SEATTLE UNIVERSITY LAW REVIEW Volume 38, No. 2, WINTER 2015
Copyright, Consumerism, and the Cloud: Proposing Standards-Essential Technology to Support First Sale in Digital Copyright
Marco Puccia(fn*)
"[S]ound policy, as well as history, supports [the Court's] consistent deference to Congress when major technological innovations alter the market for copyrighted materials. Congress has the constitutional authority and the institutional ability to accommodate fully the varied permutations of competing interests that are inevitably implicated by such new technology." (fn1)
-U.S. Supreme Court
I. INTRODUCTION
"If what you own cannot be protected, you own nothing."(fn2) These were the words of Jack Valenti, the outspoken president of the Motion Picture Association of America, when he testified before Congress in 1982. At the time, he was predicting the death of the motion picture industry by a new technology called the videocassette recorder.(fn3) There is no doubt that America's entertainment industry, and the creative talent that drives it, is a national treasure. Equally valuable, however, is America's drive and commitment toward technological innovation. The entertainment industry consistently uses copyright law to resist advances in technological innovation that it views as a threat to its existing business models.(fn4)
This historic tension dates back to at least 1908, when the U.S. Supreme Court was asked to determine whether the makers of piano rolls for automatically playing pianos had to pay royalties to the composers.(fn5) More recently challenged technologies include Sony's Betamax device in the landmark case Sony Corp. of Am. v. Universal City Studios, Inc. (fn6) and a variation of the digital video recorder (DVR) in Cartoon Network LP, LLLP v. CSC Holdings, Inc. (famously known as Cablevision ).(fn7) The tension between technology and the entertainment industry reached an all-time high during the peer-to-peer (P2P) file-sharing era of the 1990s.(fn8)
Despite the entertainment industry having largely adopted digital as a medium for distribution and the successful development of legal marketplaces for digital media(fn9) (e.g., iTunes, Amazon), there is still institutional resistance to new technologies that challenge the current marketplace and business models. (fn10) Recently, in Capitol Records, LLC v. ReDigi, Inc., the district court for the Southern District of New York held that the first sale doctrine-the copyright doctrine that allows consumers of copyrighted works, such as books or a paintings, to later sell their copy without seeking the permission of the original copyright owner- does not apply to digital media.(fn11) In other words, consumers do not "own" a digital copy of a book, music album, or movie in the same way they would understand "ownership" of a physical copy; in fact, their rights over the digital copy of the same work can be significantly diminished (regardless of whether they paid the same price). Instead, they are granted a limited license to the work that is governed by an End User License Agreement (EULA) that is often buried in the terms of service that a user agrees to when creating their account, or they may be referenced in a link to another page at the checkout screen.(fn12) Another example of this restriction on digital media is the use of digital rights management software (DRM) to technologically restrict the transferability or use of a digital media file.(fn13) The implications of all of this are important to note. Consumers of digital media, such as e-books, are limited in their ability to share their copy of that book with a family member, which means parents and grandparents cannot pass down their collection of cultural works-whether literature, music, or film-to their children and grandchildren. In other words, our nation's ability to share knowledge and works valuable enough for society to warrant copyright protection in the first place is severely restricted. In addition to the possible cultural detriments of these restrictions on digital media, there could also be significant implications on continued innovation and competition in the economy. Consumers may not be able to transfer content from one device to a newer, higher quality device made by a different manufacturer, creating consumer lock-in, reducing incentives to innovate, reducing platform competition, and raising barriers to entry for new companies that wish to introduce new and innovative ways to consume and interact with content. This strikes at the core of what is referred to as the "delicate balance" of copyright, which is to provide protection to authors while also ensuring access and other public benefits to society.(fn14)
The ReDigi court's decision highlights the challenges that arise in applying the 1976 Copyright Act to new and rapidly evolving technologies and channels of distribution that challenge traditional business models and mediums for content delivery.(fn15) The ReDigi decision also strikes a blow to consumers who have invested in these new technologies and have libraries of digital media, only to find that their rights to that content might be significantly limited by the fact that they are in digital form rather than physical hard copies.
The drafters of the 1976 Copyright Act could hardly have contemplated the technologies used to distribute copyrighted content today. Not long ago, families huddled around large radios to hear the news broadcast or catch the latest episode of their favorite radio show.(fn16) Soon after, the first television sets were shipped, and a whole new world of programming became available.(fn17) In the past ten to fifteen years, we have seen a rapid evolution in technology around media content delivery. Today, digital content can be purchased and delivered to a TV, phone, tablet, or computer within seconds. Technology companies continually look for new ways to create richer experiences for users to consume and engage with their content. Entrepreneurs and tech-savvy thinkers refer to this approach of re-envisioning the world we live in and forcing new business models as "disruptive" innovation. As technology and society change the way content is consumed, the entertainment industry is reluctant to let go of its stronghold on content distribution and adapt to new business models.(fn18) It has sought to enforce its exclusive rights under the Copyright Act as a way to maintain control, introducing mechanisms such as Digital Rights Management (DRM) software and End User License Agreements (EULAs) to further extend its grip as content transitions to digital mediums.(fn19)
"If what you own cannot be protected, you own nothing."(fn20) Jack Valenti's own words in defense of protecting the entertainment industry from consumers can be equally applied to protecting consumers from the entertainment industry. Both Congressman Bob Goodlatte, Chairman of the House Judiciary Committee, and Maria Pallante, current Director of the U.S. Copyright Office, have called for a comprehensive review of the Copyright Act to bring it up to date with today's technologies and digital marketplace.(fn21) As policymakers work to develop a copyright law that better incorporates today's digital economy and rapid pace of technological innovation, they should aspire to develop a policy that balances the interests of copyright owners, provides adequate protection for consumers, and allows for continued technological innovation.
This Note seeks to provide the necessary context and considerations for policymakers and courts to consider as they grapple with digital copyright and, specifically, the development of a digital first sale doctrine. Part II of this Note outlines the ReDigi court's analysis and explains some of the problems faced in applying the present copyright laws to the current and rapidly evolving digital marketplace. Part III briefly explores what I call the "privatization of copyright"-the use of digital rights management (DRM) software and end user license agreements (EULA) to turn what have traditionally been deemed "sales" of content (exhausting the distribution rights of the copyright owner, and bestowing certain property rights such as the right of alienability to consumers) into nonexclusive licenses with highly restrictive terms. I argue that this privatization of copyright has unwittingly shifted the "delicate balance" of copyright designed to provide protection to authors while ensuring access and other public benefits to society. Part IV examines the feasibility of a digital first sale doctrine and its importance for protecting the interests of consumers and society at-large. In Part V of this Note, I propose a framework for a digital first sale doctrine that uses standards-essential technology and digital watermarking. Part VI concludes.
II. REDIGI: APPLYING COPYRIGHT TO A DIGITAL MARKETPLACE
ReDigi is an important case for two reasons: (1) it illustrates the awkwardness of applying old copyright laws to today's digital landscape and new technologies, and (2) it extends to copyright owners greater control over digital copies of their works than they would have over physical copies of the same work.
John Ossenmacher founded ReDigi with the vision of creating an online secondhand marketplace for digital media-similar to the secondhand bookstores and album stores that played a significant role in the marketplace of physical copies of those...
