lazier and less responsible probably but objectively probably not smarter or happier. I see the brave new world coming. Further, I see a time where I’ll disconnect completely. I will be on the savage reservation. Cheers

    • David Newhoff

      amf_au —

      Thanks for reading and for the comment. Aptly timed. I was just reading this article and thinking that disconnecting might be the only hope. https://www.pastemagazine.com/articles/2017/06/how-the-trump-russia-data-machine-games-google-to.html

      Cheers!
      DN

      • I read that David … but I have to say, that anything that’s not equally bashing Trump and Hillary makes me glaze over. Trump is quite mad, but Hillary was equally as horrendous. The manipulation of the media is old. Chomsky wrote Manufacturing Consent a long time ago … same game and it’s played from both sides. The Young Turks, Buzzfeed, major news outlets, Breitbart … basically everyone is giving you a skewed view. If you lean right, you are dead on Facebook, Twitter, and most mainstream news discussion forums. If you lean left, you’d be wasting your time at Breitbart. Underlying it all is whether you subscribe to the post-modern derived view of the world. I’m listening to a lot of Jordan Peterson … I think his Darwinian approach to religion is really interesting. His view of the modern left and roots in post-modernism and the subsequent rise of the hard right makes a lot of sense. The centre is gone. People don’t want their world view challenged, they just want to be left alone keep thinking whatever it is they think. Things make news because the soundbite is 2 minutes. Currently, debating the Paris Climate Accord … no, we can’t debate that. Why is that? Why isn’t it a reasonable question to say, what price is it worth to the people of the US? You don’t have to be pro-Trump to ask the question, but you can’t. Even if you believe human beings may have some effect, you can’t ask the completely obvious economic questions like “should we spend the money preparing or preventing” … intellectually perfectly reasonable, but socially it’s walking the plank. There are a hundred of these types of issues and they’re all the same. The dialog is gone so both sides have to try to get control as there’s no chance of ending up in the middle or someone else changing their mind. The new monopolies (google, facebook, etc) have replaced old media monopolies with bigger ones. You are the product on the Internet. It’s all about getting as much information as possible on your so that you can be sold more sh_t … and that’s what every silicon valley hatched firm is designed to do. Either engage your attention to get your information, fill in your space with pointless entertainment, or give you ways to save 3 minutes somewhere for $700 … Jiucero anyone? It’s not self-evident that after 30 years we are better off. Disconnection ultimately could end up the solution … now back to the savage reservation 🙂 Cheers

      • David Newhoff

        All good points. Thank you. It is indeed exhausting to consider that one must deeply engage on every issue, which is of course impossible and the reason we have representative government and the press in the first place. I agree that there are issues — Net Neutrality is one — that will be viewed through the Trump lens but which is actually playing out quite separately from whatever the Trump doctrine might be. Conversely, while I agree that there is nothing inherently wrong with examining and debating something like the climate accord, I cynically don’t believe it’s remotely possible for the issue not to be politicized into incoherence. And while I take plenty of jabs at the left for being ahistorical or unscientific in some of their views, I would not agree that the anti-climate-change view deserves equal time anymore than the anti-Darwin view deserves equal consideration in Biology Class. We cannot come anywhere near a debate on an issue when one side rejects the seriousness of the issue in the first place.

        Anyway, I won’t bang on about that. It think the evidence so far suggests that the information revolution hasn’t worked out very well. Cheers!

      • HI David, You seem pretty reasonable but I wonder if you’d even contemplate changing your mind (or even being agnostic) on an issue such as this given it’d make you a heretic. If one side doesn’t take the topic seriously, it’s up to the other side to convince them as to why they should. Normal debate.

        Here’s my problem with the prevailing discourse. This is not Darwin (observed and measured effect) Vs creationsim (a man in the sky did it … oversampling, but for the purpose, this will do). I’ve heard this logic before on various topics. It’s simply not correct to make this comparison in this case. This is scientists who disagree with other scientists. they don’t disagree on many things as evidence and measurement win. It’s at least 1/30 who disagree even if you believe the 97% of all scientists agree which is ‘just a number’. Even if true, that’s not an insignificant fringe. It’s science, not consensus building through Delphi.

        Who determines what side ‘deserves’ equal time? I don’t need to tell you this doesn’t sound good. Here are a few of my observations which leave me on the fence. The predictions have been completely wrong. Al Gore, backed by ‘the science’ said the ice caps would be melted by now. They didn’t. Every weather even is attributed to this by the media without proof. The IPCC falsified data which was not a good look to say the least. There are credible scientists that simply disagree either on the basis that the models cannot know ‘everything’ or are otherwise incomplete, or something else. There are other scientists, particularly geologists it seems, who say this level of variability has been seen before. “It’s about the rate of change.” OK, but compared to what? The earth is 4 billion years old and we are analysing 100 years and making stunning conclusions. The bulk of the data in question is the last 100 years more or less. We are talking about fractions of a degree. It seems to me unlikely that measurement equipment (like every other piece of technology) from 100 years ago was as accurate as now. If it is, that’d be the only thing in the world.

        It’s not one thing, and it’s not a conspiracy. It’s lots of things that don’t add up and the biggest of those is the debate is over. Closing down the opposition, whatever the intended motivation, means you won’t get a conclusion with all the facts and interpretations. Dissenting scientists are not making money out of disagreeing. I’m sure they’d love to agree so they could have their funding again and stop living on the fringe of their professions. Logic says, that if they’d be open to changing their mind.

        The underlying issue I have is when the scientists don’t agree, how can I take sides? Of course human beings don’t have zero effect on the planet. Anyone who says they do is not being honest. The question is what effect, how much, over what period and does it matter. The economic approach is, even if there is going to be a change, are we better to spend the money preparing for it or spend the money trying to prevent it? It’s a perfectly reasonable question by my estimation.

        I don’t know the answer but I’m happy to listen to everyone. Scientist analysing river deltas along the great barrier reef in Australia found evidence of a 40 year drought about 500 years ago. Nothing like this has been see in Australia for the past 200 years and it was pre-industrialisation. So, even in relatively recent times there’s been huge variability. When you ask people why they believe in ‘climate change’ (was global warming) they generally can’t tell you why … even journalists.

        I don’t know why you believe so fervently but maybe you have good reasons and fully understand all the scientific arguments from both sides. I don’t know your background but mine isn’t science. I’m happy to go from the fence to the ‘oh sh_t we’re all going to die if we don’t do something’ but I’d like everyone that actually understands it to have an open discussion and agree first 🙂

        If you can’t sway a scientist with evidence, it’s not evidence.

        Cheers,

        Andrew

      • David Newhoff

        Thanks for your comment, Andrew.

        Forgive me if my answer is comparatively broad, but as this is not a science blog, I don’t want to go way off topic. Oddly enough, though, a very recent post here alludes to an early article I wrote about cogeneration, which is when I first learned most of what I understand about climate change. My simple answer is that there is not much logic to keeping the debate alive from a policy standpoint. It’s a bit like health advice where there may be disagreement about the specific benefits of exercise, but given that activity is generally salubrious and inactivity generally harmful, there’s a point at which the details almost don’t matter.

        If 90+ percent of scientists say carbon output is changing the climate to the point that it’s an existential threat, and it also happens to be the case that the solutions come with various benefits–like burning less fuel saves money–than the debate seems absurd to me. In fact, it now seems absurd to those industries and municipalities which have invested in low-carbon alternatives and have already reaped the economic benefits of those investments. It also happens to be the official policy of the DOD to consider climate change a major threat to global stability. So, at this point, the narrative that the minority view on climate science is paid for by the extraction industries becomes more than plausible. No policy is ever predicated on 100% consensus among any group of experts, so I would categorize the details to which you refer–accurate though they may be–as the stuff of academic discourse and study but not a basis for public policy.

        Meanwhile, I don’t think it could be more transparent that Trump is throwing bones to coal miners, etc. who will very soon discover that it’s nothing but bones because walking away from climate science and treaties isn’t going to bring those jobs back. All of which is to say that, even if it turns out to be true that predictions about climate have a much wider margin of error than the consensus view maintains, the argument for not adopting low-emission policy is economic; and there is ample evidence to show that this economic argument is false and obsolete.

        DN

      • Hi David,

        Thanks … I actually agree about the coal jobs in the long run. Even this is not a simple question due to energy security and generating power in the short run. This said, better not to burn it if you can avoid it due to toxic fumes even if someone doesn’t believe in AGW.

        I know this isn’t a science blog … and we’re off topic but that’s fine. This is an issue of logic and how ‘the Internet’ helps drive extremes due to issues being framed in a particular way. It is the the “if you believe this, you’re an idiot” type approach. Not saying that this is what you are implying, but this is the general approach on this and other issues. It’s unhelpful and assumes that the people who have the other opinion are stupid, malevolent or both.

        I respectfully disagree that it’s just academic discourse or that 90% of ‘hard scientists’ is enough to set public policy. This is STEM, not economics or humanities. It’s not vague. It is either an accepted and provable repeatably as a scientific fact, or it’s not. The problem currently is that the forecasts have failed to materialise. In fact, in some cases the opposite has happened. At best, the models have problems would have to be the conclusion.

        I don’t believe that all ‘dissenters’ are paid by the extraction industries although I know there are a few prominent ones who have sacrificed their credibility in this way, in the same way those that those fiddled the data at the IPCC sacrificed their credibility. It’s not straightforward. There are plenty of stories of academics that lost their funding as a result of coming out as skeptical. That is, needed further evidence not bat sh_t crazy. This is not an emotional issue to me, it’s ones and zeros.

        Academics don’t disagree about STEM subject facts. If only 90% believed the laws of physics or thermal dynamics it wouldn’t be taught in schools. There are 2 separate conversations. One is about sustainability and the other is about ‘climate change’. This is analysis based on past data predicting future effects. If those effects don’t happen, then the logic is faulty. Same for any academic study, right?

        There are several technologies which would leave coal in the ground and allow continued economic growth. Waste heat and co-gen for sure, hydrogen is one (gets almost no funding or attention), biomass applications seems in woodgas type applications, and then there’s nuclear which is clean and where there’s geological stability (not Japan) although the waste issue may take this off the list. I don’t know.

        Thus far, wind and solar in particular have failed and tidal has also failed. Geothermal promises, but hasn’t materialised yet. The point is, you won’t get many people arguing about not wrecking the planet.

        It’s not about whether or not we should be sustainable. It’s about whether 90% agreement in STEM is enough to ‘bet the farm’ on.

        Cheers

        Andrew

      • I understand your point, Andrew, but again I come back to the question of what the “farm” is that is being wagered. The premise is that we’re betting economic stability, supposedly dependent upon greenhouse gas emissions, against still-debatable conclusions that those emissions are as harmful as claimed. But I reject the premise that economic stability requires the volume of emissions achieved by the US in the late 20th century, even if those emissions are less harmful than assumed. Moreover, this view is entirely blind to the economic cost of climate change, if the conclusions are correct.

        While I obviously agree that the internet is a wonderful tool for promoting wild speculation, conspiracy theories, and divisiveness where there should be discussion, there are still many areas of science (e.g. cosmology), where best-theories are as close as we come to conclusions to date. Again, medicine is far from conclusive in several areas, but we still opt for remedies based on probability and statistics. Climate science naturally falls into this realm because, as you mentioned, predicting into such a massively complex system that has changed many times over eons, insists upon a margin of error. But if the climate scientists are correct, or even underestimating, and people are waiting for a litmus test, that seems like a recipe for unnecessary disaster. We don’t make most decisions in our lives based on certainty, but only probability because usually that’s all we get. We can count on the laws of physics to predict that leaping off a building will end in death, but we cannot fully predict the chaos that might cause an experienced base-jumper with parachute to meet the same fate.

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