Digital Content: Dumb Data or Clever Instructor?

I received so many comments on my ReDigi post that I need to write a couple of follow-up posts to address the good questions. This post and the next will focus on questions raised about the fact that ReDigi needs to make an intermediate copy of the song files, and the one after that will clean up some lingering issues about the first sale doctrine itself.

The Intermediate Copy

My last post was focused on the first-sale doctrine and the Vernor decision, but several people pointed out that, in order to transfer a music file from the seller to the buyer, ReDigi has to make at least one intermediate copy. It doesn’t matter ReDigi erases the seller’s copy of the file at the same time it makes a copy of the file on its own server–it’s still making a copy, and making a copy requires exercise of the reproduction right. See Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1992). So, assuming ReDigi isn’t licensed* and assuming ReDigi may avail itself of the first-sale doctrine**, what defense might it have against a claim that this intermediate copy is an infringement?

And I don’t know if this is an accurate assumption. No one has sued ReDigi, and ReDigi says that some portion of its sales go “to the artists,” which suggests some sort of arrangement, which in turn suggests licensing. On the other hand, if ReDigi is licensed, you’d think it’d be trumpeting that fact.

Update: I spoke too soon. The RIAA has, in fact, now threatened ReDigi with suit, apparently on grounds that ReDigi must make the intermediate copies.

Further Update: Here is the RIAA’s letter. The RIAA’s argument is subtler what I thought. Its argument is that the intermediate copies (and the ultimate copy) are the copies being sold and that since those copies aren’t authorized, the first-sale doctrine doesn’t apply in the first place. I’ll try to address the RIAA’s arguments in a later post.

** Also not a slam-dunk. See my last post. When reading this post, keep in mind that we’re making this assumption, because the defenses I’ll be discussing will be relying on this assumption.

A couple of candidates come to mind. First, of course, is our old friend fair use. Second is what is usually known as the “essential step defense.” I’ll discuss them in reverse order.

The Essential Step Defense

Under the “essential step defense” (17 U.S.C. § 117), you may make a copy of a “computer program” if you are the “owner” of an otherwise authorized copy of the computer program, and you are making the copy (1) as an “essential step in the utilization of the computer program in conjunction with a machine [i.e., a computer] and … in no other manner”; or (2) the copy is for “archival purposes only” and any archived copies are destroyed when you are no longer permitted to possess the computer program. It also provides that, if you want to sell the copy you made, you may do so only as part of a transaction that sells the original copy and all your rights to it. (In other words, you can’t use this defense as an excuse to sell multiple copies of the computer program.)

The history of this defense is interesting. When the current version of the Copyright Act was passed in 1976 (but not implemented until 1978), Congress didn’t quite know what to do about computer programs. They weren’t unknown at the time, but they were hardly ubiquitous as they are today. Punch cards were still pretty common. It was unclear how computer programs should be protected, if at all. It wasn’t clear whether computer code was sufficiently expressive to warrant the same sort of protection we give to music, novels and artwork. Computer programs were functional, and we don’t extend copyright protection to functional features. That’s what patent law is supposed to be for–only, at the time, patent law could not be applied to computer programs on grounds that algorithms were the equivalent of unprotectable mathematical formulae (that has since changed).

Congress punted the issue a bit, instituting a pretty impressive committee called the National Commission on New Technological Uses of Copyrighted Works, better known as CONTU. CONTU studied the problem for a couple of years and, in 1978, issued its final report, which you can read here (old-school versionhere). CONTU concluded that copyright protection was appropriate for computer programs, because (1) there was some expressive content in computer code, (2) coding was a laborious and expensive process (which was even more true in 1978), and (3) it was so easy to copy computer programs that, without protection, it was unlikely that the initial investment in the computer program could be recouped (this might be even truer today). CONTU recognized, however, that users of computer programs had to make intermediate copies of computer programs for them to work (which was more evident in the era of punch cards and 5 ¼” floppy disks), so users would need right to make those intermediate copies.

CONTU, therefore, recommended two changes to the Copyright Act: (1) a definition of computer program and (2) a new section of the Copyright Act to protect users of computer programs, what we now call the “essential step defense.” Congress passed CONTU’s recommendations into law with one possibly crucial change. Where CONTU would have given the essential step defense to any “rightful possessor” of the copy of the computer program, Congress gave it to the “owner” of the copy. It is unknown why Congress made this single change.

When you confront a possible application of the essential step defense, you are confronted with three main questions: (1) Is what you copied a “computer program”? (2) Are you really an “owner” of the copy of the computer program? (3) Is making an additional copy of the computer program an “essential step” for using the computer program in conjunction with a “machine”?

Is Digital Content a Computer Program?

Following the CONTU report, the Copyright Act defines computer program as “a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result.” Does digital content, like a music file, consist of “statements or instructions” that directly or indirectly bring about a certain result?*

What’s this business about statements? It’s hard to tell from the CONTU report, since it uses instructions throughout. My sense is that it’s a synonym for “instruction,” to capture computer languages that happened to refer to executable lines of code as “statements.”

Back in 1978, I don’t think there really was such a concept as digital content. There was data, to be sure, but data is just grist for an executable application’s mill. It didn’t tell the computer what to do. Instead, an application used it in connection with its telling the computer what to do. If a data file contained the datum, “Flour, $1.00, pound,” that might be meaningful to a human reader (maybe), but it wasn’t meaningful to the computer. This sort of data, by the way, didn’t need to be included in the definition of computer program because it was, by its nature, not protectable by copyright, since it’s just facts (and not expression).

Digital content, it seems to me, stands somewhere in between pure “dumb” data and an executable code. On the one hand, it could be seen as just a more complex form of data. When you play a song file on your computer, a software application takes the information supplied by the song file then tells the computer what to do with it. On the other hand, most digital content is encoded to alchemically turn sound and vision into ASCII characters. (We’ll put aside the compression algorithms.) The data is not “dumb”: it sings, it speaks. Yes, an application must translate its wonders for computer, but isn’t the content file that tells the computer what to do?

Perhaps just as important, digital content is protectable data. It might look like 0’s and 1’s, but it reproduces protectable works, like music, books and movies. If the essential step defense didn’t give you a right to make an intermediate copy of the content file, you couldn’t enjoy the copyrightable work.

To me, these arguments equally persuasive, and I’m not aware of any court decision that has addressed the question of whether digital content is a “computer program” for purposes of the essential step defense. And, in fact, the question isn’t very likely to come up: how often will someone rightfully possess a copy of digital content and yet not also have a license to make intermediate copies?

Who Is an Owner?

When we discussed the first-sale doctrine under Vernor, we encountered the question of who “owns” a copy of a copyrighted work, and who is a mere licensee. We encounter the exact same issue withe the essential-step defense, but with a twist. The CONTU recommendation used the term rightful possessor, but Congress changed it to read “owner.”

Courts are completely split on how to interpret this change. Some courts think the change is highly significant. If Congress had meant to cover licensees, it would have kept the rightful possessor language. Thus, it must have meant something much narrower by owner. Such courts almost never apply the essential-step defense, because hardly anyone can qualify as an owner of a copy of software–the mere presence of a license wrecks that. See, e.g., Krause v. Titleserv, Inc., 402 F.3d 119 (2d Cir. 2005).

Other courts more or less disregard the change. They point out that Congress didn’t explain why it made the change. For all anyone knows, Congress simply didn’t appreciate the difference and thought owner sounded better. These courts look to the CONTU report for guidance, and naturally, they conclude that licensees “own” their copies of the software for purpose of the essential step defense since they rightfully possess the software. See, e.g., DSC Communications Corp. v. Pulse Communications, Inc., 170 F.3d 1354 (Fed. Cir. 1999).

Is it an Essential Step?

This would obviously be ReDigi’s biggest hurdle. Making an intermediate copy is an “essential step” to transferring ownership of the copy to another, but is it an “essential step” for the “utilization of” the content file “in conjunction with a machine”?

Utilize can have a very broad meaning. You can utilized tissue paper to blow your nose; you can utilize a car to go somewhere; you can utilize your TV to entertain yourself. Do you not also utilize your car or TV when you sell it or give to it someone else, in the broadest sense of the word?

Well, yes, but when you read the CONTU report, you are left with the unmistakable sense that what the authors had in mind for utilize was “execute” or “enjoy” (to the extent Lotus 123 was enjoyable, I suppose).

So it turns out this idea of an “essential step” has limited utility (as it were) in connection with its titular defense. But the general idea–that it’s something you need to do in order to exercise a right–might have better application under the rubric of fair use. We’ll turn to that next time.

Thanks for reading!

Rick Sanders

Rick is an intellectual-property litigator. He handles lawsuits, arbitrations, emergency injunctions and temporary restraining orders, opposition and cancellation proceedings, uniform dispute resolution proceedings (UDRPs), pre-litigation counseling, litigation avoidance, and other disputes, relating to copyrights, trademarks, trade secrets, domain names, technology and intellectual-property licenses, and various privacy rights. He has taught Copyright Law at Vanderbilt University Law School. He co-founded Aaron | Sanders with Tara Aaron-Stelluto in 2011.