We're talking about first sale doctrine here, not fair use. If I did the exact same thing with a VHS tape, cutting out 10 second strips of tape and renting them out to people, that'd be totally legal under first sale doctrine. Doing that with VHS would be totally impractical but legal. Doing it with a digital file would be totally practical but illegal, since currently first sale doctrine doesn't apply to digital distribution of copyrighted materials.

My point is just that if you think it's a good idea to extend first sale doctrine to digital files without any restrictions you may first want to consider the logical consequences of that.

the usage being described is 1 physical copy = 1 streaming, thus if you cut it to 10 second clips only 1 particular 10 second clip could be streaming to any one customer at any time to match this model. Thus you still end up with 1 physical copy = 1 streaming. It is illegal but shouldn't be, because of first sale doctrine being a match for this use case. I can only show you the first 10 seconds of the film if nobody else is watching it.

I see that what you're saying is that User X could watch the first 10 seconds and then the second 10 seconds while you start you're first 10 seconds but that would be sort of a ridiculous use case for the following reasons:

1. your system would include a bunch of extra work for your solution to make this work, easier and cheaper to buy 10,000 copies of the movie and stream as needed.

2. people pause movies thus your solution becomes even more expensive because it would need to calculate out who has paused their ten seconds at the 5 second mark etc. etc.

Thus it seems likely that any solution being built on the model of we have physical copy we stream you copy will be built with showing complete movie and not any clever cutting up of movie to make the number of physical copies we have stretch further. The way the law works each different use case - cutting up movie, showing complete movie - would probably be challenged and there is no reason to suppose that they would all be allowed to pass, in fact since the showing complete movie was not allowed to pass in the real world it seems unlikely that the weird edge case cutting up movie would be allowed to pass even if law was changed to allow showing complete movie was changed.

> Doing it with a digital file ... digital distribution ... extend first sale doctrine to digital files

I fully understand, but there's got to be a better way to describe this line in the sand given that DVDs contain digital files. "Physical" doesn't work because networks have a physical layer. "Stream" is also problematic because bitstreams are present on any kind of media. Even "network" doesn't quite cut the mustard because a chain of video stores could be described as a trade network. "Tangible" comes damn close, but suppose the baud rate is slow enough and the voltage high enough that I can discern the download by touching the wire? What, then, is the unambiguous word for what we're talking about here?

If it really boils down to letting time elapse between views/customers, shouldn't that be what the law demands?

It boils down to how much $$$ the copyright owner makes per performance on average.