Schrödinger's Download: Whether Or Not An iTunes Music Sale Is A 'Sale' Depends On Who's Suing

from the that-cat-is-dead dept

Example 1, the case of the kettle. As summarized by the Manhattan Institute for Policy Research, “Readers who’ve been to law school may remember the chestnut known as the ‘Case of the Kettle’. A man is charged with borrowing a kettle and breaking it. His reply is that, first, he never borrowed it; second, it was already broken when he borrowed it; third, it was intact when he returned it.” Example 2, the case of the dog. Paraphrasing from a 1978 Wall Street Journal article about well-known Texas defense attorney Richard “Racehorse” Haynes: You say my dog bit you, but I don’t own a dog, and he doesn’t bite, and you kicked him first. Example 3, digital downloads. Two recent court cases hinge on how the sale of an MP3 download compares to the sale of a conventional physical recording, known as a “phonorecord” in Copyright-speak. In one case, the singer Eminem demanded that Universal Music Group calculate his royalties for downloads based on the higher rate for licensed material instead of the lower rate for phonorecord sales. UMG refused, arguing that the sale of an MP3 download was the same as a phonorecord sale. In the second case, EMI filed suit against ReDigi, a company that allows purchasers of MP3 downloads to resell those files under Copyright law’s “first sale” doctrine. EMI argued that the MP3 files were not phonorecords and thus not subject to first sale.

Putting these two arguments together, we see the music industry imagining transactions where what’s sold is a phonorecord but what’s purchased isn’t.

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Steve Worona has a great post pointing out how the record labels have clear cognitive dissonance (the ability to hold two totally conflicting ideas in your head at the same time -- and argue for both of them) when it comes to the question of whether or not an iTunes purchase represents a "sale." He puts forth three examples of such cognitive dissonance in the legal context, with the final one being taken from two recent legal cases involving major record labels:What's being discussed here, of course, are two cases that we've covered. The Eminem case involved whether or not an iTunes purchase counted as a "sale" like a CD, where there was a very low royalty rate (probably around 15%), or as a "license" like for a movie, where the royalty rate was more like 50%. Universal argued stringently, and continues to argue in a series of follow-up cases, that an iTunes purchase is just like a CD purchase, and the much lower rates apply. However, in the ReDigi case -- where the company is trying to argue that if an iTunes purchase is just like a sale, then clearly the "first sale doctrine" applies and those files can be resold -- EMI, which is in the process of being acquired by Universal, argues that an iTunes sale is a license, and thus there's no first sale.Worona sums it up beautifully:To me this seems like the Schrödinger's Cat of copyright law. According to the record labels, if we're talking about it from the seller's perspective, it's a sale. But the second you flip the equation and look at it from the buyer's perspective, it's a license. The cat is simultaneously dead and alive. Either the major labels are full of it... or they're breaking new ground in quantum physics. I'll assume it's the former, rather than the latter.

Filed Under: cognitive dissonance, downloads, licenses, sales