question on change format and commercial rental

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  • Hello,

    I am runing a small online DVD rental service website similiar to Netflix. Customers pay a monthly subscription and have DVDs delivered to their door. It does not rent DVD movies published by Hollywood studios, It only rent some Educational/Instructional seminars published by small publishers or the author. I am trying to find a solution to have digital delivery of the digital materials over the net rather than physically deliver the Disk to customers's door, without violate copyright law. It involves convertion of the digital materials to a Right protected file that can be downloaded by customers over the internet. Only customers can download a copy along with an 24-hour viewing license. Since the file is protected, it has to be opened by username/password, it cann't be viewed by other people who are not a patron of our service. If we only hold one copy of the Disk we purchased from the publisher, we will only rent one copy at a time. So when one customer is viewing the perticular material ,no other customers can rent (download) until the first customer returns the rented material. The viewing license will expire 24 hours after download and the file on his PC will self destruct. This will be considered as he returned the material and it will be available for the next customer in line to rent it.

    I am not very sure of the copyright issue involved in this practice. I came across an article stating copyright protect the Idea and Information, but not the format of the copyrighted materials. IFLA also states "Reformatting of material to make it accessible should not be considered an infringement of copyright and should be considered as reasonable access. ". In a rental business, we purchase a copy of the materal, rent it to one customer, get it back then rent to another customer, that is allowed commercial activity. But if it involves a reformat of origial files on a physical CD/DVD, does it violate copyright law? Ripping a digital file on a physical disc is considered copying, and rental business is commercial activity. Another question is about the video-on-demand service widely available on internet, does it voilate copyright too? I think technically it does, but the practice seemed well-accepted.

    Please kindly comment and give suggestions.
  • IFLA's reformatting isn't necessarily the same as a commercial services. I would say that this practice would be risky. You could argue that it is a fair use, but it would be a big risk, in my opinion. For one, the doctrine of first sale (which allows you to do your ordinary renting practice) has not been firmly established with digital materials. Also, educational publishers are attempting to offer digital services, and you might be competing with those. Have you tried asking the publishers? You might be able to work something out with them, or offer services with them.

    Other takes?
  • Context may be very important in understanding the IFLA quote. If the reformatting is necessary for any sort of access, because the original format is no longer usable, I agree that that "should" not be considered infringement. At the moment, however, section 108 allows some reformatting in that situation, but not wholesale conversions. In any case, that is not the situation ging is describing. Reformatting to create a digital distribution system for the sake of convenience and faster profits is, in my opinion, very likely to infringe the reproduction right in the original.

    I think first sale should apply to digital materials, but it never applies if the copy being distributed is not lawfully made. First sale is only an exception to the distribution right; it does not allow copying (reproduction) in order to distribute in a different format, especially when the copying is, itself, infringment.
  • I think first sale should apply to digital materials, too, but some disagree. ^_^

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