Tag: Redigi

Fair Use Week Again. But Why?

Well, it’s Fair Use Week again.  Seventh annual.  I suppose one must say something.  Though what I really want to say is Why?  What exactly happened in 2013 to provoke the idea that we needed this celebration?  The fair use doctrine had been part of the federal copyright law for forty years, and its common law precedents began percolating in the mid to late eighteenth century.  So, why did this somewhat arcane aspect of copyright doctrine, which very few people have reason to think about, suddenly demand of a week’s worth of attention?

I get why Banned Books Week is a thing.  It reiterates the need for vigilance against censorship while celebrating authors whose contributions are so transformative or provocative that somebody somewhere wants to silence them.  Notably, it is the free market that so effectively rejects this kind of censorship, and the author’s mechanism of access to that free market is copyright.  “The Framers intended copyright to be the engine of free expression,” wrote Justice O’Connor in 1985 in Harper & Row Publishers Inc. v. Nation Enterprises.  And indeed it is.

While no one should disagree that the fair use doctrine is necessary to the fulfillment of copyright’s purpose to promote progress and be that engine of free expression, I just cannot fathom the connotation of insurgency expressed in the observance of Fair Use Week—as though the principle were under assault.  Of course, eager celebrants might say that fair use is under assault based on a common tactic in politics, which is to first advocate pushing the limits of a principle and then claim that any resistance to, or criticism of, said pushing is tantamount to threatening the principle itself.  

You see, concurrent with the sudden urgency to celebrate fair use, there has also been a considerable effort to broaden the nature of the doctrine far beyond its supporting role as a cog (albeit a large cog) in the engine of expression.  Publicly, this has taken the form of blog posts and social media commentary that invoke fair use, whether it is actually applicable or not.  In the courts, organizations like the Electronic Frontier Foundation, the Computer and Communications Industry Association, and the American Library Association write amicus briefs supporting tech ventures whose fair use defenses overreach so broadly that they would nullify core copyright protections if allowed to stand as precedent.  

Fortunately, as some of the more high-profile cases have moved through the process, the courts have lately reaffirmed fair use, tucking it into its proper context—as a conditional defense for certain types of uses and not a vaguely-defined blank check based on emotion and general disdain for copyright.  Probably the two most important recent decisions in this regard were in Fox v. TV Eyes and Capitol Records v. ReDigi at the Second Circuit Court of Appeals.  In both of these cases, the court re-illustrated essential contours of fair use in a tech-driven market that too-often seeks to conflate generalized “innovation” with the first fair use factor that weighs “transformativeness.”  

As explained in detail in older posts, “transformativeness” (an analytical doctrine written by Judge Pierre Leval in 1990) is not terribly confusing in its original purpose to consider a new creative expression that makes some use of a precedent creative expression.  Where the doctrine threatens to get out of the barn, however, is in its secondary application as applied in Google Books … “a secondary use may be transformative if it provides information about the original, ‘or expands its utility.’”  

That “expands utility” language has provided opportunity for business ventures to come very close to arguing that simply offering a new service is sufficient to warrant fair use of protected works.  This rationale has even fostered minor attempts by some parties to claim that merely posting a work on social media is “transformative,” which, if this were true, would annihilate the authors’ right to make a work available (or not), thereby distorting fair use from a limited, legal exception to a talismanic incantation.  

Second Circuit Restores Reason to Fair Use 

In both TVEyes and ReDigi, the Second Circuit provided essential contours for the “transformativeness” doctrine.  In the former, the Court held that the TV monitoring service, regardless of its innovative value to B2B subscribers, infringed copyright by making full programming available to customers.  In comparing the utility of TVEyes to that of Google Books, this same court, which decided the latter, stated …

This appeal shares feature with our decision in Authors Guild v. Google,Inc.  That case held that Google’s creation of a text-searchable database of millions of books (including books under copyright) was a fair use because Google’s service was “transformative” and because integral features protected the rights of copyright holders.  However, we cautioned that case ‘test[ded] the boundaries of fair use.’  We conclude that defendant TVEyes has exceed those bounds.

That the same court found daylight between the fair use defenses of Google Books and TVEyes is of considerable value to rightholders in a market replete with ventures seeking new ways to exploit copyrighted works without license.  Authors of works have a hard enough time navigating a landscape of legal (Spotify) and semi-legal (YouTube) platforms that have decimated the monetary value of their creative products without also having fair use expanded into a generalized, amorphous license to steal.  

Perhaps future legal experts will find that the most important decision came in the ReDigi case, denying the fair use defense of this business, which sought to create and exploit a market for “used” digital music files.  One reason this decision my be seen as a landmark is that Judge Leval himself wrote the opinion and added further nuance to his own “transformative” doctrine, which has been the cause of considerable confusion in other cases.  Leval writes …

Here, ReDigi hosts a remunerative marketplace that enables resale by purchasers of digital music files, which is a commercial purpose. Especially in view of the total absence (or at least very low degree) of transformative purpose, the commercial motivation here argues against ReDigi with respect to Factor One.

In other words just because ReDigi’s business model would indeed be novel, that doesn’t make it “transformative” in regard to fair use.  The business model offered a substitute for the primary market for creative works, which would threaten the (already low) market value of those works.  (And as mentioned before, the dominance of music streaming implies ReDigi’s obsolescence rather than its novelty.)  

These two decisions in one of the most active copyright circuits provide essential guidance for the kind of fair use defenses that are typical of the digital market.  Hence the appearance of Fair Use Week six years ago is suspiciously contemporary with efforts to expand that secondary application of “transformativeness” in the service of big tech ventures, rather than the production of new forms of expression.

In this regard, I cannot agree with the way in which Peter Jaszi framed his testimony before Congress in 2014, in which he said …

“Fair use, one might say, is like a muscle – it will grow in strength if it is exercised, and atrophy if it is not. But, by the same token, fair use is hardly unusual or exotic today. Everyone who makes culture or participates in the innovation economy relies on fair use routinely – whether they recognize it or not.”

This conflating the original purpose of fair use (i.e. to foster new expression) with the so-called “innovation economy” is emblematic of the persistent confusion in the market today—a chronic inability to distinguish between the creators and the platforms on which they operate—the difference between the YouTuber and YouTube, if you will.  

Internet companies have consistently sought to exploit confusion about fair use.  Just as they conflate our free speech rights with their profit interest in letting all content “flow freely,” they promote that same talismanic notion of fair use in their own pecuniary interest.  And that’s probably why Fair Use Week started six years ago.  Meanwhile, with the jury still out as to whether the “innovation economy” is really an economy at all, at least the Courts of Appeals have restored some order to the application of fair use for the time being.  

Second Circuit Rules Against ReDigi in Major Decision

VidAngel.  TVEyes.  ReDigi.  

Copyright interests might view these enterprises as the unholy trinity of tech ventures that have attempted in recent years to strain statutory limitations to such extremes that their interpretations would actually vitiate copyright protection itself.  In August of 2017, the Ninth Circuit denied VidAngel’s crusade to push the fair use doctrine beyond any meaningful scope; in February 2018, the Second Circuit held that TVEyes’s methods for making news content available was substantially different from Google Books under the fair use doctrine of “transformativeness”; and yesterday, also in the Second Circuit, ReDigi was rebuffed in its attempts to assert fair use and first-sale doctrine to legitimize its trade in “used” digital files.

ReDigi has been the subject of several rather long posts on this blog, but to recap, the venture was based on administering transactions in “used” digital media.  The concept was that if Consumer A no longer wants to listen to a particular digital audio file (MP3), she would be able to sell that file to Consumer B, via the ReDigi interface, at a “secondary market” price on the basis that the file would be considered “used.”  

The obvious market-based problem with this proposal is that because digital files cannot accurately be considered “used,” a ReDigi enterprise would result not in a secondary market but rather in a substitute for at least some portion of the primary market.  This is the reason why the court held that the Fourth Fair Use Factor (potential market harm to the original works) “weighed powerfully against” ReDigi in its appeal to the fair use defense.  

Further, ReDigi attempted, as many others have done, to assert that its use of the files was “transformative” under the First Fair Use Factor (nature of the use and commerciality), and this was most notably rejected by Judge Pierre Leval, the author of the “transformativeness” doctrine.  From the opinion …

“Even if ReDigi is credited with some faint showing of a transformative purpose, that purpose is overwhelmed by the substantial harm ReDigi inflicts on the value of Plaintiff’s copyrights through its direct competition in the rights holders’ legitimate market, offering consumers a substitute for purchasing from the rights holders.”

This is a very important decision as a matter of doctrine because so many users of works, both large and small, have repeatedly tried to exploit the relative vagueness of the word transformative to argue that merely migrating content from one context to another is sufficient to meet that standard.  In finding against TVEyes, this same court drew essential boundaries to reign in the meaning of the term, and now ReDigi further solidifies that opinion.  

Based on these two decisions, it seems fair to summarize thus:  in order to be “transformative” without authoring a new creative expression, a user of works must a) truly offer society something novel and useful; and b) limit the use of protected works to avoid creating a substitute for fair market access to those works.  For instance, Google Books meets these standards while these other business ventures do not.

The court was also not persuaded by ReDigi’s defense under the doctrine of first sale.  As discussed in detail in those other posts, first sale is the limitation in copyright law that allows you to resell your personal copies of works for whatever price a secondary consumer is willing to pay, whether that’s a quarter at a yard sale or thousands of dollars in a rare book shop.  The first sale doctrine dates back to 1908 and, as I have theorized in the past, the principle itself may not ever have been written in a purely digital market where “copies” themselves are no longer limited to one-off, physical objects like paper, plastic, vinyl, etc. 

With regard to ReDigi, the courts agree that our digital music files qualify as “phonorecords” under copyright law and that we consumers have the right to resell our phonorecords.  The problem is that the law also holds that files are “reproduced” in the process of transferring from one device to another.  Even if the ones and zeros that compose “Silent Night” on my computer are erased while they are written onto someone else’s computer, this act is legally held to be one of “reproduction,” which is not exempted by the first sale doctrine.  

Add the interim step of copying the data temporarily to ReDigi’s servers, plus the mass-market implications of such an enterprise, and the company’s first sale defense strays very far from the individual’s right to resell one legally-acquired copy of a work one time.  

ReDigi and its proponents seem to have hoped to make a case that this “reproduction” transaction is, in principle, analogous to the transfer of used copies in the physical world that spawned the first sale doctrine; but as the court held in its opinion, it would be the job of Congress to rewrite the statute to say what they seem to wish it said.  Meanwhile, I suspect that if such a legislative proposal were to be attempted, then history, case law, and market analysis would dictate that the first sale doctrine is untenable in a purely digital market. 

In this regard, it is funny how often copyright proponents are accused of clinging to our metaphorical buggy whips.  Because when the Supreme Court ruled in favor of retailer R.H. Macy in the case that established the first sale doctrine, New Yorkers were in fact still taking hansom cabs to go shopping! 

Relatedly, as I opined in one of those previous posts, it seems both futile and myopic to propose amending the copyright law in order to foster “resale” of digital files in a market that has already shifted so dramatically to streaming nearly everything on demand.  So, ReDigi was not so much clinging to old models as it was seemingly trying to cobble together a legal framework to support a new business model that may already be obsolete.    

Either way, rights holders should be very pleased with the outcomes in what I’ve called the unholy trinity of VidAngel, TVEyes, and ReDigi because the courts have upheld the principle that copyright’s limitations are meaningless if they stray so far as to eradicate its protections. 

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.