Blockchain technology offers new possibilities for owners to sell digital copies of “pre-owned” content on secondary markets, as we’ve discussed in prior posts.  But virtual flea markets – where an owner of a collection of music, movies or books in electronic formats can sell those files directly to a new buyer by transferring them from one computer to another – may not be viable even with the new technology.

The problem is essentially the same problem that Hugh Jackman faces in The Prestige (which we will call Jackman’s conundrum, for short).  For the uninitiated [Spoiler Alert!], in Christopher Nolan’s movie, Jackman plays a Victorian-era magician who is obsessed with replicating an illusion where another magician teleports himself from one end of the stage to another.  Nicola Tesla (played by David Bowie, of course) invents a machine that appears to fulfill this purpose: Jackman steps into one box and reappears in another box 30 feet away.

However, the “teleportation” machine is in fact a duplicator which cranks out a copy of Jackman in the second box.  The essence of Jackman’s conundrum is that the only way to create the appearance of transferring himself from one place to another is to create a copy of himself on the other side of the room.  But what to do with the surplus copies? Jackman’s solution is to drown one of the clones every time that he makes a duplicate, since simultaneously destroying the copy in the first box creates the illusion that Jackman has transported himself instantaneously from one point in space to another.

With far less elaborate trappings (and little or no David Bowie), companies that have tried to create secondary markets for digital files have run into Jackman’s conundrum, and are yet to find a solution.  ReDIGI is probably the best example.  ReDigi marketed itself as “the world’s first and only online marketplace for digital used music” and aimed to allow users to sell iTunes music files just like they would sell unwanted cassettes, vinyls or CDs at a flea market.

However, because the only way for a music file owner to sell a digital copy of a song — let’s say, Bowie’s Space Oddity — is to make a copy of a file on the seller’s computer and transfer that file to the buyer,  Jackman’s conundrum stands in the way. The original copy remains on the seller’s computer.

This leftover copy defeats the purpose of a “sale,” and runs smack up against the “first sale” doctrine of the US copyright laws, which says that while sales of copies of copyrighted works are fine, unauthorized copying is not. In light of this restriction, companies offering digital content have now long relied on providing content under End User License Agreements (EULAs) rather than making outright sales.

ReDigi’s solution was a piece of software that essentially accomplished what Hugh Jackman did with his surplus clones: It (digitally) murdered them. ReDigi would upload a seller’s music file to a cloud service, and destroy the copy on the user’s computer; the buyer would then pay the seller and pull a copy of the file from the cloud onto his or her own computer.

Unfortunately for ReDigi, the Southern District of New York was not impressed by ReDigi’s sleight of hand and the Court held that ReDIGI’s service infringed Capitol Records copyrights.  Rejecting ReDigi’s “first sale” arguments under the Copyright Act, the Court noted that the first sale doctrine “protects only distribution by ‘the owner of a particular copy or phonorecord… of that copy or phonorecord.’”  The first sale doctrine did not apply since all transactions on ReDigi required the making and transfer of copies, since a seller had to “produce a new phonorecord on the ReDigi server” to facilitate any sale.  “Put another way, the first sale defense is limited to material items, like records, that the copyright owner put into the stream of commerce.  Here, ReDigi is not distributing such material items; rather, it is distributing reproductions of the copyrighted code embedded in new material objects.”  The Court thus recognized that ReDigi was a modified duplicator and not a teleportation device, as it purported to be.

So what does the Jackman paradox and ReDigi have to do with blockchain?  The answer is that it teaches us to temper our expectations of the technology, because it is not magic.  While blockchain will open up new possibility for recording the transfer of title to a digital file from one person to another, it will not (at least in its current guise) create a digital teleportation device that will allow a seller to transfer ownership of an unwanted digital file to a buyer without making a copy.  Blockchain will not miraculously create a solution to the digital first sale doctrine problem, which is to say that it will not facilitate a (legal) virtual yard sale for media files, at least under current law.

But that is not necessarily a bad thing.  Between blockchain’s ability to create an indelible record of title for a given file and its potential for generating tokens that could be exchanged to access content without infringing copyright, there is no reason to think that viable secondary markets for digital media are impossible.  And blockchain may well enable these markets to operate without the legal legerdemain that ReDigi tried (and failed) to get past the courts.

A final possibility that we’ll talk about in later posts is that perhaps a new technology like the blockchain, or new applications built upon the blockchain, may create technological solutions that will lead to changes in the copyright law itself.