This is nonsense IMHO. This is just an encoding scheme to encode data. Just because blocks used by the encoding scheme are cached and reused for other data does

This is nonsense IMHO. This is just an encoding scheme to encode data. Just because blocks used by the encoding scheme are cached and reused for other data does not mean that they're not used to represent this data. If the data downloaded is copyrighted work, then copyright applies. Are copyright laws specific as to the technical method in which reproducing copyrighted material without authorization counts as a violation, or is the method irrelevant? If the method is irrelevant, then yes, using this scheme to copy copyrighted material is copyright infringement. If it is relevant, then there's nothing special about this scheme at all except that it is different than the specific methods outlined in the law.