Is it illegal to resell digital files?

Is it illegal to resell digital files?

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In the real world, you can legally purchase a physical music CD, movie DVD or book and, later, resell the item as used to another person or at a garage sale, pawn shop or online in places like eBay, Half and Amazon (among others).

It's a right in the U.S. known as the “first sale” doctrine, the notion that if you own a copy of a copyrighted work (CD, book, DVD), you are free to resell it at whatever price you wish.

So, you might think the same rules would apply in the digital world. You’d think you could resell your “used” digital music, movie or e-book files to others in a digital marketplace.

You’d be wrong.

A New York federal judge has ruled, in essence, reselling copyrighted digital files is a form of copyright infringement (http://bit.ly/103VDDN).

Specifically, U.S. District Court Judge Richard J. Sullivan ruled ReDigi.com, a new online digital music resale company, has been selling unauthorized copies of digital works owned by Capitol Records.

ReDigi buys previously purchased digital music files from people and resells them to others through its website. Some songs that originally sold “new” for $1.29 can be purchased “used” for as little as 49 cents.

Capitol Records sued ReDigi, arguing the resale company was actually selling unauthorized copies of digital music tracks.

One issue in the suit focused on whether the act of transferring a digital file from one device to another was unlawful copying as defined in copyright law.

For example, if I electronically transfer a digital music file from my computer to your computer, the file you receive is a copy of the original file I possess. Even if I destroy the original, it can be argued that you still only possess a copy of the original.

And Capitol Records’ position is that such a copy is unlawful because the usage rights I have with the original file are not transferred with the copy. Because the copy was not purchased or authorized by the copyright holders, it is illegal.

This touches on an important point when it comes to purchasing digital products. In effect, you, as a consumer, don’t really “own” the digital files you buy. You are really purchasing licenses for the use of the specific files. Those licenses are limited in what you can do with the files.

And one of the things you can’t do with the files, at least as presented in Sullivan’s ruling, is resell them. The license you purchased for a digital song, movie or book is nontransferrable.

Another issue in the lawsuit was whether reselling a digital file fell under the “first sale” doctrine.

Sullivan ruled it didn’t, and noted that the U.S. Copyright Office has also stated the “first sale” doctrine does not cover digital works at this time.

In a 2001 review of the Digital Millennium Copyright Act and its impact on digital issues, the copyright office noted there is a significant distinction between physical copies of copyrighted works and digital copies (http://1.usa.gov/103VJLK).

“Physical copies degrade with time and use; digital information does not.

Works in digital format can be reproduced flawlessly, and disseminated to nearly any point on the globe instantly and at negligible cost,” the copyright office reported. “The tangible nature of a copy is a defining element of the first sale doctrine and critical to its rationale.”

Because a digital item is an intangible product, because the distinction between a “new” and “used” digital file is nonexistent, because distribution limitations in the real world don’t affect the digital world, and because the ease of digital transmission “interferes with the copyright owner’s control over the intangible work and the exclusive right of reproduction,” the copyright office recommended not extending the “first sale” doctrine to include digital works.

In the end, Sullivan boiled the case down to a simple question, writing, “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.”

Unless the copyright holders say otherwise.

Which is what Amazon and Apple are hoping to secure. Both companies right now are working on models for secondary digital sales marketplaces. To calm worried copyright holders and gain their support for the marketplaces, both companies have been developing separate technologies to determine that a person reselling a digital product no longer posseses a copy of the product.

However, a number of digital works copyright holders are not thrilled by any move into digital resales. The fear: Why would anyone pay full price for digital music, movies or books when they can wait for the products to appear in the resale market and purchase them for significantly discounted prices? After all, there would be no difference in the quality between the new and used versions — only the prices.

It’s a legitimate concern.

And a difficult one to resolve.

But a resolution of some kind is likely to come within the next few years.

Human nature will see to that.

Resale is the cornerstone of the garage sale, the flea market, the discount store, the swap meet. People are always looking for ways to make a buck or two on their used items. And more people in the near future will have a lot of “used” digital products they’ll want to sell.

Do digital products have a resale value? Should digital products have a resale value?

The answers will further define and refine the online marketplace.

(Keith Darnay has worked in the online world for more than a decade, the traditional media world for a few decades more and manages the online department and website for the University of Mary. His own site, featuring this column going back to 1995, is at www.darnay.com.)

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