ReDigi Is Not About Consumer Rights

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

(Photo source photo by jgroup)

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.”

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 …” 

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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