First sale’s big fail

Amazon and Apple might want to put a hold on their plans for a used-digital goods marketplace, at least for now. On Saturday, U.S. District Court judge Richard Sullivan issued a ruling putting the copyright kibosh on used-MP3 store ReDigi in a case brought against the retailers by Vivendi Music.
In a brisk 18-page opinion, Judge Sullivan makes short work of nearly all of ReDigi’s arguments in its defense, finding it liable for direct infringement of the record labels’ reproduction and distribution rights, as well as for contributory and vicarious infringement for enabling infringing activity by its users.
The ruling is a severe blow to those who would like to see the first sale doctrine, which generally allows owners of a lawfully made copy of a copyrighted work to dispose of that particular copy without restriction, extended to digital copies. Under Judge Sullivan’s reasoning, however, that is essentially impossible. In a nutshell, the court found that any transfer of a digital file from one hard drive or storage device to another inescapably involves making a new copy of the file on the second device. Since that copy is not made under license, it is not a “lawfully made” as required by the first sale doctrine. Thus, the doctrine does not apply to such a copy.
As for ReDigi’s argument that its system physically “migrates” the file from one hard drive to another without making a copy, Judge Sullivan was not impressed.

[W]hen a user downloads a digital music file or “digital sequence” to his “hard disk,” the file is “reproduce[d]” on a new phonorecord
within the meaning of the Copyright Act.
This understanding is, of course, confirmed by the laws of physics. It is simply impossible that the same “material object” can be transferred over the Internet.

As I’ve noted in previous posts, neither Amazon nor Apple seemed to be contemplating a used market buttressed by the first sale doctrine. Instead, each seems to envision a carefully managed exchange, occurring inside their respective walled gardens, under license from the rights owners.
Part of their calculation, however, had to be that rights owners would come to see the Amazon and Apple managed and licensed services as preferable to a first-sale free-for-all of used digital goods, and the specter of things like ReDigi would drive rights owners into their arms. Given rights owners’ resounding victory in ReDigi, however, Apple and Amazon may need to rethink those calculations.
This weekend’s ruling may not be the last word on the matter, however. ReDigi could appeal (so far it has not responded to the decision). Or the decision could add urgency to the budding movement on Capitol Hill to undertake some kind of copyright reform, including considering the application of the first sale doctrine to digital formats.
Judge Sullivan, himself, in fact, all but invited Congress to step up to the plate:

At base, ReDigi seeks judicial amendment of the Copyright Act to reach its desired policy outcome. However, “[s]ound policy, as well as history, supports [the Court’s] consistent deference to Congress when major technological innovations alter Congress has the constitutional authority an the institutional ability to accommodate fuly the varied permutations of competing interests that are inevitably implicated by such new technology.” …Such deference often counsels for a limited interpretation of copyright protection. However, here, the Court cannot of its own accord condone the wholesale application of the first sale defense to the digital sphere, particularly when Congress itself has declined to take that step.

For now, at least.