(Funny: I replied to this last night, but it didn't take. Let's give it another try.)
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Originally Posted by llasram
I don’t think that morality exists by state imposition or is identical with the law. This seems to me the basic disagreement underlying our competing claims. If my Prohibition analogy doesn’t budge you here then I guess we should stop tilting at each other’s windmills  .
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It isn't identical. A society is always formed by morality, but at the same time, it often has to bend morality to its own ends.
The Prohibition argument has some parallels with e-books, but only some. Prohibition would have succeeded if not for so many people who did not believe they needed to be protected from alcohol, and they actively fought the law until it was repealed. But Prohibition was in essence a religion-inspired public health issue, not a commercial issue like e-books... and we are not trying to ban all e-books... so I'd say the analogy has some problems.
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Originally Posted by llasram
I’m keeping to the separately-created-instance case in order to focus the discussion clearly on the issue of copyright and intellectual property.... What does “another instance” mean? If I buy one of your books then scatter several copies of it around my hard drive am I guilty of immoral duplication? If I buy it to give as a gift, but keep a back-up copy, unread, because I know my friend accidentally deletes his files often, am I then guilty of immoral duplication?
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Okay: An e-book is an Intellectual Property, or IP. An Instance is a copy of that IP. The point (or at least the intent) of copyright law is that every instance of an IP should pay the owner of that IP, whether the owner created that instance or not. In this case, the law makes an exception for an instance created by someone who already owns it, for their own use only (format-shifting). But if one of those copies gets out of your hands, you are considered liable for disseminating an instance of the IP without permission.
Regarding your friend, what you should do is gift him the book, and tell him to make a backup copy. If you make a backup and keep it, then the law will consider you in violation (2 people now hold 2 instances of an IP that was paid for by only 1). If he makes a copy of the book he's got, you're both in the clear.
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Originally Posted by llasram
My point is that we should account for these case by modifying or replacing the copyright system, not by forcing consumers to treat digital media like physical media. And that until we do so there will be certain classes of “piracy” (not all – I am not saying that) which are not immoral, do not violate the popularity-linked compensation principle.
My point is that we have very solid intuitions concerning the value, sale, trade, and theft of physical things. Copyright worked so well for so long because it makes informational products into physical things. Copyright is presently failing because the average consumer increasingly has the ability to deal with informational products as information and our intuitions about physical things no longer apply. The hardback-and-paperback analogy is flawed because it applies our intuitions about two physical products to an informational product.
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Here's the point I'm making: "Intuitions" have to go out the window here. "Intuition" suggests that ideas want to be free, that the creator didn't actually make the copy and therefore doesn't deserve to profit off of it, etc. But "Intuitions" have not yet evolved to take into account the reality of digital media. Copyright law was created to bend morality, or Intuition, into a form that allowed for profit from IP. Until our intuition, or morality, catches up to reality, we need copyright law to guide us.
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Originally Posted by llasram
I searched mobileread for “library royalty” and didn’t see any likely-looking threads. I looked at a few of the search results and found only one relevant example, but which was claiming the opposite (that the author received their royalty for each copy sold, but that copy could be placed in a public library and read any number of times). Could you direct me to a specific reference?
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Not off the top of my head... but there are others here who will back me up that when libraries obtain a book for their collection, their payment includes a royalty fee designed to cover the people that are expected to borrow the book.
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Originally Posted by llasram
I agree (format shifting is) illegal – I was more curious about your take on the morality of this transaction.
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Basically, I stand with the law on this: Although format-shifting is technically illegal, as long as the new Instance is used by the person who bought the original Instance, and does not get passed on to another person, I have no problem with that. So sure, make a hundred copies of my e-book. Just don't give 'em to anybody without paying the creator (me), and we're cool.