Embracing London-Sire, the Second Circuit Weighs in on the Latest Generation of Music Media

The U.S. Court of Appeals for the Second Circuit affirmed a lower court’s determination that ReDigi and its founders, by operating its e-commerce platform for the lawful resale of legally acquired digital audio files, had infringed plaintiffs’ copyrights under Title 17.

A Fight over Semantics: What counts as a “Phonorecord”? And what counts as a “Reproduction”?

I think that digital music files count as a form of “phonorecord” based on the word’s plain meaning, irrespective of its statutory definition. I assume most people would agree with me in this regard. Regardless of colloquial interpretations, however, the U.S. Copyright Act, enacted in 1976, statutorily defines the term.[1] The definitional provision involves a baseline requirement that the item is a “material object,” yet the Copyright Act did not include a statutory definition for that term.

In absence of a legislated definitional provision, courts typically construe legislative text with deference to the ordinary colloquial meaning of the term in question.[2] Several court opinions have construed the ordinary meaning of the term “material object” as connoting a physicality requirement.[3] Other courts have come to the same interpretive conclusion through an intertextual analysis of the statutory provision that defines “phonorecord.” For example, in Walker v. University Books, Inc.[4], the Ninth Circuit held that “[t]he notion of fixation requires that the material object must, in some manner, take on the physical aspects of the protected work such that the copy of that work may be perceived by an observer.”

In Capitol Records, LLC v. ReDigi, Inc.[5], a case about the applicability of U.S. copyright laws to digital music files, the Second Circuit waded into the definitional debate concerning the term phonorecord. In doing so, it affirmed the district court’s ruling that ReDigi’s operating system infringed plaintiffs’ exclusive rights to “reproduce” their copyrighted works codified under 17 U.S.C. § 106(1).[6] The appellate litigation largely centered on the issue of whether or not the digital files stored on ReDigi’s server, as well as those disseminated to the file-purchasing users of its software, qualify as “reproductions” in terms of U.S. copyright law.

In spite of ReDigi’s assertion that the innovative technology utilized by its software system has the effect of ensuring “the entire file never exists in two places at once,”[7] the Second Circuit held that, each time a digital music file had migrated through DeRigi’s system (either from the original file purchaser’s computer to DeRigi’s server, or from the server to the new purchaser’s computer), the digital file became “fixed” to a new material object, whether a computer “or other physical storage device” in which the file is encoded.[8] The Court then made its decisive embrace of a ruling from the 2008 case from the U.S. District of Massachusetts, London-Sire Records, which DeRigi cited affirmatively for the proposition that the fixing of a file within a storage device (i.e., a computer), “or at least the portion of it in which the digital music file is fixed (e.g., the location on the hard drive) . . . creates a new phonorecord, which is a reproduction.”[9] One factor that weighed in favor of the Court’s judgment, according to a footnote from the opinion, was the Court’s concern about the potential serious blows to the economy that could result from a determination that digital music files are not covered by the Copyright Act’s protections that it affords to phonorecords.[10] Describing its grasp over technological matters as “limited,”[11] the Court portrayed itself as inclined to not rock the boat, so to speak – with the boat being the U.S. economy.

The JIPEL Symposium

On April 16, JIPEL held a symposium to discuss the Second Circuit’s recent decision in ReDigi. Despite its location, high up in an unseen chamber of NYU Law’s Vanderbilt Hall, the “fireside chat” between Professor Jonathan Band (who filed an amicus brief in support of ReDigi’s side) and Richard Mandel (Capitol Records’ attorney) was well-attended, and it occasionally got heated.

Attending as a mere spectator, I arrived expecting there’d be the occasional throwing of jabs, given the opposing positions of Band and Mandel. But they were both admirably level-headed, if not weathered from the years of litigation. “I’ve been eating and breathing this case for eight years,” Mandel explained in his opening remarks, referencing the original phase of trial litigation[12] that led to the Second Circuit’s appellate decision. Nonetheless, fresh passions were periodically voiced by members of the audience in attendance, composed of students and alumni.

From my seat in the back of the room, the most memorable instance occurred in reaction to a passing remark made by the moderator of the event, Professor Jason Schultz of NYU Law. Schultz commented that the internet of things (“IOT”)[13] is “a physical thing,” meaning IOT software involves a physical component, at least for legal purposes. “That’s bullshit!,” I suddenly heard from an alumnus seated next to me. After the symposium, he introduced himself to me as Juan Ramón Zarco, a partner of Silicon Valley Ventures Growth Partners LLP. His opinion, he explained, is that the notion that IOT has a physical component is nothing more than a legal fiction. More generally, Zarco believes that the U.S. copyright laws, or at the very least its definitional statutory provisions, are antiquated; incompatible with the technological and consumer realities of the digital world we now live in; and therefore in need of rewriting, with due respect to the increasingly digital technological atmosphere that distinguishes this century from the last one.

In any event, attending the symposium left me with a strong impression that the ReDigi holdings are far from settled from the perspective of interested parties. In fact, near the end of the two-hour discussion, Mandel mentioned that the ReDigi team insists they’ll file a cert. petition. “We’ll see,” he said, seemingly skeptical they’d have the appetite to press it further. Mandel suggested that a part of his skepticism stems from his belief that resurrecting the downloading process that is central to ReDigi’s software would be a questionable business decision, legal issues aside. “The world is moving to a subscription model.…Streaming seems to be the way.”

Joshua Perkins is a J.D. candidate, 2020, at NYU School of Law.

[1] See 17 U.S.C. § 101.

[2] See, e.g., Perrin v. United States, 444 U.S. 37, 42 (1979) (“[U]nless otherwise defined, words will be interpreted as taking their ordinary, contemporary, common meaning.”).

[3] See, e.g., Alliance of Artists & Recording Cos. v. GM Co., 306 F. Supp. 3d 422, 430 (D.C. 2018) (“[T]he plain meaning of the term ‘material object’ . . . [is] a physical, tangible thing.”).

[4] 602 F.2d 859.

[5] Capitol Records, LLC v. ReDigi Inc., 934 F.3d 649, 656 n.10 (2d Cir. 2018).

[6] On the other hand, the Court declined to decide whether ReDigi had also infringed plaintiffs’ exclusive rights to “distribute” their works under the separately-codified provision, 17 U.S.C. § 106(3).

[7] Capitol Records, LLC v. ReDigi Inc., 934 F.3d at 653-54.

[8] Id. at 657.

[9] Id. (citing London-Sire Records, Inc. v. Doe, 542 F. Supp. 2d 153, 171 (D. Mass 2008)). See also London-Sire Records (“[A]ny object in which a sound recording can be fixed is a ‘material object.’ That includes the electronic files at issue here. When a user on a peer-to-peer network downloads a song from another user, he receives into his computer a digital sequence representing the sound recording. That sequence is magnetically encoded on a segment of his hard disk (or likewise written on other media). . . . The electronic file (or, perhaps more accurately, the appropriate segment of the hard disk) is therefore a ‘phonorecord’ within the meaning of the statute.)“.

[10] See Capitol Records, LLC v. ReDigi Inc., 934 F.3d at 656 n.10.

[11] Id.

[12] Capitol Records, LLC v. ReDigi Inc., 934 F. Supp. 2d 640 (S.D.N.Y. 2013).

[13] IOT usually involves “edge computing,” which refers to manners of computing data or applications at the extremes of a decentralized network (i.e., peer-to-peer), rather than a centralized repository. It involves a cloud of devices communicating with each other at high speeds, enabling self-driving cars, for instance.