Friday 5 April 2013

Copyright Law Creates Crazy Business Models

That’s not my headline, it's from a blog from Dan Mitchell on, but it’s a good reflection of a still current theme running through cyberspace – particularly in light of what many perceive are conflicting decisions in the ReDigi case, and Kirtseang v John Wiley: One decision allowed the application of the ‘first use’ doctrine to the re-sale of textbooks legally brought in Asia and re-sold in in the USA with no infringement of copyright – and one which prohibited a business model based on re-selling ‘used’ MP3 files legally brought in the US and re-sold there. Add this a recent patent law decision that says that with patents, the law does NOT follow copyright as it is derived from the common law: in the Ninestar case the US Supreme Court held that “first sale” applied only to first sales made inside the US:  Many are baffled!

Then there is the recent Aereo decision (which Andy J referred in his comments on the ReDigi case and Iona blogged about yesterday), Meltwater and now another case from Australia on threats to a start up textbook rental business referred to below: It’s hardly surprising that consumers are confused, entrepreneurs frustrated and bloggers annoyed, and as one blogger says 

“Two recent court rulings exemplify the sometimes bizarre outcomes of a legal system that's often a couple of decades behind technology. No matter where you stand on copyright issues, you can't deny that the law as it stands is dysfunctional when it comes to dealing with the fact that owning a "copy" of something -- a song, a video -- means something completely different than it did when copies were attached to physical media -- a CD, a DVD.”

What we have are sets of what seem to be very very complex rules: the above cases, and and other decisions probably make little sense to the 'reasonable' or perhaps 'reasonably computer literate' man or woman, and also create a web of challenges for new market entrants. Eleonora has been busy blogging from the Fordham  IP Conference in New York, and commented that in the US the current legislative framework is perceived as outdated: the Copyright Act was adopted in 1976 (but negotiated in the 1960s) and the Digital Millennium Copyright Act (DMCA) is already a teen-ager, being 15-year-old. In particular, duration of copyright and the set of exceptions and limitations should be revised, with the US Register of Copyrights Maria Pallante saying that copyright is becoming increasingly unreadable and the result is that it is difficult for people to understand how it works (and sometimes even its rationale), adding that this impairs both the operation and reputation of copyright law.

Let's look at the Aereo case: Aereo streams local TV broadcasts over the Internet, has little TV antennas in its server room, which it rents to subscribers for $1 a day or $80 a year. Each stream is of a unique, independent file of a TV show that's not shared by anyone else. Aereo creates a new file for every user, which, it says, gets the company around the broadcasters' copyrights that disallow "public performance". The U.S. Court of Appeals in New York has now declined to overturn a lower court's denial of a preliminary injunction that would have put New York-based Aereo out of business, following a 2008 decision that favoured Cablevison. But a room full of little antennae? Just to get round copyright law? Sounds mad doesn’t it? But there again, its not mad but necessary, because as we know, Judge Richard Sullivan in New York looked at ReDigi’s business model and decided that said “The novel question presented in this action is whether a digital music file, lawfully made and purchased, may be resold by its owner through ReDigi under the first sale doctrine. The court determines that it cannot" although Judge Sullivan added the case represented a "fundamental clash over culture, policy and copyright law."

The final case is the recent threat of legal action against Zookal, an Australian company started two years ago to save students money by renting them textbooks. The CEO of the Australian Publishers Association Maree McCaskill said she has now notified the APA's lawyers of alleged copyright breaches by Zookal with action to follow. Zookal said that leading law and business textbook supplier Thomson Reuters ''outright told us will not supply a textbook renter company at all'' and that other publishers refused to supply the books to Zookal at wholesale prices or did so on terms less favourable than those given to other textbook retailers. These included shipping terms of six weeks instead of 24 hours.

It’s worth repeating Andy J’s comments on the ReDigi blog on this site:

“Cases like this one, 'Meltwater III' and Aereo's recent victory (also within the Second Circuit) are really stretching the current law's ability to accommodate digital technology within statutes which were fundamentally drafted before the internet was born. That means judges are making a lot of law on the hoof. That is not to criticise Judge Sullivan in this case. It is hard to fault his analysis, even if the outcome appears perverse to many who think they own their digital downloads, when in fact they merely have licences to use them under strictly constrained conditions.”

A good comment. And it seems many at the Fordham IP conference agree, and back in the blogsphere, Dan Mitchell says this 

The law as written tends to apply to such physical media, even as the world is swiftly consuming its media online, where an infinite number of copies of such media can be easily created and shared. That has led to the creation of some weird business models that in some cases make "no technological sense whatsoever," as Techdirt's Mike Masnick puts it in one case, and exist only because the law is so inadequate. How to deal with a world of limitless copies is more than just a legal or economic question, but poses "metaphysical quandaries," says Variety's Andrew Barker."

Mitchell adds 

“The three-person appeals panel's lone dissenter was absolutely right in his characterization of Aereo as "a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law." The other two judges, though, didn't see it as a "perceived loophole," but rather simply .... the law.

Many years ago when the digital age was beginning (OK, not that many years ago) I remember having to explain to a senior record label executive that actually even making even a single copy of a CD for personal use, by way of format shifting, was technically an infringement of copyright here in the UK. He was amazed! And baffled. And he made his money out of selling CDs! Prohibition of alcohol in the US in the 1920s merely drove almost all legitimate suppliers out of business, and allowed organised crime to consolidate control and profitability.  A nonsensical set of rules governing copyright isn't going to help many - except those who see a profit in playing the system - and a lack of respect of the law really is a poor starting point for any system of governance  - especially one within which new business models.have to try to function.

Dan Gillmor's reflections on ReDigi case on the Guardian website here

More on nonsensical laws here (completely unverified by the 1709 blog I may add)

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