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Week 8 Seminar: B10 Ryan Lipes

Capitol Records, LLC v. ReDigi Inc. and Bitcoin Technology

Christian Georg Strobl

• CopyrightX is an online learning experiment and we are all part of it. The X stands for experiment. Therefore I want to give it a try.

• There is such a diverse background of knowledge, experience and different access to the copyright system, it would be really great, if some of you would share your views re this subject: Could Bitcoin technology lead to a better copyright system?

• We are currently working on a startup in the field of Bitcoin and Copyright, since we believe that this decentralized approach could lead to a lot of efficiency in the field of copyright;

• Moreover I’m writing an essay about the proposal of a Decentralized Copyright Register based on the Technology of the Bitcoin Protocol. Your feedback would be a huge benefit for sure.

Follow up• Wikipedia: Capitol Records, LLC v. ReDigi Inc. • Capitol Records, LLC v. ReDigi Inc. case brought up the

problem of first-sale-doctrine in digital goods; • The case was discussed in Seminar B10 (Ryan Lipes) on

Friday, 28th of March; • Judge Richard J. Sullivan ruled in favor of Capitol

Records: ReDigi Inc. is infringing copyright. ReDigi’s transfer of data of digital music is a reproduction of the copyrightable work and therefore not under protection of the first-sale-doctrine.

Arguments• Copyright law should adopt to new technology: ReDigi is basically providing a way of reselling

digital goods;

• In the analogue world a business model like ReDigi would be similar to a second-hand CD or LP store;

• First-sale doctrine: copyright owner “exhausts his exclusive statutory right to control its distribution“ with his/her first sale of work;

• (Fair Use, see Wikipedia.)

• ReDigi’s transfer of data from „owner“ of work to the server of ReDigi to another „owner“ is not a distribution, but each time a reproduction of a digital good. The consumer of iTunes music is a licensee and not owner of the digital good, therefore ReDigi’s software is not transferring ownership, but reproducing the work;

• Second hand CDs are scratched and „used“, whereas when digital goods are copied, there is no change in the product. It is basically the same product;

• The judge was not convinced that the digital file is really deleted and not copied somewhere else (work-around). In ReDigi’s current business model is too much trust involved.

Pro

ReD

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Con

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Could Bitcoin technology lead to a better copyright system?

• Bitcoin is widely misunderstood in the press as a hacker-currency for money laundering, criminal activity and speculation;

• Unfortunately most articles don’t understand that Bitcoin as a technology and network is a fundamental breakthrough in computer science. Marc Andreesen wrote a very good article re the subject (2014-01-21 Why Bitcoin Matters, New York Times).

• Bitcoin is basically solving the double-spending problem of digital goods between untrusted parties in a new way: Instead of a centralized authority, there is now a decentralized network, which is verifying transactions between two unrelated parties.

Overview Bitcoin Technology• Let’s keep it simple: There are two major problems, when transferring value over a network like the internet.

1) The internet is global and the parties are usually unrelated in the real world. As a consequence there is nearly no trust;

2) There are (effectively) no costs for reproducing digital goods (copy/paste).

• As a consequence, a third party is needed. Generally a centralized institution.

• Example PayPal:

A B

PayPal is establishing trust between A and B, because 1) both have to be registered with PayPal; 2) PayPal controls that neither A nor B are double-spending the same amount of USD. PayPal is controlling the „reproduction“ of value in an account.

wanted to do the same, but judge didn’t

trust ReDigi.

Decentralized Proof of Ownership

A B

• Bitcoin is a decentralized network, which replaces trust between unrelated parties with cryptographic proof, via a distributed database, the Blockchain;

• Example Bitcoin:

• A and B are transferring value directly, without a centralized institution; • The network is verifying with a transparent and distributed database (Blockchain), if A is

really owner of value or if A did spend the amount before (double-spending); • The network has no incentive to neither manipulate the transaction in favor of A or B;

Like Professor David Parry noted in class, it would be possible to proof

ownership via the Blockchain. !

But it is also possible to restrict the access to the music itself with

Bitcoin. One needs to own public and private key in order to listen to the music, like

one needs to have both keys in order to access his Bitcoins currently. If you transfer your private key to another person, then only

the other person could access the music.

Like Associate Professor David Parry noted in class, it would be possible to proof ownership via the Blockchain. !But it is also possible to restrict the access to the music itself with Bitcoin. One needs to own public and private key in order to listen to the music, like one needs to have both keys in order to access his Bitcoins currently. If you transfer your private key to another person, then only the other person could access the music. !As a consequence: The data transfer of ReDigi would be closer to a distribution than to a reproduction and the first-sale-doctrine could be applied. !Further Reading: 2014-02-24: Jerry Brito, Is Bitcoin Key to Digital Copyright

Conclusion• Bitcoin technology could solve several problems in the

field of digital copyright, like for example the first-sale-doctrine in the case of Capitol Records, LLC v. ReDigi Inc.

• With the help of Bitcoin a real transfer of ownership would be possible with a digital good. And this transfer of ownership would restrict access to only one person. This type of digital transfer of ownership would be much closer to a distribution of a product than to a reproduction. As a consequence the first-sale-doctrine would be applicable, also on digital goods.