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Preserving the First Sale Doctrine in the Digital Age

20 Apr, 2004 By: Holly J. Wagner

DVDStreamer.com's entrepreneurs, who earlier created a free software-based media player called Flashdust and are testing their new online rental business concept, believe their new model is covered by the First Sale doctrine. Others believe the service, which charges a $15-a-month subscription fee to stream DVDs to viewers over the Internet, falls afoul of the Digital Millennium Copyright Act (DMCA).

To the entrepreneurs, their business is no different than a brick-and-mortar video store, except that their movies get returned a lot faster because they are considered back on the shelf whenever a viewer finishes the stream. First Sale protects the business, they contend, because they maintain a 1:1 ratio — that is, they will only serve a title to as many viewers at one time as they have copies of that title on legally purchased DVDs. They don't crack the copy protection or region codes to offer the service, and they don't advocate copying, they say.

That may sound like enough in theory, but the DMCA goes beyond earlier copyright law. The mere act of recompressing the data from a DVD to transmit it over the Internet may well be enough to persuade a court to shut the service down.

These things get fuzzy — pixilated, perhaps — in the digital world. If there were no DMCA, or if it was differently written, would the DVDStreamer people be on firmer ground? Possibly. Or not.

Several companies are in courts fighting to define what Fair Use means in the post-DMCA world. First Sale may well be the next battleground, especially as the used-disc trade gains steam. Like book publishers, studios will not be happy about others profiting from reselling studio products without paying the vig. Before video retailers get their knickers in a twist about a service that's experimenting with a new delivery system, it's important to look at the big picture.

You can't fault people for innovating, but maybe a little more legal homework was in order for DVDStreamer. Or maybe this company will end up fighting the battle to preserve First Sale for everyone.

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