Ars Technica has a very thought provoking article that asks a simple question with a not so simple answer, at least legally speaking.
The article describes a service (Bopaboo) that allows you to sell your MP3s by uploading them on to the Internet and letting other users pay to download them. You can read CNET’s more even-handed overview of the service here.
The most troubling part of this process is the fact that you are copying your file on to the web and it is impossible to track what you’ve done with the file that you have uploaded. This breaks the model of the used book or CD market, since when something is able to be copied perfectly, it is hard to prevent you from both keeping a copy and selling one or multiple copies.
Media companies try to get around this in a couple of different ways. The first is through a method called licensing. These companies claim they have not given you the software, they are merely giving you a license to use it in a particular setting. If media organization could convince everyone of this, they would be in great shape because people would then have to buy multiple copies of the same item to consume it in a variety of settings. As you might guess this method hasn’t gained a lot of traction outside of the software industry.
The second method is using DRM (digital rights management, or copy-protection). This method uses a variety of different software systems to try and prevent content from being copied. This inevitably is broken in one way or another, and there is always the problem of what is called the “analog hole.” Basically, this concept means that one could simply play a movie or piece of music and then record the output. You have lost a “generation” of quality. Something familiar to those in the mix tape era, but you still have a pretty good quality copy that is completely DRM-free.
Legally, however, media companies have some protection here from the Digital Millenium Copyright Act (or DMCA). This law states that it is illegal to circumvent DRM. This may also them legal protection against things like Bopaboo, since most likely (it is hard to tell exactly how this would work since Bopaboo is still in private beta) DRM would have to be cleared to make the copies useable by others.
So, the answer to the question that started this debate is still unclear. Until there is a legal court battle over the use of this content, it remains to be seen what is and is not legal in the transfer of digital content.