REDIGI; DISTRIBUTION OF DIGITAL CONTENT VIA THE
INTERNET; EXHAUSTION OF THE RIGHT OF DISTRIBUTION: IS A STATUTORY LICENCE THE
ANSWER?
The appeal decision in Capitol
Records v ReDigi issued December 2018 did not attract anywhere near the
same attention as the 2015 trial decision.
Presumably this was because audio streaming has largely replaced audio
downloads and consumer demand for a web marketplace facilitating second-hand
sale of such downloads has dissipated. Or
possibly, at least so far as lawyers are concerned, because the Court of
Appeals confined its decision (although not its reasoning) to infringement by
reproduction. The District Court finding
that the first sale doctrine was not drafted so as to apply to distribution
over the internet.
Nevertheless, the appeal decision was another reminder
that there are still unresolved copyright issues arising from the ‘distribution’
of intangibles such as the delivery of digital files over the internet,
especially at the consumer end of the delivery chain. Despite the WIPO ‘Internet treaties’
concluded 23 years ago copyright law is still more tuned to distribution of
tangible objects that may constitute or contain copyright works.
For example, the making of new copies is an inevitable part of online distribution of digital
content. And not just for uploads and
downloads, but also for streaming, despite the transient nature of the part
copies created within that technology (to be discussed in an upcoming blog). Second, Redigi
serves as a reminder that there are fundamental copyright exhaustion issues
which have to be addressed and resolved for the digital world. Should section 109 of
the US Act be amended to ensure first sale of a digital file over the internet
exhausts the distribution right? Similarly
in the EU, although their issue must be expressed as: should first sale of
intangible content exhaust the copyright holder’s communication right?
As argued at the WCT negotiations in the 1990s the US,
unlike the EU, considered the distribution right included communication and that
they had no need to create a new communication right as had been proposed by
WIPO. But clearly both the US and the EU
either overlooked first sale exhaustion for internet communicated works or
decided they did not want it.
And should jurisdictions that do not have legislation to
exhaust either distribution or communication rights – like New Zealand and
Australia – start reform programmes to achieve this? Should exhaustion be an international outcome
for a given set of circumstances? If so should
there be any exceptions?
Exhaustion is primarily a commercial issue rather than a
legal issue. The ReDigi trial court noted a report from the US Copyright Office that
pointed out that second-hand digitised content files remained in perfect
condition, unlike, say, second-hand paper books. Allowing the sale of perfect digital replicas
by download at a price cheaper than the price required on first sale by the
copyright holder under a first sale doctrine could be seen as a disincentive to
publish. Maybe this was the rationale
for the exhaustion provision in Article 6(1) of the EU InfoSoc Directive being
restricted by the associated Agreed Statement: ‘As used in these Articles, the expressions “copies”
and “original and copies,” being subject to the right of distribution and the
right of rental under the said Articles, refer exclusively to fixed copies that
can be put into circulation as tangible objects.’
On the other hand Jessica Stevens at the Queensland
University of Technology argues
for exhaustion of the distribution right even in such a circumstance because she
sees the issue as a cultural or moral one.
For example, with university text books becoming digitised the long
established student practice of selling a text book second hand when a course
has been completed has become unlawful.
The CJEU will soon be deciding on the references to it
from The Court of the Hague in the Tom
Kabinet case and giving its further views on exhaustion of the ‘distribution
right’ for second hand sale of eBooks.
Tom Kabinet is a Dutch company which is virtually a mirror image of
ReDigi except it trades in eBooks rather than iTunes. It relies on the 2012 CJEU decision in UsedSoft to provide for exhaustion despite
the works it is dealing with not being software and which could be expected to fall
under the InfoSoc Directive (which excludes exhaustion of the communication to
the public right) rather than the Computer Program Directive which contrary to
the WCT does not provide a communication right for software. The issue is unlikely to be comprehensively
resolved and advocates for exhaustion will no doubt continue to argue for legislative
change to bring the distribution/communication of intangibles into line with
that which applies to tangibles.
ENTER THE
LICENSING DOMAIN
Contrary to the CJEU this blogger is adamant that the
correct legal classification of a commercial transaction resulting in the
delivery of an intangible such as software or digital content over the internet
is a licence and not a sale. It is surprising that this issue was not
dealt with in ReDigi, bearing in mind
the structure of Apple’s iTunes agreement. Putting that aside, it is suggested
that exhaustion advocates should adopt and extend the traditional English
common law substitute for exhaustion of IP rights, namely the concept of an
implied licence to ‘resell’. As Sir
Robin Jacob stated at the 27th Fordham IP Conference, doctrines of
exhaustion of IP rights were unknown in English law and instead it was always
considered that an implied licence to
resell ran with the patented or copyright ‘goods’.
It is not just that the written contracts for internet
deliveries are ‘dressed up’ as licences (as the CJEU thought in UsedSoft v Oracle) and contain the terms
that are only befitting of a licence, but also that the technological process
for a download necessitates a licence.
Unlike the situation for the supply of tangibles where the copyright
holder makes each and every copy which is subsequently delivered to each
acquirer, with internet deliveries it is the acquirer, not the supplier, who
makes the copy he/she will retain for their private use. The internet delivery is facilitated by: (i)
the supplier making a temporary copy on its server, (ii) dividing it up into
packets, (iii) transmitting the packets over the internet to the acquirer’s
computer device where (iv) the received packets are assembled into a digital
file (which is a copy of the one held on the suppliers server) which is (v)
loaded onto the hard disk of the computer device.
The acquirer could not lawfully make this new copy
without a licence from the supplier/copyright holder. The acquirer holds his copy under
licence. It has not become his property
by any transfer of title under a sale agreement so as to allow him to do
whatever he likes with it, including selling it second hand.
Having now entered the licensing domain this blogger
suggests that content exhaustion advocates pursue a statutory licence to allow ‘second
hand sales’ of internet delivered content.
How about statutory provisions vaguely along these lines:
- A licensed private user of a copy of content in the form of a digital file has the right to assign his/her licence from the copyright holder to another private user so as to allow that user to make a single copy of that digital file, provided:
- The first licensee then immediately deletes his/her copy of the file.
- Any term in the copyright holder’s licence which purports to exclude or limit the operation of sub-section (1) will have no effect.
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