Undoing the Digital Revolution

How the Doctrine of “Used Bitstreams” Replaces Physical Barriers by Legal Boundaries

In the world before the Digital Relvolution, most goods for everyday use could be divided into two categories: “new” items and “used” items. Those words still refer to easily understandable concepts when they designate elements of a physical world. If the adjective new is defined as “having been made or come into being only a short time ago; recent”, the adjective used will stand for its opposite, i.e. “not new” or “secondhand”. A “new” car, fridge, piece of furniture or hard drive has some inherent advantages over a “used” item of the same category. Being “used” may change fundamental or non-fundamental characteristics of material objects, deteriorate their functions, worsen their efficacy. The quality is lower and the life expectancy is almost inevitably shorter than that of a new item.

Nonphysical goods, such as bit streams, data or software do not deteriorate through use. Although nonphysical goods sometimes become obsolete and may thus lose worth over time (as better solutions emerge or flaws are discovered), their sole “use” will not lead to deterioration or loss of quality. Playing the original 1968 vinyl record of the Beatles’ White Album thousands of times on a record player will cause audible degradation of the initial sound. Playing the mp3 file containing the White Album will not. Hence the concepts of “new” and “used” cannot be transposed into the digital world. There is no such thing as “used bitstreams”.

Lots of legal questions nevertheless arise in the context of “used bitstreams”, virtually all related to the possibility of their being “resold”: can a consumer “resell” the music files he or she “used”? Can a company “resell” its copies of an office software (that is formally “licensed” to it) when it decides to use software of another provider? As evidenced by these examples, courts are in fact confronted to a world in which not only the term “used goods”, but also the term “resale” does not necessarily mean what it has meant for the last few centuries. The sale of property implies termination of the seller’s ownership and creation of the buyer’s ownership as a result of a transfer. In the digital world, bits cannot be “sold”. The process that perhaps closest resembles a “sale of bits” would involve the creation of a copy on the buyer’s hardware and the subsequent deletion of the file on the seller’s hardware. There is no such thing as “resale of bitstreams” either.

Notwithstanding the intrinsic defectiveness of the very concepts, courts have been recently dealing with issues related to the “resale of used bitstreams” (see in particular UsedSoft? GmbH? v. Oracle International Corp, European Court of Justice, July 3, 2012 (C-128/11)). In order for its decision to fit reality, the UsedSoft? court used the above mentioned analogy (the seller deleting its own bitstreams) and in fact encouraged software manufacturers to use technical protection measures to prevent several persons from using the same “copy” of the software in parallel. As evidenced by the UsedSoft? decision of the ECJ, courts continue to apply legal concepts originally developed for a world of physical goods to the digital economy, without analyzing the new meaning of some of the words they use – such as “used” and “resale”. In principle, interpreting the law in an evolving society is precisely what courts are supposed to do. However, the danger of being entrapped in concepts that are not only inaccurate, but often useless in the digital age, is increasingly looming. The UsedSoft? court will undoubtedly not be the only one to make this mistake.

From a legal point of view, words are only the imperfect vehicles of ideas. What a lawyer (of any legal education) is interested in, are the concepts behind the words, not the words themselves. If a court is using the terms “resale of used goods” and applies the legal rules conceived for the “resale of used goods” to facts that contain neither an actual “resale” nor any “used goods”, the decision will be quixotic at best, plainly wrong at worst.

European copyright statutes insist on the distinction between the intellectual property (e.g. the musical work “Back in the USSR”) and the chattels that contain it (e.g. my personal copy of the White Album LP). US copyright law has insisted on the distinction since Forward v. Thorogood (985 F.2d 604 (1st Cir. 1993)) at the latest. The distinction was highly important for decades – it appears to be moot in the digital age. The misunderstanding around the “resale of used bitstreams” arguably arises from the dematerialization of the digital economy. If works can be transferred without transferring chattels containing reproductions of the works, intellectual property law cannot – and should not – apprehend the transfer of chattels. Trying to create artificial and unworldly facts (such as the definite and irreversible deletion of the seller’s file after the creation of a copy on the purchaser’s hardware) or encouraging self-help (such as technical protection measures intended to prevent the “seller” from continuing to use his copy of the software after the transaction) to make the deal resemble – as good as it gets – to the sale of chattels cannot be said to be an interpretation or an adaptation of the original rule to a new technology. The very concept of “used” and “resale” in the digital world should be abandoned.

The “entrapment” of intellectual property on physical supports resulted in a factual (and not legal) barrier of the multiplying and distributing both copyrighted and uncopyrighted works for centuries. The factual barrier being gone, the question remains how the law should apprehend the new situation. The main options are clear. What the ECJ (and undoubtedly most copyright owners) seems to desire is the transformation of a factual barrier into a legal one, by requiring technical protection measures, intended to remove the main advantage of bitstreams over chattels: easy, uncontrolled and free copying. What the fast and sound development of a digital economy would require is probably different.