Can The First Sale Copyright Doctrine Apply to a Digital Copy?

A lawsuit filed a few days ago in Manhattan might answer the question. Capitol Records LLC v. Redigi, Inc., 12 civ 0095 (SDNY 2012) is an action by the famous record company which says in effect there just can’t be a used digital record store.

The first sale doctrine is codified at 17 U.S.C. 109 and says that the owner of a particular phonorecord (sound recording or record) may sell or otherwise dispose of possession of the phonorecord without the authority of the copyright owner. So if I buy a new boxed set of Frank Zappa CD’s, I’m free to sell the discs or give them away [except I wouldn’t]. Hence, used record stores.

Redigi offers owners of digital copies of records what it regards as the equivalent of a used record store where buyers can shop for their favorite music and buy it at reduced prices.

The Capitol complaint is obviously the result of a lot of thinking about Redigi’s first-of-its-kind business. It focuses on the technical aspects of the transactions between owner, Redigi, and buyer. Citing the Copyright Act’s “material object” definitions of “copies” and “phonorecord,” the complaint argues that a copy of a phonorecord must also be a material object. Accordingly, it argues that it is impossible in effect for you to upload to Redigi the very song file you downloaded from iTunes, and that it is also impossible for Redigi to download that very song to a buyer. So there is no protection for Redigi under the first sale doctrine as there would be for the owner of a brick and mortar used record store.

The technical profile of the transactions requires multiple copies. Unlike handing a CD to the clerk behind the counter, you’re really sending a copy from your harddrive to the cloud and copies of the copy will advertise and transfer the recording to a buyer. The plastic might be the same in your hand, but the electrons are different in your upload.

The complaint may raise a fundamental question about what exactly is going on under the Copyright Act when music is bought and sold on the internet. The definition of “copies” says they are “material objects, other than phonorecords…” 17 USC 101. If a phonorecord can only be a material object, does the act still leave open the question of whether a copy of a phonorecord can be something other than a material object?

What qualifies as a material object is undefined. With respect for the work going on at the Large Hadron Collider, this term comes from the world of 1976 and I’ve always thought it meant something you can hold in your hand, not your harddrive.

And if a phonorecord must be a material object, is the sound recording I buy from iTunes really protected by the Copyright Act after all? And were all those illegal download actions not about “copies”? If this litigation progresses to a merits ruling, there may be answers.

About Craig Pinkus

Craig Pinkus is a partner in the Intellectual Property Group. He also is a member of the Litigation and the Sports, Entertainment and Media Groups. He assists clients with a broad range of disputes and transactions involving all areas of intellectual property, entertainment, and other complex business arrangements. He has conducted trials and arbitrations throughout the United States and has argued appeals before the Seventh, Sixth and Federal Circuit Courts of Appeal, the Indiana appellate courts, and United States Supreme Court.
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