MSCHF Settles Upgraded Shoe Dispute With Nike And Promises (Wink, Wink) To Buy Back Satan Shoes

from the good-luck-getting-those-shoes-back dept

There were actually a whole bunch of interesting legal questions raised by Nike's trademark lawsuit against MSCHF the weird "structured chaos" organization that seems to basically sell publicity stunts as a business model. It had teamed up with the musician Lil Nas X to sell 666 pairs of upgrade Nike Air Max 97, complete with red ink (and, it claimed, a single drop of blood) inserted in the sole of the shoe. The lawsuit raised issues regarding first sale/resale rights, art, freedom of expression, trademark, ownership, property, dilution, confusion and more. And... all of it's going nowhere, because a settlement has been reached.

This isn't that much of a surprise. MSCHF execs have admitted in the past that lawsuits only raise their profile, which may be true, but they're also crazy fucking expensive. MSCHF already got the benefit of the publicity bump from the lawsuit, and now probably sought to get things done and over with as quickly as possible -- and that includes agreeing to issue a "voluntary recall" of the shoes -- 665 pairs of which it had already shipped out. MSCHF also agreed to do the same thing for the much smaller number of Jesus shoes it had sold two years ago in a similar stunt.

Of course, the whole thing seems like a charade. It's a voluntary recall, in which MSCHF is supposed to buy back the shoes at their original retail prices "in order to remove them from circulation." But, uh, anyone who has those shoes in their possession now knows that these shoes are way more valuable because of this dispute. I'd be amazed if anyone actually agreed to sell the shoes back to MSCHF, because these shoes just went from already established rare collector's items, to rare collector's items with an even more insane story including the fact that Nike wants them to disappear.

In some ways, this form of settlement just shows how ridiculous the lawsuit was in the first place. Nike's statement on the settlement is hilarious:

“As part of the settlement, Nike has asked MSCHF, and MSCHF has agreed, to initiate a voluntary recall to buy back any Satan Shoes and Jesus Shoes for their original retail prices, in order to remove them from circulation. If any purchasers were confused, or if they otherwise want to return their shoes, they may do so for a full refund. Purchasers who choose not to return their shoes and later encounter a product issue, defect, or health concern should contact MSCHF, not Nike.”

I mean, c'mon. No one who bought this shoe was "confused." No one's going to want to return it. And, no one's going to contact Nike about any "defect" or "health concern." The whole thing is silly. And yes, that's even though there were some foolish pundits on certain infamous news channels who tried to make a culture war issue falsely claiming Nike was making these shoes. So, sure, Nike can point to the lawsuit as proof they had nothing to do with the shoes, but responding to the brigade of trumped up controversial people is lame. Pretty much everything about this story has been about posturing, rather than anything substantive.

Filed Under: art, confusion, dilution, first sale, free speech, jesus shoes, lil nas x, satan shoes, tarnishment, trademark
Companies: mschf, nike

Amazon's Refusal To Let Libraries Lend Ebooks Shows Why Controlled Digital Lending Is So Important

from the libraries-need-books dept

The Washington Post tech columnist Geoffrey Fowler recently had a very interesting article about how Amazon won't allow the ebooks it publishes to be lent out from libraries. As someone who regularly borrows ebooks from my local libraries, I find this disappointing -- especially since, as Fowler notes, Amazon really is the company that made ebooks popular. But, when it comes to libraries, Amazon won't let libraries lend those ebooks out:

When authors sign up with a publisher, it decides how to distribute their work. With other big publishers, selling e-books and audiobooks to libraries is part of the mix — that’s why you’re able to digitally check out bestsellers like Barack Obama’s “A Promised Land.” Amazon is the only big publisher that flat-out blocks library digital collections. Search your local library’s website, and you won’t find recent e-books by Amazon authors Kaling, Dean Koontz or Dr. Ruth Westheimer. Nor will you find downloadable audiobooks for Trevor Noah’s “Born a Crime,” Andy Weir’s “The Martian” and Michael Pollan’s “Caffeine.”

I've seen a lot of people responding to this article with anger towards Amazon, which is understandable. I do hope Amazon changes this policy. But there's a much bigger culprit here: our broken copyright laws. In the physical world, this kind of thing isn't a problem. If a library wants to lend out a book, it doesn't need the publisher's permission. It can just buy a copy and start lending it out. Fowler's correct that a publisher does get to decide how it wants to distribute a work, but with physical books, there's the important first sale doctrine, which lets anyone who buys a book go on and resell it. And that meant that in the past, libraries have never needed "permission" to lend out a book. They just needed to buy it.

Unfortunately, courts seem to take a dim view of the first sale doctrine when it comes to digital goods.

However, a few years back, some very smart librarians and copyright professors and experts got together and created a system called Controlled Digital Lending (CDL), which aimed to (1) rectify this massive gap in public access to knowledge while (2) remaining on the correct side of copyright law. In its most basic form, CDL, involves libraries buying physical copies of books (as they did in the past), scanning those books (which has already been ruled to be fair use for libraries) and then lending out that digital copy only if they had the matching physical copy on the shelf. As the libraries and copyright experts correctly note, it's difficult to argue that this is any different than lending out the copy of the book that they bought.

But, of course, publishers have always hated libraries' ability to lend out books in the first place -- and have been itching to use the power of copyright to block that. Already, they charge libraries insanely high prices for ebooks to lend, and put ridiculous limits on how those books can be lent.

So, no surprise, last year, in the middle of a once-in-a-century pandemic, the publishers sued the Internet Archive, arguing that its Open Library project, which runs based on the CDL principles, violated copyright law. And, incredibly, a ton of people have cheered on this nonsense lawsuit -- even those who hate Amazon.

Yet, if you really want to stop Amazon from being able to block libraries from lending out ebooks, there's a simple answer: fix copyright law. Make it clear that Controlled Digital Lending is legal. Or, go even further and say that the First Sale Doctrine also applies to digital goods, as it absolutely should.

Filed Under: controlled digital lending, copyright, digital first sale, ebooks, first sale, knowledge, libraries
Companies: amazon, internet archive

Libraries Have Never Needed Permission To Lend Books, And The Move To Change That Is A Big Problem

from the permission-culture dept

There are a variety of opinions concerning the Internet Archive's National Emergency Library in response to the pandemic. I've made it clear in multiple posts why I believe the freakout from some publishers and authors is misguided, and that the details of the program are very different than those crying about it have led you to believe. If you don't trust my analysis and want to whine about how I'm biased, I'd at least suggest reading a fairly balanced review of the issues by the Congressional Research Service.

However, Kyle Courtney, the Copyright Advisor for Harvard University, has a truly masterful post highlighting not just why the NEL makes sense, but just how problematic it is that many -- including the US Copyright Office -- seem to want to move to a world of permission and licensing for culture that has never required such things in the past.

Licensing culture is out of control. This has never been clearer than during this time when hundreds of millions of books and media that were purchased by libraries, archives, and other cultural intuitions have become inaccessible due to COVID-19 closures or, worse, are closed off further by restrictive licensing.

What's really set Courtney off is that the Copyright Office has come out, in response to the NEL, to suggest that the solution to any such concerns raised by books being locked up by the pandemic must be more licensing:

The ultimate example of this licensing culture gone wild is captured in a recent U.S. Copyright Office letter. Note that this letter is not a legally binding document. It is the opinion of an office under the control of the Library of Congress, that is tasked among other missions, with advising Congress when they ask copyright questions, as in this case.

Senator Tom Udall asked the Copyright Office to give its legal analysis of the NEL and similar library efforts, and it did so... badly.

The Office responded with a letter revealing their recommendation was not going to be the guidance document to “help libraries, authors, and online outlets,” but, ultimately, called for more licensing. It also continued a common misunderstanding of an important case, Capitol Records, LLC v. ReDigi Inc., 910 F. 3d 649 (2d Cir 2018).

We've written about the Redigi case a few times, but as Courtney details, the anti-internet, pro-extreme copyright folks have embraced it to mean much more than it actually means (we'll get back that shortly). Courtney points out that the Copyright Office seems to view everything through a single lens: "licensing" (i.e., permission). So while the letter applauds more licensing, that's really just a celebration of greater permission when none is necessary. And through that lens the Copyright Office seems to think that the NEL isn't really necessary because publishers have been choosing to make some of their books more widely available (via still restrictive licensing). But, as Courtney explains, libraries aren't supposed to need permission:

Here’s the problem though: these vendors and publishers are not libraries. The law does not treat them the same. Vendors must must ask permission, they must license, this is their business model. Libraries are special creatures of copyright. Libraries have a legally authorized mandate granted by Congress to complete their mission to provide access to materials. They put many of these in copyright exemptions for libraries in the Copyright Act itself.

The Copyright Office missed this critical difference completely when it said digital, temporary, or emergency libraries should “seek permission from authors or publishers prior” to the use. I think think this is flat-out wrong. And I have heard this in multiple settings over the last few months: somehow it has crept into our dialog that libraries should have always sought a license to lend books, even digital books, exactly like the vendors and publishers who sought permission first. Again, this is fundamentally wrong.

Let me make this clear: Libraries do not need a license to loan books. What libraries do (give access to their acquired collections of acquired books) is not illegal. And libraries generally do not need to license or contract before sharing these legally acquired works, digital or not. Additionally, libraries, and their users, can make (and do make) many uses of these works under the law including interlibrary loan, reserves, preservation, fair use, and more!

And, yes, Congress has already made it clear that libraries hold a special place with regard to copyright:

Libraries can make these uses of their legal acquired books without permission because the copyright system, via Section 109 first sale, maintains the market balance long recognized by the courts and Congress as between rightsholders and libraries. Libraries sit right in the middle of the economic purpose of copyright (we buy the books!) and the access purpose of copyright (we loan the books!) – or in the Constitutional narrative, “to Promote the Progress of Science and the Useful Arts” libraries provide unfettered access and freedom to the books they purchase.

When a library legally acquires a book via a sale, it has the right, under the first sale doctrine, to continue to loan that work unimpeded by any further permission or additional fees to the copyright holder. No license is needed. A digitized copy replaces the legitimately acquired copy, not an unpurchased copy in the marketplace. To the extent there is a “market harm,” it is one that is already built into the transaction and built into copyright law: libraries are already legally permitted to circulate and loan their materials. The authors have been paid (as have the publishers) in that first transaction.

Congress, when it legislated the copyright exceptions, made it possible for libraries to fulfill their “vital function in society” by enabling the lending of books to benefit the general learning, research, and intellectual enrichment of readers by allowing access to these materials. And arguably, now that we are in the 21st century, why should we not use technology to allow this loaning to continue online? Let libraries use technology (the same used by the publishers, for example) to INCREASE access to these works, especially during a pandemic.

Courtney then goes on to point out that the whole "license everything" concept fundamentally eviscerates the concept of ownership of private property. Once we've bought something, we should be able to do what we want with it, and the push here to now force libraries to get licenses for books they already own is a direct attack on property rights:

Licenses continue to eviscerate ownership rights for patrons, libraries, and the general public under very restrictive terms. And, these licenses are absolutely not the equivalent of a purchase. These vendors may use the word “buy it now” or “purchase” or “for sale” but, when you read the fine print – it is absolutely the opposite....

When a library or patron agrees to these licenses, at best they are merely renting or leasing temporary access to these works.

Even worse, because a library has special exceptions to copyright as built into law, when we move into a copyright world, libraries are effectively giving up those rights:

Or, in some licenses, the terms are so limited that libraries or their patrons are restricted from the very uses, exceptions, or exemptions made legal in the Copyright Act. I pulled an example of one of the more common licensing clauses:

“Except as explicitly authorized in this License, you agree not to archive, download, reproduce, distribute, modify, display, perform, publish, license, create derivative works from, or use content and information contained on or obtained from the Work....” and “articles, chapters, and other materials made available via this License may not be used for the purpose of interlibrary loan...”

This license takes away nearly all the copyright exceptions for libraries, and many exceptions for the public as well. Licenses do often restrict use beyond what copyright law might otherwise allow. And the licenses do not have consistent language relating to library uses, so they are all different, and all full of boilerplate limiting terms. What other rights are these licenses interfering with?

And after digging into the variety of ways in which copyright law is structured, Courtney makes it clear that libraries have a clear first sale right to lend out books they have in their possession:

Additionally, under Section 109, first sale, a library can place a book on reserve and let it be accessed or checked out as many times as it can. Each patron uses and returns the book – and there is no license, no additional payment, and the library or user does not have to seek any further permission from the copyright holder. Some books have been read hundreds of thousands of times on reserves! The author and publisher were compensated for that first purchase, and from there, the access and loaning can continue unfettered.

As for the ReDigi case regarding digital first sale, Courtney points out that the Copyright Office is blatantly misreading it to make it say a lot more than it really does, specifically with regard to how it impacts libraries and their first sale rights:

Here is the main difference: these ReDigi resales the court examined were exact, bit-for-bit replicas of the original sold in direct competition with “new” mp3s online through other marketplaces, such as iTunes. The substitutionary effect was clear, especially since the mp3 format is the working market experiencing harm.

However, again, a library is not a commercial for-profit company. The books they own, via first sale, are not licensed mp3s. There is clearly a distinguishable analysis here.

For digitized copies of legally acquired print books under the first sale doctrine, the substitutionary effect is

far less clear. With most 20th-century books, the vast majority of books in a library’s collection, the market has almost been exclusively print-based. And, for those books, some new evidence from the Google Books digitization project suggests that digitization may in fact act as a complementary good, allowing digital discovery to encourage new interest in long-neglected works.

Secondarily, the ReDigi court raises a significant question as to whether using digitized copies of legally acquired books may be “transformative” in nature – a modern fair use test adopted by the U.S. Supreme Court. In the decision, examining the first factor of fair use, Judge Level, who established the concept of transformative fair use in a law review article, explained that a use can be transformative when it “utilizes technology to achieve the transformative purpose of improving delivery of content without unreasonably encroaching on the commercial entitlements of the rights holder.” This sounds awfully close to correct analysis for modern libraries loaning digital copies of books.

There's a lot more in Courtney's analysis, but it is very thorough, and a fairly complete debunking of the Copyright Office's (and others') push that the answer to libraries being shuttered due to the pandemic is merely "more licensing."

Filed Under: copyright office, covid-19, culture, first sale, lending, libraries, licensing, national emergency library, permission
Companies: internet archive

Court Sides With Nintendo Over RomUniverse In Atttempt To Dismiss The Former's Lawsuit

from the ninten-did dept

As most of you will know, a year or so ago saw Nintendo suddenly flip a litigious switch and begin going after all the ROM sites that had existed for a decade or more. The timing suggests that the company may have made this move out of a misguided attempt to support its release of several retro consoles that contained many of the games that the public could also simply get for free on these ROM sites. I say misguided because it's not as though Nintendo's aggression suddenly made free online ROMs unavailable. They are all still very much there through various means, but Nintendo's retro consoles sold like gangbusters anyway, because half the appeal in the product is the ease of use and the other half is in having the cool looking retro console next to the television.

Most sites simply folded up and caved. RomUniverse, run by Matthew Storman, was one of the few that attempted to fight back. Despite the site making not just Nintendo Roms available, but also all kinds of other copyrighted media, Storman tried to crowdfund his legal defense before pivoting to representing himself in court. We're still in the early stages of the litigation. Storman sought a dismissal of the case by arguing that First Sale doctrine meant Nintendo had no claim to the Roms being offered on his site coupled with claiming to be a neutral service provider protected by DMCA safe harbors. We said at the time that the move was unlikely to work.

And we were right. The court has now ruled for Nintendo against the motion to dismiss, stating that at best the claims that Storman makes are not properly made at this stage of the litigation, along with some comments that the claims probably aren't going to get Storman where he wants to go anyway.

After considering the arguments from both sides, US District Court Judge Consuelo B. Marshall has sided with Nintendo. In a ruling released yesterday, she denies the various arguments presented by Storman. RomUniverse’s operator wanted the case dismissed based on failure to state a claim, lack of jurisdiction, improper venue, insufficient service of process, and failure to join a party. None of these arguments convinced the court.

Storman, for example, argued that Nintendo is not the owner of previously purchased games because consumers have the right to sell, destroy, or give them away. The Judge didn’t address this in detail but concluded that Nintendo’s copyright registrations are sufficient at this stage.

On the DMCA safe harbor claims specifically, the court acknowledges that it cannot determine whether RomUniverse meets the criteria for those provisions at this stage of the trial, at which no evidence has been presented. Nintendo's entire case here is that Storman's site doesn't act as a third party service provider. Asking the court to find otherwise when Nintendo hasn't been allowed to present evidence yet would make no sense. And, as the court goes on to note, Nintendo sued for trademark infringement and unfair competition claims as well, and DMCA safe harbors don't protect from those claims.

Therefore, the Court would be required to look beyond the pleadings to determine whether Defendant is a service provider who satisfies the statutory requirements for protection pursuant to the DMCA's safe harbors, which is improper on a Rule 12(b)(6) motion to dismiss.

As to Storman's claim that First Sale doctrine means that Nintendo failed to join the actual owners of the games that are the basis of the ROMs on his site, the court points out that's not how any of this works at this stage. Nintendo has alleged that Storman's site is liable and arguing that Nintendo also has to sue everyone else isn't very convincing.

Defendant argues Plaintiff has "failed to join the true and essential owners of copies known only to Plaintiff, or unknown." As discussed supra, Plaintiff sufficiently alleges ownership and "the owner of copyright ...has the exclusive rights to ...reproduce the copyrighted work in copies [and] to prepare derivative works based upon the copyrighted work." 17 U.S.C. § 106(1)-(2). Therefore, Defendant fails to demonstrate there are persons subject to service of process which, in their absence, would prevent the Court from providing complete relief among the existing parties or persons claiming an interest in the subject of this action. See Fed. R. Civ. Proc. 19. Accordingly, the Court denies Defendant's motion to dismiss based on failure to join an indispensable party pursuant to Rule ~12)~b)~~)•

And so the motion to dismiss is denied. We've made the point several times now that Nintendo has better ways to deal with ROM sites than this sort of litigation. That is still true. But none of that changes the fact that Storman and RomUniverse have a mountain to climb if it wants to successfully defend itself from this lawsuit.

Filed Under: copyright, dmca, first sale, liability, matthew stroman, roms
Companies: nintendo, romuniverse

Nintendo Responds To RomUniverse's Lame Argument That First Sale Doctrine Makes The Site Non-Infringing

from the that's-not-gonna-work dept

You will recall that Nintendo, as part of its sweeping new war on ROM sites initiated a year or so ago, went particularly hard at RomUniverse and its site operator, Matthew Storman. Differentiating RomUniverse from other ROM sites is some combination of the fact that it's run out of California as opposed to overseas, that the site is also a place to go get lots of other media that sure looks to be infringing on copyright, and Storman's verbose attitude in making public comments that don't paint him or his site in the best light. At the onset, as part of an attempt to crowdfund its legal battle with Nintendo, RomUniverse trotted out the claim that it was offering ROMs in an attempt to preserve video gaming history. It wasn't a particularly believable argument given the rest of the site's behavior and RomUniverse quickly opted for other legal arguments in court.

Storman appears to be defending himself in the matter and attempted to have the case dismissed on two grounds. The first is that Safe Harbor protections extend to RomUniverse, which Storman claims is simply a service provider and not participating or reaping commercial benefit from infringing material. Storman claims that Nintendo has acknowledged RomUniverse as a service provider by sending DMCA takedown requests to the admin for the site, at least some of which have been complied with. That, unfortunately, is not really how any of this works, as Nintendo details in its own response to Storman's motion.

In 2009, Mr. Storman emailed members of his website that he would be adding new content including ROMs for various Nintendo game systems. In 2018, when Nintendo was successfully enforcing its intellectual property rights against other pirates, Mr. Storman bragged that he would continue to offer copies of Nintendo’s games.

Mr. Storman directly profits from this infringing activity by allowing users to sign up for “Premium Memberships.” While non-members are limited to one free download through the website, premium members pay $30 per year to Mr. Storman to download an unlimited number of pirated games, and at higher speeds than non-members.

That seems to be evidence of Storman and the site participating in the infringing activity and somewhat directly profiting from it. Whatever the DMCA safe harbors protect, that ain't it. Nintendo goes on to argue that this sort of affirmative defense is not one to be made in preliminary motions, either, making one wonder if it isn't time for Storman to get himself some actual professional legal counsel.

Storman's latter claim doesn't assuage that concern. In his petition for a dismissal, Storman claims that Nintendo actually has no standing to make the infringement claim, arguing that the uploads of the game content to the site were done by those that had legally purchased copies of these games. As such, Storman claims that First Sale Doctrine makes that game code the property of the purchaser of the game, who can resell it at will without it being infringing. As Nintendo again claims in its response, nah, dawg.

The first sale doctrine does not permit mass distribution of copyrighted works, copying of the copyrighted works or distribution of those copies, or the creation and sale of derivative works based on Nintendo’s copyrighted video games. See 17 U.S.C. § 109(a) (“the owner of a particular copy [of a copyrighted work]. . . lawfully made . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy.”) (emphasis added). Indeed, Mr. Storman’s actions fall well outside of the first sale doctrine. The first sale doctrine only allows an owner of a lawful copy of the copyrighted work to dispose of that individual copy.

We have argued in the past that Nintendo, and other gaming companies, should really find better routes for mitigating or even making good use of the effects of piracy...but none of that makes the company's rebuttal to Storman's claims any less valid and correct. These are claims made at the improper time, that don't seem to comport with the site's behavior, and that represent a misreading of the law. That isn't going to be good for Storman's legal outcome prospects.

Again, to reiterate from our last post on this matter, it's time for Storman to go into damage control mode. And for the love of god, get some professional legal assistance.

Filed Under: copyright, dmca, dmca safe harbors, first sale, matthew storman, roms
Companies: nintendo, romuniverse

Appeals Court Hands ReDigi Another Loss; Says Reselling Mp3s Violates Copyright Law

from the copies-of-copies dept

Things were never going to turn out well for mp3 remarketer ReDigi. Its business model -- facilitating third party sales of digital files -- worked better as a rhetorical device. It attempted -- perhaps inadvertently -- to obtain an answer to the eternal question: do you own the stuff you buy? When it comes to digital goods, the answer is almost always "no." Platforms shut down. Rightsholders dissolve contracts. File formats lose support. And DRM is all over everything, frequently making pirated goods superior to those people pay for.

ReDigi claimed it could harness this untapped market, somehow providing a sales platform for infinite goods that wouldn't allow sellers to sell the same goods infinitely. It claimed it could verify the destruction of the "original" files -- something that could be easily circumvented by storing additional copies where ReDigi couldn't "see" them.

Obviously, ReDigi was sued almost immediately. Records labels sought -- but didn't get -- a permanent injunction blocking ReDigi from getting into the used mp3 business. But they did get a win in court roughly a year later. Five years ago, a federal court ruled in favor of record labels, finding that ReDigi's business resulted in the production of new copies of files -- something not allowed under copyright law. If ReDigi just allowed for the swap of physical media (hard drives, thumb drives with mp3s on them), perhaps it might be lawful. But even then, the court seemed unwilling to entertain the hardware option as anything but rhetorical

ReDigi appealed. Five years later, it finally has a decision in hand, but not the one it wanted. Eriq Gardner of The Hollywood Reporter has more details.

Writing for the panel of Second Circuit judges, Pierre Leval doesn't buy ReDigi's defense that there is no unauthorized reproduction at play when consumers use ReDigi to resell their digital files.

ReDigi argued that from a technical standpoint, its process of transfer shouldn't be seen as making a reproduction because its system simultaneously causes packets of data to be removed from a consumer's computer as those packets are transferred.

Leval responds, though, that during the transfer, a new copy of the digital file is "fixed...for a period of more than transitory duration," and as such, the fixing creates a new phonorecord, i.e., a reproduction.

So much for the Right of First Sale, at least in this context. Copyright law is a "patchwork" (as Judge Leval calls It), a polite, appellate-level way of calling it a twisted mess of pre-digital-era artifacts that have resisted modernization thanks to legacy industry interference. There may be a path towards something more coherent, but those who can do something about it aren't really doing anything about it. From the decision [PDF]:

The copyright statute is a patchwork, sometimes varying from clause to clause, as between provisions for which Congress has taken control, dictating both policy and the details of its execution, and provisions in which Congress approximately summarized common law developments, implicitly leaving further such development to the courts.

[...]

Notwithstanding the purported breadth of the first sale doctrine as originally articulated by the courts, see Bobbs‐Merrill Co., 210 U.S. at 350 (“[T]he copyright statutes, while protecting the owner of the copyright in his right to multiply and sell his production, do not create the right to impose . . . a limitation at which the book shall be sold at retail by future purchasers . . . .”); Bureau of Nat’l Literature v. Sells, 211 F. 379, 381‐82 (W.D. Wash. 1914) (finding no infringement, in light of first sale doctrine, where reseller re‐bound used books and held them out as new books),

Congress, in promulgating § 109(a), adopted a narrower conception, which negates a claim of unauthorized distribution in violation of the author’s exclusive right under § 106(3), but not a claim of unauthorized reproduction in violation of the exclusive right provided by § 106(1). If ReDigi and its champions have persuasive arguments in support of the change of law they advocate, it is Congress they should persuade. We reject the invitation to substitute our judgment for that of Congress.

This is about as unhelpful as the laws being discussed. Congress left it to the courts "for further development." The court is saying, "Take it up with Congress." That leaves the Right of First Sale ripe for further development but both Congress and the courts feel the other party should handle it.

ReDigi's case was never going to be the standard bearer for First Sale rights in the digital age. But it could have paved a path forward for better protections for consumers, allowing them to at least recoup some of what they've spent should a third party or rightsholder decide the stuff you paid for is no longer yours. Until that happens, digital media is worth less than the hardware storing it in terms of resale value.

Filed Under: copyright, first sale, resale, used mp3s
Companies: redigi

Apple, Amazon Team Up To 'Enhance Customer Experience' By Limiting Customers' Options

from the *enhanced-customer-experience-may-require-bending-over dept

The "right of first sale" still exists. Not that Apple's happy about it. Apple's no fan of right-to-repair laws either, preferring to keep its revenue streams nice and deep by forcing customers to get their repairs only from Apple-approved vendors, no matter what the law actually says.

So, yeah, you still have the right to resell your Apple products. You're just not going to do it in the largest marketplace in the United States. This CNBC article delivers the bad news like it's good news.

In a new agreement between tech giants Amazon and Apple, shoppers will soon see a selection of the latest Apple products on Amazon.com, Amazon told CNBC in statement.

The agreement means the latest Apple products like the iPhone XR, XS and XS Max will be available on Amazon.

Both companies issued statements about improving customer experiences, but nothing about this sounds like a better deal for consumers. It's a paywalled garden guarded by Apple and Amazon that will keep all but a select few resellers from participating. Being an Apple reseller/repairer is pay-to-play.

First, Apple has to be convinced you'll do more for it than it will do for you. Then you have to pay for the privilege of being allowed to exercise your first sale rights.

Independent shops pay Apple a fee in return for "authorized" status, which gets them exclusive access to Apple training and guidebooks and the ability to buy parts directly from Apple. But authorized repair shops are only "authorized" to do a select few repairs; if a customer comes in with other easily fixable problems, the repair shop must ship the phone to Apple.

This "improvement" of "customer experience" means more old Apple products will be headed for landfills than other people's homes. Jason Koebler of Motherboard interviewed John Bumstead -- a reseller who buys old MacBooks from recyclers and, until recently, sold the refurbs on Amazon. Bumstead was just informed he was no longer welcome at Amazon, thanks to the new deal with Apple.

Bumstead had a good thing going -- something that worked for him and the environment. But Amazon's refurb program -- as modified by Apple -- only wants to deal with people who have the capability to feed a bunch of money to Apple before reselling used devices.

Amazon currently has its own “certified” refurbisher program called “Amazon Renewed” that will be unaffected by the new deal with Apple. But the requirements to sell Apple products under that program are impossible to hit for any small business: They must prove to Amazon that they spend at least $2.5 million dollars every 90 days buying Apple products “directly from a national wireless carrier or retailer with over $5 billion in annual sales (Example: Verizon, AT&T, or Target) or the manufacturer (Apple.)” This means that only big companies with direct relationships with corporate giants can meet the requirements.

This doesn't do much for customers seeking affordable Apple products. Apple continues to set the literal gold standard with its phone and laptop pricing. Severely curtailing the options Amazon customers have for affordable devices doesn't sound like an "improved customer experience," but those are the empty words both companies are using to sell this.

Now, Apple and Amazon are free to handle refurb sales however they wish. There may be a "right to first sale" just like there's First Amendment speech protections, but the actions of private companies don't infringe on that right. They're free to de-platform anyone for almost any reason. You can resell your Apple stuff. You just can't do it here.

I'd say it isn't wise for Apple to take such an antagonistic stance against its customers, but its aggressively anti-consumer efforts haven't made much of a dent in customer goodwill. It may attract the occasional attention of regulators, but not often enough to result in a softened stance on resale or repair. The problem is Apple's actions make things worse for customers who have never purchased its products. Homogenizing marketplaces rarely results in better prices and its anti-right-to-repair efforts are funneling customers towards a select few outlets and preventing device owners from enjoying the privileges of ownership.

Filed Under: first sale, right to repair
Companies: amazon, apple

Disney Fixes Its Sketchy DVD Rental License, Wins Injunction Against Redbox Over Digital Downloads

from the copyright-as-blocking-innovation dept

Earlier this year we wrote about Disney's silly lawsuit against Redbox. If you don't recall, Redbox, whose main business was renting DVDs out of kiosks started also offering digital download codes that could be purchased at their kiosks. What Redbox did, was it would buy Disney "combo packs" (that came with both a DVD and a download code) and would offer up just the slip of paper with the code out of its kiosks. This seems like perfectly reasonable first sale rights. A legitimate code was purchased, and then resold.

When we wrote about the case back in February, it involved the court smacking down Disney, and even saying that the company was engaged in "copyright misuse" in overclaiming what copyright allowed the company to do. Later in that ruling, the court also rejected Disney's claim that Redbox was in breach of a contract by saying that the text Disney prints on the box (at the time: "codes are not for sale or transfer") was not actually a contract. Of course, as we noted at the time, the court's language made it clear that slightly different language could fix this. From the ruling:

The phrase “Codes are not for sale or transfer” cannot constitute a shrink wrap contract because, like the box at issue in Norcia, Disney’s Combo Pack box makes no suggestion that opening the box constitutes acceptance of any further license restrictions.... Although Disney seeks to analogize its Combo Pack packaging and language to the packaging and terms in Lexmark, the comparison is inapt. The thorough boxtop license language in Lexmark not only provided consumers with specific notice of the existence of a license and explicitly stated that opening the package would constitute acceptance, but also set forth the full terms of the agreement, including the nature of the consideration provided, and described a post-purchase mechanism for rejecting the license. Here, in contrast, Disney relies solely upon the phrase “Codes are not for sale or transfer” to carry all of that weight. Unlike the box-top language in Lexmark, Disney’s phrase does not identify the existence of a license offer in the first instance, let alone identify the nature of any consideration, specify any means of acceptance, or indicate that the consumer’s decision to open the box will constitute assent. In the absence of any such indications that an offer was being made, Redbox’s silence cannot reasonably be interpreted as assent to a restrictive license.

So my prediction following that was: "this almost certainly means that Disney is quickly reprinting the packaging on all its Combo Pack DVDs to make this language more legalistic to match the Lexmark standard."

And... bingo. That's exactly what happened. In a new ruling, the court has now granted a preliminary injunction against Redbox all because of the new "contract" language Disney has put on its DVDs (though amusingly, in a footnote, the court notes "Disney does not concede that the changes were necessary.")

Disney subsequently changed the language on its Combo Pack boxes, changed the download sites’ Terms of Use, and amended its Complaint. Disney’s Combo Pack packaging for the movie Black Panther is the first to reflect changes implemented after this Court’s denial of Disney’s first motion for a preliminary injunction. The front of Black Panther Combo Pack boxes indicates that the Combo Packs include a “Digital Code.” The back of the boxes state, in some of the largest print displayed, “Digital Code Included*[.]” The asterisk directs the reader to a discrete text box at the bottom of the package, which states, in smaller, allcapitalized text, “Digital code redemption requires prior acceptance of licence terms and conditions. Codes only for personal use by recipient of this combination package or family member. Digital movie code . . . subject to expiration after May 15, 2023.” Smaller type in a more central, fine print-type section of the packaging reads, “The digital code contained in this package may not be sold separately and may be redeemed only by the recipient of this combination package or a family member. Visit MoviesAnywhere.com, RedeemDigitalMovie.com, and disneytermsofuse.com for code redemption and other applicable terms and conditions.” The paper Code insert within the Combo Pack contains a similar statement and also reads, “This digital code is part of a combination package and may not be sold separately,” and “Digital code redemption is subject to prior acceptance of license terms and conditions.”

It actually goes on from there. Basically, in response to the earlier ruling, Disney slapped legal warnings and language basically everywhere possible. Some of us would suggest that this -- again -- represents clear copyright abuse, trying to use copyright in restraint of first sale, but the court notes that under the Lexmark standard, it's all groovy. The court does still seem a bit perturbed at Disney's actions, and has a somewhat fascinating discussion on the differences between shrinkwrap, clickwrap, and other types of agreements (while arguing that Disney is arguing things that are not accurate about what constitutes a contract), but does conclude that with Disney pasting legalese everywhere, Redbox is on notice:

At this stage, the court need not make a determination whether Combo Pack purchasers enter into a shrinkwrap, clickwrap, or other type of agreement, nor precisely delineate the terms of any such agreement. It appears from the record currently before the court that neither Redbox nor any other Combo Pack purchaser could (or did) reasonably believe that, notwithstanding the Black Panther licensing language on the box itself, the Combo Pack included unrestricted ownership rights to any digital content.... Because Redbox did not obtain an ownership right to any digital content when it purchased Combo Packs, Disney has adequately shown that it is likely to succeed on its claim that Redbox encouraged Redbox customers to infringe Disney’s copyrights by redeeming Codes in violation of the license terms set forth on the redemption sites.

As in the earlier ruling, the court is not impressed by Redbox's First Sale argument, noting that it was basically killed off due to the awful ReDigi ruling that killed off reselling MP3s.

This is, of course, silly. Everyone recognizes that Redbox has every right to buy physical DVDs and then resell them. In what world does it make sense that it can't also buy up a piece of paper with a download code and resell that as well? Apparently, the one we live in. I've seen some copyright extremists online cheering on this ruling, which is not surprising, but ridiculous. Cheering on a ruling like this is cheering on monopolistic practices that limit innovation and the spread of culture.

Filed Under: clickwrap, contracts, copyright, downloads, dvd rentals, first sale, licenses, movies, rentals, shrinkwrap
Companies: disney, redbox

Disney's Stupid Lawsuit Against Redbox Results In Judge Saying Disney Is Engaged In Copyright Misuse

from the blowback dept

Well, well. For the past few months I've been meaning to write about Disney's silly lawsuit against Redbox, but other stuff kept coming up, and now a judge has ruled against Disney and said that Disney appears to be engaged in copyright misuse. This is in a case that Disney brought -- and it appears to be backfiring badly. Redbox, as you probably know, has kiosks where you can rent DVDs relatively cheaply. It's managed to stay alive despite the traditional DVD rental business disappearing most everywhere else. About a decade ago, Hollywood fought vigorously against Redbox, but the company survived (though being taken over by a private equity firm in 2016), relying heavily on first sale rights, enabling it to legally purchase DVDs and then rent them out.

Back in December, however, Disney sued Redbox over taking its business to the next level and including download codes that could be purchased at a Redbox kiosk. Though it took them basically forever, Hollywood studios have finally realized that offering online access with the purchase of movies is a good idea, but they only want the end consumer who is buying a DVD to get access to them. So, Redbox would buy the Disney "Combo Packs" that offered the DVD and a download code, and the would offer the paper codes in kiosks to let renters watch the movie online. They weren't just copying the code and letting anyone use it -- it was still a one-to-one limitation with the purchase in that they would buy the DVD with a paper code on it, and then stuff that paper code into their kiosk delivery pods. Disney argued that this was contributory copyright infringement, even though the code pointed to a legitimate/authorized version of the movie and was legitimately purchased.

Redbox hit back by arguing that the First Sale doctrine protected it (as it did with the physical rentals) and that it is free to use the codes in this manner as the legal purchaser. Disney's response to that was that First Sale does not apply to the download code because it's not the copyright-covered work.

But Redbox also hit back with a separate punch against Disney, arguing that it was engaged in copyright misuse, a concept we've discussed in the past, but that rarely shows up in cases these days (even though we've argued it should be used more often). The basic argument was that Disney was over-claiming what copyright allowed it to exclude in order to stamp out competition. And, (somewhat surprisingly), in the process of denying Disney's demand for a preliminary injunction, the court agrees that Disney is engaged in copyright misuse because it is using its copyright in the movies to restrict what happens to purchases.

Combo Pack purchasers cannot access digital movie content, for which they have already paid, without exceeding the scope of the license agreement unless they forego their statutorily-guaranteed right to distribute their physical copies of that same movie as they see fit. This improper leveraging of Disney’s copyright in the digital content to restrict secondary transfers of physical copies directly implicates and conflicts with public policy enshrined in the Copyright Act, and constitutes copyright misuse.

Because of this, the court finds that Disney has little chance of prevailing on its contributory copyright infringement claims and denies the injunction request.

The court then notes that it doesn't even need to get into the First Sale issues, but then suggests Redbox would have difficulty winning on a pure first sale argument, mainly because of the ReDigi decision that said you can't sell "used" MP3s. And then concludes that First Sale doesn't really come into play since it's the code that's at issue, rather than the copyright-covered content:

Notwithstanding ReDigi, the plain language of the statutes, and the important policy considerations described by the Copyright Office, Redbox urges this court to conclude that Disney’s sale of a download code is indistinguishable from the sale of a tangible, physical, particular copy of a copyrighted work that has simply not yet been delivered. Even assuming that the transfer is a sale and not a license, and putting aside what Disney’s representations on the box may suggest about whether or not a “copy” is being transferred, this court cannot agree that a “particular material object” can be said to exist, let alone be transferred, prior to the time that a download code is redeemed and the copyrighted work is fixed onto the downloader’s physical hard drive. Instead, Disney appears to have sold something akin to an option to create a physical copy at some point in the future. Because no particular, fixed copy of a copyrighted work yet existed at the time Redbox purchased, or sold, a digital download code, the first sale doctrine is inapplicable to this case.

There's a separate issue around whether or not Redbox's actions constituted a "breach of contract," and again the court is unimpressed. The key question is whether or not the text that Disney prints on its box about how "codes are not for sale or transfer" represents a contract. The court easily concludes that it does not:

The phrase “Codes are not for sale or transfer” cannot constitute a shrink wrap contract because, like the box at issue in Norcia, Disney’s Combo Pack box makes no suggestion that opening the box constitutes acceptance of any further license restrictions.... Although Disney seeks to analogize its Combo Pack packaging and language to the packaging and terms in Lexmark, the comparison is inapt. The thorough boxtop license language in Lexmark not only provided consumers with specific notice of the existence of a license and explicitly stated that opening the package would constitute acceptance, but also set forth the full terms of the agreement, including the nature of the consideration provided, and described a post-purchase mechanism for rejecting the license. Here, in contrast, Disney relies solely upon the phrase “Codes are not for sale or transfer” to carry all of that weight. Unlike the box-top language in Lexmark, Disney’s phrase does not identify the existence of a license offer in the first instance, let alone identify the nature of any consideration, specify any means of acceptance, or indicate that the consumer’s decision to open the box will constitute assent. In the absence of any such indications that an offer was being made, Redbox’s silence cannot reasonably be interpreted as assent to a restrictive license.

Of course, this almost certainly means that Disney is quickly reprinting the packaging on all its Combo Pack DVDs to make this language more legalistic to match the Lexmark standard.

Still, the court also notes that Disney makes other claims on the box that are clearly not true, which further undermine the claim that random sentences on the box represent a contract:

Indeed, the presence of other, similarly assertive but unquestionably non-binding language on the Combo Pack boxes casts further doubt upon the argument that the phrase “Not For Sale or Transfer” communicates the terms or existence of a valid offer. The packaging also states, for example, that “This product . . . cannot be resold or rented individually.”... This prescription is demonstrably false, at least insofar as it pertains to the Blu-ray disc and DVD portions of the Combo Pack.8 The Copyright Act explicitly provides that the owner of a particular copy “is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy.” ... Thus, the clearly unenforceable “cannot be resold individually” language conveys nothing so much as Disney’s preference about consumers’ future behavior, rather than the existence of a binding agreement. At this stage, it appears that the accompanying “Not For Sale or Transfer” language plays a similar role.

While it's a bit disappointing to see the court buy into the ReDigi reasoning on First Sale, it's good to see it not buy the language on the box representing a contract and to call out the company for copyright misuse in leveraging copyrights to stifle other lawful activity. This case is likely far from over, though, so we'll see how things progress.

Filed Under: copyright misuse, digital downloads, first sale, rental kiosks
Companies: disney, redbox

Top EU Court Advisor Makes A Strangely Sensible (But Only Provisional) Copyright Ruling On The Lending Of eBooks

from the evolutionary,-not-revolutionary dept

The Court of Justice of the European Union (CJEU), the EU's highest court, has a slightly unusual procedure for delivering its judgments. After a case has been referred to it by a national court, one of the CJEU's top advisors, known as an Advocate General, offers a preliminary opinion. This is meant to provide guidance to the judges considering the case, and generally indicates how the CJEU will rule. But it is by no means binding, and judges have been known to go completely against the advice offered to them. Let's hope that doesn't happen in a copyright case currently before the EU court.

The library association of the Netherlands wants to lend out ebooks as well as the dead-tree kind, but is concerned that the relevant EU directive on the rental and lending rights of books does not cover the digital ones. So it decided to take pre-emptive legal action against the Dutch organization tasked with collecting payments for authors, seeking a declaratory judgment from the court that it could indeed lend out ebooks without any problems. Since deep questions of EU law were involved, the District Court of The Hague in the Netherlands referred the case to the CJEU. That, in its turn, triggered a preliminary response from Advocate General Szpunar (pdf) as follows:

In today's Opinion, Advocate General Maciej Szpunar takes the view that the making available to the public, for a limited period of time, of electronic books by public libraries may indeed come within the scope of the directive on rental and lending rights.

He points out that the reason ebooks aren't mentioned in the EU directive is that the technology was still in its infancy, and so the question wasn't considered by the lawmakers.

He thus suggests that a 'dynamic' or 'evolving' interpretation of the directive should be applied, arguing, inter alia, that the lending of electronic books is the modern equivalent of the lending of printed books. According to the Advocate General, such an interpretation alone will be capable of ensuring the effectiveness of the legislation in question in a sector experiencing rapid technological and economic development.

Recognizing that the law needs to be interpreted in a way that takes account of technological change ought to be simple common sense. But in the backward-looking world of copyright law, it isn't -- even the tiniest advance has to be fought for, and can take years of effort. So the Advocate General's clear statement of that principle here is welcome. Of course, there's still plenty that could go wrong before this sensible view actually helps the group that asked for it. First, the CJEU must weigh in. As mentioned above, it would be surprising -- very surprising in this case -- if it diverged from the views of the Advocate General, but it could happen. After that, the case will be sent back to the District Court of The Hague to make the final ruling. Who knows? In a few years' time, EU libraries might even be given formal permission to lend out ebooks.

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Filed Under: cjeu, copyright, digital works, eu, first sale, reselling ebooks