this post was submitted on 23 Feb 2024
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The answer is that it’s more practical than any alternative.
Copyright holders can’t sue Reddit for selling access to copyrighted content (before Reddit receives a copyright claim) because there is no way Reddit could reasonably distinguish between original and copyrighted content. Reddit users violate copyright law and the ToS in submitting copyrighted content, and Reddit is only required to take action as they are made aware of the content’s copyright status.
It would be trivially easy to to circumvent Reddit’s ToS otherwise: I could create some original content, sell my copyright to a friend for $1, and immediately put Reddit in violation of copyright law by submitting the content to Reddit. My friend could go after Reddit, and Reddit could go after me, but my friend would likely get more out of Reddit than Reddit could successfully get out of me.
It’s the same reason publishers can’t sue Cloudflare for hosting a piracy website unless they refuse to take it down, nor can they sue Facebook for ad revenue earned from banners placed next to a copy+paste of a New York Times article. The content providers do not knowingly/intentionally violate copyright law, and they make reasonable attempts to prevent/rectify it. Without such limitations on legal standing, the internet becomes a way bigger mess than it already is.
I think you're conflating two very different things here.
The DMCA covers hosting and dissemination. If a user submits copyrighted data to Reddit that they do not own and Reddit unknowingly (because, to be fair, they can't know what is or isn't owned or by who), then Reddit is not liable for copyright infringement as long as they comply with DMCA takedown requests from people who claim to own the original IP.
But again, none of that implies that Reddit themselves (or Twitter, Facebook, TikTok, etc.) can realistically claim ownership over all of the data that is on their website. The reason they are subject to DMCA at all is because there is a globally shared assumption that data that users submit may or may not be owned by some other party, and while the DMCA protects them from being held liable for simply hosting and disseminating that data, it does not magically make them the owner of all data that hasn't had a DMCA claim made against it.
In other words, if I post a picture of Homer Simpson on Reddit (and there are many), it is ridiculous for anyone to suggest that they have any intellectual property rights over that picture, that character, any trademarks, etc., whether someone has made a formal DMCA take down request or not. And if they don't own the picture, the character, the trademark, etc., when what exactly are they selling (licensing) and where did they get the right to sell it?
They might not be liable for just hosting/distributing it, but just like you can't sell someone else's car, you can't license out someone else's IP.
I see your point, and I’m somewhat inclined to agree with you, but what Reddit is doing doesn’t seem very different from what Meta and friends have been up to for years. Reddit isn’t selling the rights to the content on their platform, nor are they attempting to. They’re effectively selling API access to its content, in bulk, to Google. I don’t see how that is legally distinct from Meta selling (insulated) access to its content via their ad platform. They are both monetizing data that is potentially copyrighted by other parties.