Blockchain-based Digital Assets and the Case for Revisiting Copyright’s First Sale Doctrine


The Copyright Act of 1976 (hereinafter 1976 Act)—the current Copyright Act—provides copyright owners with certain rights, including the right to distribute their work.1  The 1976 Act also provides a limitation to the right of distribution, called the “first sale doctrine,” which allows the lawful owner of a physical copy of a copyrighted work to resell that work to others.2  Since the first sale doctrine’s inception in 1908, technology has exponentially advanced, but this doctrine has remained stagnant.  Importantly, the advancement of technology has not alleviated the concerns of the Congress and the courts, and thus the doctrine has not extended to digital files.  The concern is that intangible objects can be easily reproduced.  In essence, the “problem is that one cannot send property over the Internet.”3

Blockchain, the “technological genie [that] has been unleashed from its bottle,”4 can solve this issue which has plagued Congress, the courts, copyright holders, and consumers.  This technology provides “an opportunity to not only limit the number of copies as intended by the artist but also to create unique non-fungible versions of the digital masterpiece.”5

Part I gives an overview of the right of distribution, the first sale doctrine, and the reasons why the doctrine has not applied to digital files.  Part II dissects blockchain technology and its components.  Finally, Part III analyzes how blockchain technology can alleviate the concerns of extending the first sale doctrine to digital goods, and tackles the two main legal impediments to doing so.  This piece concludes with suggesting that extension of the first sale doctrine should be done through a congressional amendment to the 1976 Act, and not by the courts.

I. The Right of Distribution and the First Sale Doctrine

The 1976 Act6 provides copyright owners with six exclusive rights, including the right of distribution.  This right gives a copyright owner the exclusive right to distribute copies “of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.”7  This means that only the copyright owner can lawfully distribute copies of the copyrighted work.

The first sale doctrine limits this right to distribution.  It is a 1908 judicial doctrine from Bobbs-Merrill Co v. Straus that intended to prevent an owner of a copyright from putting restriction on copies of copyrighted works “after the owner had parted with the title to one who had acquired full dominion over it and had given a satisfactory price for it.”8  Congress codified the first sale doctrine from Bobbs-Merrill in the Copyright Act of 1909,9 and the 1976 Act also includes the first sale doctrine under Section 109.

Section 109(a) provides a defense when one is alleged to have violated a copyright owner’s right of distribution: “[T]he owner of a particular copy or phonorecord10 lawfully made under this title . . .  is entitled . . . to sell or otherwise dispose of the possession of that copy or phonorecord. . . .”11  This right to sell or dispose of the particular copy, however, does not apply to copies acquired from the copyright owner “by rental, lease, loan, or otherwise, without acquiring ownership of it.”12

The first sale doctrine is based on the chattel rights of the owner of the physical property, compared with the copyright owner’s rights in the work itself, and turns on the distinction between the “work” and the “copy.”13  The chattel rights in the copy include the right to resell it; therefore, the chattel owner may dispose of their physical object (for example, selling a used CD in a secondary market) but may not make further copies.14

The Digital First Sale Doctrine?

The advent and advancement of computer networks and the Internet left many wondering if the first sale doctrine applies to electronic files, allowing purchasers to freely sell or dispose of particular copies they rightfully own, and a presidential task force tackled the issue in 1995.  It determined that “under current technology the transmitter retains the original copy of the work while the recipient of the transmission obtains a reproduction of the original copy,” and thus the first sale doctrine does not apply, limiting the extent to which consumers can resell electronic files such as MP3s and eBooks.15

This conclusion led Congress to enact the Digital Millennium Copyright Act (DMCA) in 1998, which criminalized the circumvention of technology put in place by copyright owners that control access to copyrighted works,16 because “[w]orks disseminated in digital form may be particularly susceptible to unauthorized copying.”17  Section 104 of the DMCA directed the Copyright Office to issue a report on “the development of electronic commerce and associated technology” on the first sale doctrine.18  The 2001 Report focused on the issue raised by the 1995 Task Force and rejected proposals to amend the 1976 Act that would apply the first sale doctrine to “forward and delete” technology because they are “less than 100 percent reliable.”19  The Report recommended no changes to the first sale doctrine and advocated for a “wait and see” approach.20

A 2016 presidential task force revisited the issues raised in the 2001 Report and concluded that the 2001 Report’s conclusion was still valid because “the technology to effectively prevent the retention of copies after a transmission has not yet become a practical reality.”21

The leading case on the digital first sale doctrine is Capitol Records, LLC v. ReDigi Inc.22  ReDigi operated what it called “the world’s first and only online marketplace for digital used music” and invited users to “sell their legally acquired digital music files.”23  Users had to download ReDigi’s software on their computer, upload the song they wished to sell onto the software, and then the software would scan the user’s computer and detect any copies of the song that were uploaded.24  However, the copies were not deleted automatically; rather, the software prompted the user to authorize the deletion of the copy on its computer or risk having their ReDigi account suspended.25  Importantly, ReDigi’s software “could not detect copies stored in other locations.”26  Once the song was uploaded and deleted from the seller’s computer, the seller no longer had access to the file and another ReDigi user could purchase the song and download it to their computer.27  Capitol Records charged ReDigi with infringement of the reproduction and distribution rights.28

On the issue of “whether a digital music file, lawfully made and purchased, may be resold by its owner through ReDigi under the first sale doctrine,” the District Court held that it could not.29  While the ReDigi user “own[ed] the phonorecord that was created when she purchased and downloaded the song . . . to her hard disk,” selling that song on ReDigi required “produc[ing] a new phonorecord on the ReDigi server.”30  The District Court determined that “reproduction occurs when a copyrighted work is fixed in a new material object.31  Under ReDigi’s system, it was impossible for an owner of a particular phonorecord to sell that phonorecord – as is required by §109(a).32  The “laws of physics” further bolstered the District Court’s determination that “[i]t is simply impossible that the same ‘material object’ can be transferred over the Internet.”33  Thus, “the sale of digital music files on ReDigi’s website infringe[d] Capitol’s exclusive right of reproduction” and the first sale doctrine did not apply.34

The Second Circuit affirmed the District Court’s holding that ReDigi’s system effectuated an unlawful reproduction.35  However, while the Second Circuit agreed that a reproduction occurred because the song was fixed in a new material object (ReDigi’s server), its decision was more narrow because it did not rule on the issue of whether digital files—independent of any physical storage device in which the file is fixed—could be considered “material objects” and eligible to qualify as phonorecords.36  Moreover, the Second Circuit reasoned that it did not have to rule on the ongoing relevance of the Copyright Office’s 2001 Report or “decide whether all digital file transmissions over the Internet make reproductions.”37

II. Blockchain Technology

Blockchain is a relatively new concept that originated in 200938 and is best understood as a system that allows one to “validate, with absolute certainty, a source and destination of a transaction.”39

While blockchain as a concept is relatively new, its genius lies in its unique combination of two breakthroughs in computer science, both of which have won Turing Awards—the Nobel Prize in computer science.40  “Asymmetric Cryptography” allows participants on a blockchain network to validate transactions through complex cryptographic functions, and “Distributed Systems” creates a network where transactions can only be considered valid if the participants reach a consensus on the answer to the complex cryptographic function.41

A blockchain essentially maintains a ledger that tracks the transfer of information from the transferor to the transferee.42  “Blocks” are groups of transactions that have been validated and are linked together in a chronologically ordered chain, giving rise to the name “blockchain.”  It is decentralized because each transaction (in other words, the entire ledger) is stored on multiple computers connected to a common network via the Internet.43  These computers are known as “nodes,” and each node acts as a record-keeper who updates the ledger.  And it is considered immutable because the information in the blocks cannot be altered “without changing all subsequent blocks in the chain and creating a discrepancy that other record-keepers in the network would immediately notice.”44

III. Blockchain-based Digital Assets and the Digital First Sale Doctrine

[O]ther technology may exist or be developed that could lawfully effectuate a digital first sale.”45

A. Concerns With Sending a Particular Copy and Tangibility

The two main legal impediments to creating a digital first sale doctrine are: (1) the inability to sell a “particular” digital copy—and relatedly, the ability of the seller to retain the original copy; and (2) the requirement that the copy be tangible or physical.

1. Sending a Particular Copy Without Retaining the Original

The greatest breakthrough of blockchain is its ability to solve the “double-spending” problem.46  Double-spending is the risk that something digital can be sent while retaining the original because digital information can be reproduced relatively easily.47  The combination of cryptography and distributed systems “secures the transfer of ownership” with “confidence that no one else can access or use what was sent,” thus preventing a transferor from retaining the original or sending it to more than one transferee.48  As a result, the blockchain provides “a way for one Internet user to transfer a unique piece of digital property to another Internet user”49 and has “made the concept of a digital asset possible for the first time.”50

The 1995 and 2016 Task Forces and the Copyright Office were concerned with the double-spending problem of digital copies because the technology they considered51 would allow the transmitter to retain the original copy; thus the “particular” copy was not sold.52  Both courts in ReDigi were similarly concerned with this as it related to the “forward and delete” technology at issue.53  Both courts agreed that there was no way for ReDigi to detect or prevent the retention of duplicates after the resale.54  Moreover, copies were not automatically deleted after the resale.55  ReDigi’s technology seemed to allow the unlimited duplication of MP3 files because copies made on another device prior to resale would go unnoticed.

Blockchain technology’s “robust” and “persistent”56 solution to the double-spending problem of digital money could extend to the resale of digital copies of files such as songs.  Blockchain technology is already being used to transfer digital assets such as art,57 trading cards,58 and videos with soundtracks.59  This “power to transfer anything”60 may help solve copyright’s problem of double-spending and create a digital first sale doctrine.

Blockchain alleviates the concern that “forward and delete” technology “would probably not be 100 percent effective”61 or could be “hacked”62 because the combination of cryptography and decentralized systems are secure to the point “where no one has yet managed to break [it].”63  The duplication of a digital asset on the blockchain is not possible because, once verified and validated, a transaction ensures that the particular digital asset is transferred in its entirety and that the original seller does not retain the original.  For example, a record label’s “first sale” of a purely digital song through the blockchain would “unequivocally ensure that a particular digital ‘edition’ of a creative work is the only one that can be legitimately transferred or sold.”64

2. Rivalrous Assets Without Tangibility

The difficulty in allowing blockchain technology to lead the way for the creation of a digital first sale doctrine is the notion originating from the 1908 Bobbs-Merrill decision that the first sale doctrine applies only to physical copies.65  However, the Second Circuit has left the door open for arguments to the contrary.66

Courts often conflate the idea of tangibility with rivalrousness,67 and “[t]he intangible nature of assets . . . seems to blind courts.”68  In economic terms, “[a] rival good is a type of good that may only be possessed or consumed by a single user.”69  The District Court’s holding in ReDigi rests on the idea that if an item is intangible, it cannot contemporaneously be rival.70  The court’s interpretation is understandable because of the statutory requirement of tangibility.71  Interestingly, for both this court and the Copyright Office, the first sale doctrine applies to selling a hard drive with digital copies on it.72  This distinction implies that tangibility is used as a proxy to describe rivalrousness, since, after all, the digital copies on the hard drive can still be infinitely reproduced.

The antiquated distinction between tangible and intangible goes against the objectives of copyright law73 and is not required to grant the copyright holder control over the market of their work, which is the purpose of the public distribution right in the first place.74  Placing the emphasis on rivalrousness over tangibility balances the interests of both copyright holders and consumers, and better ensures that unlawful reproductions are not made while allowing the copyright holder to control their market.  Blockchain offers, for the first time, the potential to create an intangible rivalrous asset because the technology can be “used to implement ‘artificial scarcity’ at the level of each individual file.”75  For example, a record label can decide the number of blockchain-based songs to sell, and that number will stay constant throughout the secondary markets.

B. Applying Section 109(a) Without the Tangibility Requirement

Section 109(a) allows the resale of a physical copy when (1) the owner of a (2) particular copy, which is lawfully made, (3) sells that particular copy.76  The 1976 Act’s broad language also allows the consideration of new technologies, because both the definition of “fixation” and “device” include the phrase “now known or later developed.”77  Removing the tangibility requirement will likely allow blockchain technology to lead to the creation of a digital first sale doctrine.

Consider the example of a record label issuing a first sale of a song through a blockchain.  (1) The verifiable ledger, maintained by the record company, allows the accurate verification of the seller being the rightful owner who initially purchased the song.  (2) Similarly, the ledger allows the record label to ensure that the song that is being resold is lawfully made (as in, it was initially purchased from the record label).  (3) Lastly, as mentioned in Part III.A.1, blockchain allows the sale of a particular copy of a song.  The record label can also decide whether to sell or license out a song on the blockchain through technologically imposed and enforced limitations, thus limiting the purchaser’s ability to resell the copy.  Thus, a blockchain-based first sale of a song by a record company would fit all of the requirements of Section 109, minus tangibility.


The 1976 Act was written at a time when copies and phonorecords were tangible objects, and the application of the first sale doctrine has not evolved much since its inception.  The technology has finally come into existence that can help extend this doctrine to digital goods, but it would require a statutory amendment by Congress to remove the tangibility requirement from the 1976 Act.  Congress, and not the courts, should revisit the digital first sale doctrine,78 since the tangibility requirement is codified into the 1976 Act,79 which cannot be overturned on a judicial whim.  Indeed, courts consistently acknowledge this80 and the Copyright Office agrees.81

[1] 17 U.S.C. § 106 (2012).

[2] Id. § 109(a).

[3] Joshua A.T. Fairfield, Bitproperty, 88 [small-caps]S. Cal. L. Rev.[end-small-caps] 805, 820 (2015).

[4] [small-caps]Don Tapscott & Alex Tapscott, Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and the World[end-small-caps] 3 (2016).

[5] Elena Zavelev, How Blockchain Empowers the Digital Art Market, [small-caps]Forbes[end-small-caps] (Nov. 7, 2018),

[6] 17 U.S.C. §§ 101–1332.

[7] Id. § 106(3);  see also London-Sire Records v. Does, 542 F. Supp. 2d 153 (D. Mass. 2008) (“[E]lectronic file transfers fit within the definition of ‘distribution’ of a phonorecord.”).

[8] Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 350 (1908).

[9] See 17 U.S.C. § 41 (1909) (stating that “nothing in this Act shall be deemed to forbid, prevent, or restrict the transfer of any copy of a copyrighted work the possession of which has been lawfully obtained”).

[10] Phonorecords are material objects in which sound-only recordings are fixed (such as CDs, vinyl records, hard drives), while copies are material objects in which works of authorship other than sound recordings are reproduced (such as books, paintings, movies).  17 U.S.C. § 101 (2012).

[11] Id. § 109(a).

[12] Id. § 109(d).  Thus, a copyright owner may license, rather than sell, copies of their work and therefore limit the applicability of the first sale doctrine—or, in other words, limit the purchaser’s ability to resell the copy without infringing on the copyright owner’s right of distribution.

[13] See [small-caps]Robert Gorman, Jane C. Ginsburg & R. Anthony Reese, Copyright: Cases and Materials[end-small-caps] 826 (Robert C. Clark et al. eds., 9th ed. 2017).

[14] See, e.g., 17 U.S.C. § 109(c).

[15] [small-caps]Information Infrastructure Task Force, Intellectual Property and the National Information Infrastructure: The Report of the Working Group on Intellectual Property Rights[end-small-caps] 92 (1995) [hereinafter [small-caps]1995 Task Force[end-small-caps]].

[16] Digital Millennium Copyright Act, Pub. L. No. 105-304, 112 Stat. 2860 (1998).

[17] [small-caps]Gorman et al.[end-small-caps], supra note 13, at 1335.

[18] § 104, 112 Stat. at 2876.

[19] [small-caps]U.S. Copyright Office, A Report of the Register of Copyrights Pursuant to § 104 of the Digital Millennium Copyright Act[end-small-caps] 78–85 (2001) [hereinafter [small-caps]2001 Report[end-small-caps]].

[20] Id. at 97–101.

[21] [small-caps]Internet Policy Task Force, White Paper on Remixes, First Sale, and Statutory Damages[end-small-caps] 66 (2016) [hereinafter [small-caps]2016 Task Force[end-small-caps]].

[22] Capitol Records, LLC v. ReDigi Inc., 934 F. Supp. 2d 640 (S.D.N.Y. 2013), aff’d, 910 F.3d 649 (2d Cir. 2018).

[23] Id. at 645.

[24] Id.

[25] Id.

[26] Id.

[27] Id. at 645–46.

[28] Id. at 647.

[29] Id. at 648.

[30] Id. at 655.

[31] Id. at 648.

[32] Id. at 655.

[33] Id. at 649.

[34] Id. at 652–55.

[35] Capitol Records, LLC v. ReDigi Inc., 910 F.3d 649, 656 (2d Cir. 2018).

[36] Id.

[37] Id. at 660.

[38] See generally [small-caps]Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System[end-small-caps] (2008),

[39] How to Web, John McAfee: About Blockchain, Bitcoins and Cyber Security, [small-caps]YouTube[end-small-caps] (Feb. 23, 2017),

[40] See Whitfield Diffie, [small-caps]Ass’n for Computing Machinery[end-small-caps], (asymmetric cryptography); Leslie Lamport, [small-caps]Ass’n for Computing Machinery[end-small-caps], (distributed systems).

[41] [small-caps]Josias N. Dewey, Shawn S. Amuial & Jeffrey R. Seul, The Blockchain: A Guide for Legal and Business Professionals[end-small-caps] (2016) [hereinafter [small-caps]Blockchain Guide[end-small-caps]].

[42] See id.

[43] Id.

[44] Praveen Jayachandran, The Difference Between Public and Private Blockchain, IBM (May 31, 2017),

[45] Capitol Records, LLC v. ReDigi Inc., 910 F.3d 649, 659 (2d Cir. 2018).

[46] See [small-caps]Nakamoto[end-small-caps], supra note 38, at 1.

[47] Double-Spending, [small-caps][end-small-caps],

[48] Fairfield, supra note 3, at 820.

[49] Marc Andreessen, Why Bitcoin Matters, [small-caps]N.Y. Times[end-small-caps] (Jan. 21, 2014),

[50] [small-caps]Michael J. Casey & Paul Vigna, The Truth Machine: The Blockchain and the Future of Everything[end-small-caps] 235 (2018).

[51] Blockchain technology was not considered.

[52] See [small-caps]1995 Task Force[end-small-caps], supra note 15, at 92; [small-caps]2016 Task Force[end-small-caps], supra note 21, at 66; [small-caps]2001 Report[end-small-caps], supra note 19, at 98.

[53] See Capitol Records, LLC v. ReDigi Inc., 910 F.3d 649, 656–57 (2d Cir. 2018); Capitol Records, LLC v. ReDigi Inc., 934 F. Supp. 2d 640, 655 (S.D.N.Y. 2013) .

[54] See ReDigi, 934 F. Supp. 2d at 645; ReDigi, 910 F.3d at 654.

[55] ReDigi, 934 F. Supp. 2d at 645.

[56] The Copyright Office stated that for a technology to be “workable” for a digital first sale doctrine to apply, it would have to be “robust” and “persistent.”  [small-caps]2001 Report[end-small-caps], supra note 19, at 98.

[57] See CryptoPunks, [small-caps]Larva Labs[end-small-caps], (10,000 unique 24x24 pixel art images with an estimated market cap of $211,500); Elisa Mala, Who Spends $140,000 on a CryptoKitty?, [small-caps]N.Y. Times[end-small-caps] (May 18, 2018), (CryptoKitties being described as “blockchain art” that are essentially “digital Beanie Babies—collectible items that can be bought, sold, collected and traded,” with one being sold for $140,000 in 2018).

[58] See Angus Leung, Rare Pepe Cards Become Tradable CounterParty Asset, Now Has Value, [small-caps]CoinTelegraph[end-small-caps] (Oct. 10, 2016), (digital trading cards, formed around an online meme, with a market cap of $56,634 at the time); Joseph Young, Spells of Genesis to Design Blockchain-Based Cards Weekly Until Beta Launch, [small-caps]CoinTelegraph[end-small-caps] (Nov. 9, 2015), (digital trading cards with “distinctive characteristics and abilities”).

[59] Diana Ngo, Brings Blockchain to Visual Art With New Collaboration With Eve Sussman, [small-caps]CoinJournal[end-small-caps] (Nov. 7, 2018), (selling individual segments of a ten-minute video art).

[60] Fairfield, supra note 3, at 808.

[61] [small-caps]2001 Report[end-small-caps], supra note 19, at 98.

[62] [small-caps]2016 Task Force[end-small-caps], supra note 21, at 54.

[63] [small-caps]Deloitte, Blockchain: Enigma. Paradox. Opportunity[end-small-caps] 12 (2016),

[64] [small-caps]Casey & Vigna[end-small-caps], supra note 50, at 235 (quoting attorney Lance Koonce from Davis Wright Tremaine LLP).

[65] Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 347 (1908); see also [small-caps]H.R. Rep. No. 94-1476[end-small-caps], at 56 (1976) (phonorecords are material objects, which means “physical object”); Capitol Records, LLC v. ReDigi Inc., 934 F. Supp. 2d 640, 649 (S.D.N.Y. 2013) (first sale is limited to “material items,” like records, and it is impossible to send these over the Internet); [small-caps]2016 Task Force[end-small-caps], supra note 21, at 35 (first sale only applies to “the owner of a physical copy of a work”); [small-caps]1995 Task Force[end-small-caps], supra note 15, at 92 (first sale applies to “physical” copies).

[66] See supra notes 36–37 and accompanying text.

[67] See Juliet M. Moringiello, False Categories in Commercial Law: The (Ir)relevance of (In)tangibility, 35 [small-caps]Fla. St. U. L. Rev.[end-small-caps] 119, 137 (2007).

[68] Id. at 141.

[69] Rival Good, [small-caps][end-small-caps], (“Rivalrousness is a measure of exclusivity of possession.”).

[70] See Fairfield, supra note 3, at 864 (“Block chain technology provides strong practical evidence against the notion that intangible assets cannot be rivalrous.”).

[71] 17 U.S.C. §101 (2012) (“material object” requirement).

[72] See Capitol Records, LLC v. ReDigi Inc., 934 F. Supp. 2d 640, 656 (S.D.N.Y. 2013); [small-caps]2001 Report[end-small-caps], supra note 33, at 76.

[73] See United States v. Paramount Pictures, 334 U.S. 131, 158 (1948) (stating that the “primary object[ive] in conferring the monopoly [on copyright owners] lie[s] in the general benefits derived by the public from the labors of authors”).

[74] See [small-caps]H. Rep. No. 94-1476[end-small-caps], at 62 (1976).

[75] Primavera De Filippi & Samer Hassan, Blockchain Technology as a Regulatory Technology: From Code Is Law to Law Is Code, 21 [small-caps]First Monday[end-small-caps] (2016),

[76] 17 U.S.C. § 109(a).

[77] Id. § 101.

[78] Cf. Monica L. Dobson, Comment: ReDigi and the Resale of Digital Media: The Courts Reject a Digital First Sale Doctrine and Sustain the Imbalance Between Copyright Owners and Consumers, 7 [small-caps]Akron Intell. Prop. J.[end-small-caps] 179, 200–02 (2015) (arguing that the courts have the authority and ability to declare a digital first sale doctrine because the statute’s purpose and plain language permit a digital first sale doctrine).

[79] See 17 U.S.C. § 101.

[80] See, e.g., Capitol Records, LLC v. ReDigi Inc., 910 F.3d 649, 664 (2d Cir. 2018) (“We reject the invitation to substitute our judgment for that of Congress.”); Capitol Records, LLC v. ReDigi Inc., 934 F. Supp. 2d 640, 656 (S.D.N.Y. 2013) (“It is left to Congress, and not this Court, to deem [the first sale doctrine] outmoded.”).

[81] See [small-caps]2001 Report[end-small-caps], supra note 19, at xx (“The time may come when Congress may wish to address these concerns should they materialize.”).

About the Author

J.D., UCLA School of Law, 2019; B.A., University of California, Los Angeles, 2015. The opinions expressed in this Article reflect the author's personal views only. A special thank you to Alicia Solow-Niederman — PULSE Fellow in Artificial Intelligence, Law, and Policy — for her comments and guidance and for putting together a thought-provoking seminar titled "Disruptive Technology," which sparked the idea for this piece.

By uclalaw