Wanna Buy a Used Download?

While not nearly as exciting as the same sex marriage cases, it’s always noteworthy (at least to people like me) when the Supreme Court issues a decision about copyright. A recent high court case and an even newer one from the district court highlight some real differences between the physical and digital worlds for producers and consumers of copyrighted stuff. On March 19, the Supreme Court issued its opinion in  Kirtsaeng v. John Wiley & Sons (No. 11-697). This case involves a conflict between two provisions of the Copyright Act, the “first sale” doctrine” under Section 109(a) and the “importation” provision of Section 602(a)(1).

The “first sale” doctrine is what enables so much commerce at garage sales and  flea markets and the very existence of used book and record stores. In short, it says that once a copy of a copyrighted work, such as a book or CD, has been lawfully sold (or given away), the purchaser (or other lawful recipient) is free to dispose of that particular copy as he wishes. The copyright owner of the work no longer has a say in the matter. More on the “first sale” doctrine later.

The importation provision states that bringing a copyrighted work into the US without permission of the copyright owner violates that owner’s right to distribute copies of the particular work.  It’s easier to understand in the context of the Kirtsaeng case. Wiley is a publisher of text books. It’s common for a publisher to print different editions of texts in various geographic markets and at different prices. Often, these editions are printed overseas or licensed to an overseas publisher, printer and/or distributor.

Kirtsaeng was a graduate student who figured out that certain English-language texts published by Wiley for the Asian market were significantly cheaper than their domestic counterparts. So, he was able to finance his education by buying up foreign editions and selling them stateside for less than the US editions while still making a tidy profit. That is, until Wiley sued him for copyright infringement. Cutting to the chase of the typically lengthy and arcane Supreme Court opinion, complete with a dissent and concurrence, the Court concluded that despite the provisions of the import clause, the first sale doctrine applies to works lawfully made overseas.

Unless one is selling lots of stuff overseas or is setting out to be a text book arbitrageur, the Kirtsaeng decision is not likely to have an immediate impact on your life. However, another decision involving the “first sale” doctrine, Capitol Records, LLC v. ReDigi, Inc., (No. 12 Civ. 95 (RJS)), may have a more direct impact on music lovers. In this March 30 decision from the Southern District of New York, the court essentially held that digital really is different.

Let me explain. ReDigi is a recently launched service that claimed to allow people to sell their “used” downloads of music. A user would download the company’s software, which would go through their computer’s hard drive and locate eligible files, e.g., downloads lawfully purchased through iTunes and not ripped from a physical CD. The files would be uploaded to ReDigi’s cloud server so that customers could purchase the “used” recording at a discount. ReDigi would take a cut of the sale as its commission fee.

Capitol sued, claiming copyright infringement and other unpleasantness and ReDigi replied that it was lawfully facilitating a digitized record swap. In other words, since the downloads were lawfully purchased, the “first sale” doctrine applies, just like reselling physical copies of recordings at a garage sale. Without going into all the technicalities (and the techno-geeks among you should do so as the opinion contains a digestible discussion of the first sale, direct, contributory and vicarious infringement and fair use), the Court concluded that despite ReDigi’s claims, additional copies of the music were being made and distributed – even if the “seller” of the “used” file no longer had access to it. If the music is transferred first to the cloud, that’s one copy and if someone purchases and downloads the “used’ music file, that’s another copy. The “first sale” doctrine only applies to that particular copy; it doesn’t allow you to make and distribute more. Then, there’s the concern that ReDigi will only search the particular machine on which the software has been downloaded. Other copies of the “used” file could easily be saved on other devices.

ReDigi claimed that the Court’s analysis is a hypertechnical view of the law that prevents the first sale doctrine from operating in the digital world. The Court, however, was not convinced and cited examples of handing over your hard drive or your iPod if you want to legitimately resell your particular copy of a digital file. Because of the distribution of unauthorized copies of copyrighted works as part of its service, the Court found ReDigi guilty of direct, contributory and vicarious copyright infringement.  The Court concluded that whether these incidental copies and distributions should matter is a policy matter for the legislature – current copyright law is clear.

What does it all mean? You can bet there will be much lobbying of Congress as to whether and how the “first sale doctrine” should apply in the multinational and digital environments. But as for now, I wouldn’t advise opening a used download store.