The Copyright Act grants the owner of a copyright certain rights, including the right to reproduce, to distribute, and to perform and display the copyrighted work. 17 U.S.C. § 106. However, these rights are limited by other sections of the statute. One such limitation to the distribution right is known as the “first sale doctrine,” which states, “the owner of a particular copy or phonorecord lawfully made [] is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord. Id. at § 109(a). For example, if you purchase a DVD at the store, you own a particular copy of a copyrighted work. You can resale the DVD, give it away, or destroy it without infringing the copyright owner’s right of distribution. The same is true for any number of copyrighted works fixed in a variety of mediums, e.g., a CD, cassette, vinyl record, book, photograph, art print, etc. But what about digital content? That is, can you resell a song or movie you lawfully purchase and download?

The United States Copyright Office (“USCO”) has acknowledged digital content differs from traditional physical copies of works. In 2001, the USCO stated that with traditional physical copies, the natural degradation of works (e.g., scratches, fading, etc.) and “the need to transport physical copies of the works” “act as a natural brake on the effect of resales on the copyright owner’s market.” The USCO further stated that these limitations no longer exist with digital transmissions. “Digital information does not degrade…. [and] time, space, effort and cost no longer act as barriers to the movement of copies, since digital copies can be transmitted nearly instantaneously anywhere in the world with minimal effort and negligible cost.” In addition, the USCO recognized the product of a digital transmission “is a new copy in the possession of a new person” and thus the recipient “obtains a new copy, not the same one with which the sender began.” For example, when we email or text a photo, we retain our “particular” copy while the recipient receives a new copy.

In Capitol Records, LLC v. ReDigi Inc., the court, relying in part on the USCO’s report, found that it was impossible to digitally transfer the “particular” copy purchased; any digital transfer creates a new copy of the work, even if the original file is deleted during the transfer. First, the court found the new copy violates the copyright owner’s reproduction rights, to which the first sale doctrine is not a defense. Second, because the thing being sold is an unlawful reproduction and not the “particular” copy originally purchased, the first sale doctrine does not protect such a distribution. In another recent case, the court held that the first sale doctrine was inapplicable until a particular physical copy of copyrighted work was downloaded. Disney Enterprises, Inc. v. Redbox, Automated Retail, LLC (declining to extend the first sale doctrine to the reselling of a digital code that would allow a user to download a copy of the copyrighted work). That is, in order for the first sale doctrine to likely apply the copyrighted work must physically exist as a digital copy but once downloaded, it probably cannot be digitally transferred without creating an unlawful reproduction.

The court in Capital Records also held the owner of a copyrighted work may sell, gift, or otherwise dispose of the hard drive, iPod, or other memory device onto which the digital file was originally downloaded. This solution may alleviate the numerous concerns expressed by the USCO in 2001. However, by forcing the user to dispose of their digital content in this manner it forces the user to dispose of at least part of their electronic device, which in all likelihood includes digital copies of multiple copyrighted works. In other words, in order to be protected by the first sale doctrine the owner of the copyrighted work must dispose of significantly more than he or she initially bargained for.

As digital downloads increase in popularity, the importance of this issue will continue to grow. The Second Circuit, where the Capital Records case is currently on appeal, is poised to give us further guidance by creating the first circuit level case law on digital first sale. However, when the Digital Millennium Copyright act was introduced nearly 20 years ago, it was acknowledged that this was “only the beginning of Congress’ evaluation of the impact of the digital age on copyrighted works.” Ultimately, it may again be time for Congress to evaluate this impact.

Last month, a journalism collective called the Fourth Estate Public Benefit Corp. (“Fourth Estate”) petitioned the United States Supreme Court to review a decision issued by the Eleventh Circuit involving the question of when a copyright holder can properly file a copyright infringement lawsuit.  At issue is 17 U.S.C. § 411(a), which states that “no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.”  Although copyright holders obtain copyright protection immediately upon the creation of a copyrightable work, copyright holders cannot initiate a lawsuit without satisfying the “registration” requirement set forth in 17 U.S.C. § 411(a).  According to a Copyright Office circular, this means that “registration (or refusal) is necessary to enforce the exclusive right of copyright through litigation.”

34126235 - copyrightHowever, the Circuit Courts are split as to whether “registration” as used in 17 U.S.C. § 411(a) includes the mere filing of a registration application or whether it requires that the Copyright Office have actually approved or denied the registration application.  Earlier this year, the Eleventh Circuit held in Fourth Estate Public Benefit Corp. v. Wall-Street.com that “registration” requires the latter.  Because Fourth Estate had applied for copyrights that had not yet been decided upon by the Copyright Office, the Eleventh Circuit held that Fourth Estate could not properly bring its copyright infringement lawsuit against Wall-Street.com, a news website that Fourth Estate claims kept its news stories live after Fourth Estate’s membership was cancelled.  Therefore, the Eleventh Circuit affirmed the lower court’s dismissal of Fourth Estate’s complaint.

Now, Fourth Estate asks the Supreme Court to weigh in, reverse the Eleventh Circuit’s decision, and resolve the dispute amongst the Circuit Courts.  In the event the Supreme Court hears the case, copyright holders will finally obtain clarity as to whether they may file suit merely after filing an application for a copyright registration.  On the other hand, if the Supreme Court declines to hear the case, copyright holders will be forced to continue to evaluate which courts are, or may be, favorable on the issue.  If copyright holders are stuck with filing in an unfavorable court, they must evaluate the risks of waiting to file a lawsuit (and potentially paying for an expedited registration) or of jeopardizing dismissal of their complaint.

On November 1, 2017, the Supreme Court distributed the case for conference on November 21, 2017.  After that conference, we should know whether the Supreme Court has granted certiorari, and will thus hear the case, or whether the Circuit Court split will remain for the foreseeable future.