Die hard (and pass on your digital media): how the pieces have come together to revolutionize copyright law for the digital era.

• Author: Horan, Elizabeth

ABSTRACT

Today's modern world is defined by its digital assets. Books, movies, music, games, and even currency are available in digital format. Brick and mortar stores are slowly being replaced by online marketplaces. And yet despite these innovations in technology and media, the law lags far behind the digital age. One of the most glaring areas of the law in need of an update is the First Sale Doctrine, the legal right allowing downstream distribution of copyrighted material. An update to the First Sale Doctrine has not been seriously contemplated since 2001, when the Copyright Office found the time for an update was not ripe. The Copyright Office's rationale was three-fold: digital media was just developing, restrictive licensing was not yet threatening ownership, and no technology existed that would facilitate a true "Digital First Sale." This Note argues that these initial objections are no longer applicable. Digital media has grown rapidly, but is distributed under ultra-restrictive licenses. Finally, a recent court case demonstrates technology has emerged that can serve as the final piece needed to revolutionize copyright for the digital era.

CONTENTS INTRODUCTION I. A BRIEF BACKGROUND ON COPYRIGHT AND THE EVOLUTION OF THE FIRST SALE DOCTRINE A. Judge-Made Law B. Congress Catches On: Modern Copyright and the Birth of the First Sale Doctrine 1. The Modern Doctrine 2. Important Limits on the First Sale Doctrine C. The First Sale Doctrine Meets the Digital Era 1. The First Attempts to Update: The Digital Era Copyright Enhancement Act 2. The Digital Millennium Copyright Act and the Copyright Office's Section 104 Report a. The digital era was only just beginning b. Restrictive licenses were not threatening copyright limits c. The necessary and effective technology needed to facilitate a Digital First Sale did not exist II. WELCOME TO THE FUTURE A. Music B. Movies and Games C. Books III. DIGITAL FEUDALISM: WHEN CONTRACT OVERTOOK COPYRIGHT A. Old Days B. New Kings. C. Is Ownership Meaningless? The Judicial Nails in the Digital Ownership Coffin. IV. THE FINAL PIECE: A REDIGI-SPARKED REVOLUTION A. "Just like your favorite record store" B. The Second Circuit Weighs In 1. David v. Goliath 2. One Step Forward, Two Steps Back. 3. The Next Phase. V. EVERYTHING THAT IS NEW IS OLD AGAIN: A CALL FOR CONGRESSIONAL ACTION A. Congress Must Act Before Copyright Holders Set the Rules B. A Statutory Amendment Will Restore the Function of the First Sale Doctrine C. The Rest of the World Is Already Moving Forward D. Suggestions for Creating a Statutory Balance 1. Expressly include digital content 2. Preempt the use of certain licenses 3. Fuel creation CONCLUSION "The true foundation of republican government is the equal right of every citizen, in his person and property, and in their management. "

--Thomas Jefferson (1)

"I cannot help fearing that men may reach a point where they look on every new theory as a danger, every innovation as a toilsome trouble, every social advance as a first step toward revolution, and that they may absolutely refuse to move at all...."

--Alexis de Tocqueville (2)

INTRODUCTION

Books. Music. Movies. Games. Art. We collect them throughout our lifetime. They embody our personalities, our interests and quirks. They remind us of our stories, and we pass them on to our loved ones to tell our histories. At our deaths, some become valuable sources of estate revenue. Some become the invaluable sources of fond memories. But as we transition into a digital age, are we losing the ability to pass along these very collections? In July, 2012, a sensational news story broke that Bruce Willis, the mega-movie star known for his role in the Die Hard series, was considering a lawsuit against Apple for his apparent inability to bequeath his massive iTunes collection to his daughters. (3) Though the story turned out to be just a rumor, (4) it brought to the forefront an issue that had apparently gone relatively unnoticed: who, exactly, owns a digital download?

The legal right that would enable Bruce to sell or bequeath a collection of tangible goods is enshrined under the Copyright Act in the First Sale Doctrine. The First Sale Doctrine grants the owners of legally obtained copies of copyrighted work the right to sell, rent, lease, bequeath and, in some cases, destroy their copies without permission from the copyright owner. (5) Thanks to the First Sale Doctrine, libraries allow us to check out books as we please. Secondhand markets allow us to recoup some of our expenses or get rid of our embarrassing Backstreet Boys CDs. The doctrine allows us to build and mold our collections over our lifetime, selling what we do not want, and passing down our most beloved collections for generations to come. Our rights to do what we please with the books and music we own is so well grounded, we hardly give it a second thought. But what about our digital collections? Can Bruce bequeath his iTunes?

The answer is currently unclear. Although the First Sale Doctrine has been in effect for over a century, and updated to reflect changing technologies in the past, it has never been updated to reflect the transition to a digital era. In fact, in 2001, the Copyright Office expressly recommended against Congress creating a Digital First Sale Doctrine. In developing its recommendation, the Copyright Office made three main observations: electronic commerce was just beginning, the use of licenses and contracts were not threatening the control of goods limited by copyright laws, and, most importantly, the technology needed to facilitate a Digital First Sale did not exist yet, Years later, however, the copyright landscape is far different.

E-commerce and digital downloads have exploded in growth, and only continue to grow. In the face of uncertainty over the application of the First Sale Doctrine to digital works, copyright owners have begun to use contract to vastly expand the rights statutorily granted to them in the Copyright Act and circumvent the First Sale Doctrine completely. Ultra-restrictive and non-transferable licenses are placed on digital "purchases," seemingly putting them squarely out of reach of the First Sale Doctrine and effectively robbing consumers of the ownership rights that used to come with sales. Every time an individual purchases a digital item, they must first digitally sign off on a lengthy "Terms of Service" agreement. We think we "buy" our movies, music, and ebooks, but, per these terms of service, we are in fact doing little more than renting them for a lifetime. And though the use of non-negotiable licenses effectively makes the entire purpose and function of the First Sale Doctrine useless, attempts to preempt these licenses have all but fallen on deaf ears. Congress has not moved and the courts have largely favored upholding the validity of these restrictive licenses.

But there may be hope for Bruce yet. Amidst the chaos and confusion, a case, Capitol Records LLC v. Redigi Inc., emerged that could serve as the much-needed catalyst for Congress to finally reexamine the copyright landscape and finally bring the First Sale Doctrine into the digital era. Redigi hails itself as a secondhand marketplace for digital music, allowing users to sell their lawfully acquired, but unwanted, iTunes. Capitol Records quickly sued Redigi claiming digital music could not be sold without producing copies. Yet a combination of cloud-computing and patented software allows Redigi to transfer songs without making copies and in a manner that only ever allows one user access. Redigi demonstrates that the technology now exists to facilitate a Digital First Sale Doctrine. It is the final puzzle piece needed to turn the Copyright Office's objections to a Digital First Sale on their heads. And while Capitol might doubt the efficacy of Redigi's technology, Amazon and Apple are on track to support the Redigi revolution: both recently were issued patents allowing them to utilize remarkably similar technology to open their own secondhand marketplaces for digital goods.

This Note will examine how Redigi is perched to revolutionize the First Sale Doctrine and open the door for true digital ownership. It will argue that Redigi is the final piece that renders the Copyright Office's objections to a Digital First Sale obsolete, and that the time has come for Congress to restore the copyright balance by expressly adopting a Digital First Sale Doctrine. Part I will present a brief background on the development of the First Sale Doctrine. It will highlight attempts to update the doctrine to the digital era, and present the Copyright Office's response and reasoning behind its ultimate recommendation against such an update. Part II will demonstrate how the digital landscape today is immensely different from when the Copyright Office made its recommendation. It will show how digital works--e-books, music, movies--have greatly evolved and expanded, and the day may not be far when all media is disseminated exclusively in digital form. Part III will discuss how, in the face of uncertainty, contract has been used to greatly expand the rights of copyright owners. It will argue that use of restrictive licensing in place of sales is equivalent to the creation of digital feudalism, and threatens to undermine the function of the First Sale Doctrine completely. Part IV will introduce Redigi, discussing why Redigi's ground-breaking technology and the suit against Capitol Records is the final piece needed to overcome the Copyright Office's trifecta of objections to a Digital First Sale. Finally, Part V will argue for Congressional adoption of a Digital First Sale Doctrine, offering some suggestions for amendments to the Copyright Act that would preserve the function of the doctrine in the digital era.

1. A BRIEF BACKGROUND ON COPYRIGHT AND THE EVOLUTION OF THE FIRST SALE DOCTRINE

   Copyright protections, like private property laws, have been around for...