I have been reading the legal arguments undergirding the Controlled Digital Lending initiative (controlleddigitallending.org). The legal arguments are outlined in the white paper here: https://controlleddigitallending.org/whitepaper.
Our library has a DVD collection that has been heavily used over the years for teaching, research, and recreational use. Circulation of that collection has been restricted to members of our campus. There are fewer and fewer DVD players available on campus now and so we are facing significant sunk costs with a collection that may become unusable. Hence, I am wondering whether we could reformat DVDs that we have purchased over the years, put those physical copies in a dark archive (i.e., no longer circulating), and stream the digitized copies one user at a time to verified members of our campus (current students, staff, and faculty). Would the doctrines of 1st sale and Fair Use apply, given that there would be a one-to-one relationship between the physical copy purchased and digital copy loaned, as well as noncommercial use?
This is a great and important question, and it rests on an critical issue.
With that in mind, before you delve into this answer, I encourage readers of “Ask the Lawyer!” to check out the CDL “Statement” on www.controlleddigitallending.org/statement.
Okay. Did you check it out? Interesting, right? Now, on to the answer….
Controlled Digital Lending (“CDL” ) is an effort to assert the rights of content users—as opposed to those of content owners—in the next regime of copyright law.
As described in the CDL “Statement”:
CDL enables a library to circulate a digitized title in place of a physical one in a controlled manner. Under this approach, a library may only loan simultaneously the number of copies that it has legitimately acquired, usually through purchase or donation. For example, if a library owns three copies of a title and digitizes one copy, it may use CDL to circulate one digital copy and two print, or three digital copies, or two digital copies and one print; in all cases, it could only circulate the same number of copies that it owned before digitization.
Rallying librarians from an impressive array of institutions, CDL asserts an extension of current copyright doctrines and seeks to confirm rights critical to the world of information management.
But although it is a hybrid argument of Fair Use and the First Sale Doctrine, CDL is not the law. Rather, it is a concerted effort to influence—and perhaps become—the law.
As I see it, CDL is also a deliberate and potentially powerful answer to the established trend of content providers using contract law to impose limitations on copyright’s “First Sale” doctrine. Here are some examples of this trend:
Because of the billions of dollars in revenue such contracts protect, the entertainment, publishing, and other IP industries will fight tooth and nail to not only resist CDL, but any extension of Fair Use and the First Sale doctrine. Considering the lobbying power and commercial heft of these industries, the CDL position will need all the recruits and allies it can get. It will be a showdown fought through usage, lawmaking, and most likely, law suits.
The CDL’s organizers know this might be hazardous combat. Right in their “Statement” is the caution:
Because the following analysis is general, any library considering implementing controlled digital lending should consult a competent attorney to develop an appropriate program responsive to the specific needs of the institution and community.
This warning in the Statement is well-justified. The stakes for generating infringing copies (which is what copyright owners will argue CDL digital copies are) and distributing them (which is what copyright owners will argue CDL-using libraries are doing) can be high, with the violator liable for damages and attorney’s fees, and stuck in a courtroom battle for years.
So what would a “competent attorney” advise their client to do in this case? I don’t speak for all competent attorneys, but in a case like this, I would strongly advise an institution NOT to make “CDL” copies unless the action was part of a highly assessed, planned, and well-calculated strategic plan that considers the benefits and accepts the risks.
How does an institution do that? Any institution seriously considering CDL should form a “CDL Committee” consisting of the institution’s librarian, risk manager/insurance liaison, a representative of the institution’s academic wing (if applicable), and an administrative decision maker (an officer of the institution). The group should consult with (but not necessarily include) a lawyer.
The group would assess what use their institution could make of CDL, get advice from the lawyer about those specific uses and the risks, check their insurance coverage, assess what is being done at peer institutions, and (perhaps most important) consider how this overall issue impacts their mission. There would possibly be, at some of the bolder institutions, some acceptance of calculated risk.
If the group’s overall assessment leaned toward CDL, the committee could create a “CDL Assessment and Use Policy” to govern all its uses of CDL. This way, the decision to use CDL would be rooted in the institution’s mission, while the process would be informed by the library’s assets and users’ needs. This is critical because if the institution was ever sued for infringement, a good array of back-up material, showing a bona fide belief in Fair Use, and consistent with that of other participants’ in the CDL effort, could help them assert their position and limit financial damages.
With regard to the member’s particular scenario (trying to get more use out of an extensive collection of aging DVD’s), if I were the lawyer consulting with a committee, I would probably advise against that particular use for CDL. Unless the transmission is per section 110 of the Copyright Act, the risk of a suit for unlicensed transmission of a motion picture is just too high. But I’d also want to assess each movie on a case-by-case basis. While the combination of First Sale and Fair Use might not simply allow the restricted streaming, other solutions (a news exception, a license) might.
I am sorry I cannot give a more definitive answer, but as the CDL organizers themselves point out, CDL is on uncertain ground. The authors of the “Statement” don’t come right out and say it, but they are trying to fight fire with fire…offering a bold and critical counterpoint to the current copyright scheme through which rights owners tightly control digital dissemination of works in print.
Libraries, these days, occupy ground zero of many of society’s struggles, and the next regime of IP law is one of those. On the battlefield of intellectual property, troops are massing at the no-man’s land between digitization and the First Sale Doctrine. Led by librarians, there is an army that hopes to not only hold the First Sale line, but officially extend it to a practice that is more convenient, green, and aligned with current technology: CDL.
Does your library want to join that battle? Does it want to explore making select works available, under closely controlled circumstances, without requiring a person to pick up a hard copy? By making a deliberate, well-planned decision to have a CDL policy, your institution can answer the famous question:
“There’s a war coming…are you sure you’re on the right side?” 
 The signature list is like a “Who’s Who” of library world.
 The person at your institution who makes sure you have insurance, and transmits claims information when there is an issue…or that person’s supervisor.
 At least until a heavy hitter wins a case or two using the CDL argument.
 Wolverine to Storm in X-Men, movie (2000). I wish I had it on DVD.