Petitioner Asks SCOTUS to Hear ReDigi Case

A new business called OmniQ has filed an amicus brief urging the Supreme Court to grant cert in ReDegi v. Capitol Records, alleging that the Second Circuit’s opinion in December 2018 effectively brings an end to the First Sale doctrine.  The company is developing a patent pending model that (presumably) would facilitate an online market for “used” and hard-to-find motion pictures.  Its brief contends that the lower court erred in its plain text reading of “reproduction” under the copyright law and would permanently “outlaw” the kind of technology they propose to introduce.

It is unlikely the Supreme Court will agree to hear ReDigi, not least because, as Hollywood Reporter’sEric Gardner rightly notes, “The issue of whether the First Sale Doctrine has survived the digital age may make for good scholarly articles, but is the Supreme Court really going to devote its limited bandwidth to technology that’s already outdated?”  ReDigi proposed to facilitate trade in “used” digital music files at the same time that subscription streaming was on the rise and may, therefore, be considered obsolete at inception. But in its brief, OmniQ implies that its business model fulfills an unmet need in the market by addressing what it claims is dwindling access to classic motion pictures …

…the public has already lost access to vast libraries of motion pictures and other audiovisual works, simply because modern technological solutions like the one at issue here are lacking.

…the breadth of choice in movies was many times higher 20 years ago than it is today.

I personally find the brief’s argument about the lower court’s interpretation of “reproduction” somewhat persuasive when it states “there is no ‘reproduction’ without the multiplication of copies.” If in fact a file can be moved from my hard drive to your hard drive so that you now have it and I do not, then it there is a plausible argument to be made that “reproduction” has not occurred.  But from there, I think OmniQ’s claims overreach, blaming copyright protections for phenomena fostered solely by the market and technological change.

First Sale Probably Does Not Survive the Digital Age

Even if the Supreme Court were to agree with OmniQ that the Second Circuit misread “reproduction” in ReDigi, this would not rescue the fact that the proposed business model exceeded the purpose of the First Sale doctrine because it would create a “used” market in name only—one that could theoretically become a substitute for the primary market.  In 1908, the Supreme Court held…

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.”

And for the next century, physical copies of books, records, DVDs, etc. were sold in second-hand stores, garage sales, or rented through outlets like Blockbuster.  But the fact that a “used” digital file is identical to a “new” digital file is a technological reality that reshapes the meaning of “second-hand” material, and this at least alters—if it does not outright extinguish—the First Sale principle.  

Further, the potential for a transaction facilitator (which OmniQ presumably aspires to be) to foster a parallel trade in “used” digital files operating at internet scale is a vastly different consideration from the scope and nature of the secondary market that emerged between 1908 and the digital age. 

Finally, these same technological changes have spawned a primary market that (despite persistent complaints that all media should be free) is both cheaper and more abundant than the primary market of 20 years ago.  For example, The Criterion Collection, while perhaps not wholly satisfying to all film buffs, allows an account-holder to stream a library of motion-picture classics for about 27 cents a day—access that was unthinkable 20 years ago.  

In the still-evolving digital market, therefore, a petitioner like OmniQ should at least be required to demonstrate that its purpose is to facilitate a “second-hand” trade in material that is not likely to become available via licensed distribution systems—whether online or as physical copies.  And in this regard, the brief makes an emotional and cultural plea that fails to present a problem caused by copyright law.  

“1960 Doesn’t Exist on Netflix”

To demonstrate the market need for its business model, OmniQ relies almost entirely on one article written by Zach Schonfeld in 2017 for Newsweek.  It is an engaging piece on the theme that motion pictures from the oeuvres of Hitchcock, Truffaut, Fellini, Kubrick, et al are disappearing from mainstream cultural literacy.  The spirit of the piece which focuses almost exclusively on Netflix, is well captured when Schonfeld quotes blogger Nora Fiore (a.k.a. The Nitrate Diva) …

“If you’re the biggest name in film streaming services, the less you offer in classic movies, the more you imply that classic movies have less to offer.  It’s a terrible message to put out there.”

Perhaps this is a fair observation about contemporary culture and the movies, but the reasons for these changes have little or nothing to do with copyright law and everything to do with the inevitability that Netflix was going to transition to become a producer of new material. 

Before I go on, I have to interject that it is curious that in one moment, copyright is alleged to be a framework for nostalgic fuddy-duddies who don’t understand the future, but in the next moment, it is the nostalgic fuddy-duddies who are blaming copyright for stifling connection to the past.  Or I might also note that one of the complaints about copyright terms is the false allegation that creators will not produce anything new as long as they retain copyrights on older material they can keep reselling.  Maybe there are forces at play that are not really about copyright?

Speaking as one nostalgic fuddy-duddy who would rather watch Day for Night than Game of Thronesany day, the problem (if we agree it is a problem) with the apparent loss in status of classic films in the cultural mainstream is not a licensing issue.  Netflix could make all these films available tomorrow, and I predict that younger audiences will, by and large, think they’re being told to eat their vegetables.  

It isn’t copyright’s fault that a whole generation has been feasting on a steady diet of short-attention-span, handheld video clips for more than a decade.  The young mind does not easily transition from TikTok to Tarkovsky, and availability of the latter alone is not going to fill the apparent gap in cinematic literacy. Piracy statistics bear this out year after year as even illicit access worldwide continues to favor major, contemporary works like blockbuster movies by substantial margins.  

As an observer of culture and a cineaste, I would love to join Schonfeld and the film historians, academics, and buffs he cites for a drink to mourn the apparent loss of interest in the classics, but this was to be expected in a market destined to expand and become more segmented.  It should be little surprise in a world where we can have “liberal news” and “conservative news,” that entertainment is going to be even more distinctly subdivided.  

On the plus side, we get a diverse range of material and subject matter because investors are not restricted to appealing to the safe middle every time.  On the negative side, we no longer share a common film culture as we once did.  But this is a change borne of technological innovation in distribution systems that has nothing to do with copyright per se. 

Further, I think Schonfeld’s article is unduly harsh on allNetflix offerings as being substandard when he writes, “The universal power of boredom guarantees that any piece of Netflix programming will be watched by millions simply by virtue of being plastered across the Netflix homepage.”  This complaint that Netflix does not host a library of classics that Schonfeld et al believe it should is not especially helpful to OmniQ’s purpose.  After all, this is familiar territory. When David Lynch’s Blue Velvet was released in 1986, the box-office winner that year was Top Gun. It was ever thus.

Which Market is OmniQ Really Trying to Serve?

Serious film buffs have long been a niche audience who, by and large, have had to spend extra resources in the pursuit of their passion.  In many ways, I can only imagine that film-buffery is easier today because one can enter a title into various search tools and locate, for instance, a used DVD someone is willing to sell.

Presumably, OmniQ wants to facilitate the same kind of one-to-one transactions in titles that would-be sellers own as digital files on hard drives rather than plastic disks.  And it is not an unreasonable premise to claim that First Sale should apply to this kind of trade so long as the number of copies in circulation remains fixed and never increases.  A problem arises, however, when an enterprise facilitates this trade at scale in works that are available through licensed channels; and it is not clear which market OmniQ proposes to serve.

If OmniQ is focusing on the serious collector looking to obtain a digital file of a hard-to-find title by Ernst Lubtisch, they may have a reasonable legal argument, but possibly not a viable business.  If instead, the company is responding to a declining interest in classics like The Apartmentor Spartacus (both named in the Schonfeld’s introduction), availability is not the underlying cause of this cultural phenomenon.  These and other popular classics are widely available through existing channels, including streaming, and this weighs against OmniQ’s claim that First Sale remains relevant in the digital age.  

As mentioned, it seems highly unlikely the Supreme Court will hear ReDigianyway, but even if it were to overturn the Second Circuit opinion on “reproduction,” I suspect OmniQ would still have a lot of homework to do in order to prove that its business operates within the spirit of First Sale.  I do not think one magazine article, no matter how much I personally agree with the spirit of its commentary, is going to support OmniQ’s argument with regard to copyright law.  

© 2019, David Newhoff. All rights reserved.

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