This case is going to be really interesting if it goes to court, but right now it's not in court.
The letter makes two claims, "copyright infringement" which might be substantiated by the readme, (but not against youtube-dl authors, perhaps against their users) and "anticircumvention [sic]" which is the meat of their real issue.
The making of a copy is not outside of fair use unless it fails the balance test, aka "four factors."
Sony Betamax disagrees with you, if we can agree that youtube is similar to a broadcast medium and that youtube-dl is similar to a "VTR" from that case, aka VCR, unless there are other substantial differences that I'm missing.
Making a copy is only infringing if it isn't for fair use, and Betamax ruled that time shifting could be fair use.
One of the four factors is market impact, so how is the market for this content impacted by this taking a permanent copy? It would be impacted if the purpose and character of the copy was inconsistent with fair use, but remember youtube-dl hasn't taken or shared any permanent copies.
So unless you think that youtube-dl has made a copyright violation (which I think we've established they haven't) then youtube-dl is Sony Betamax, permitted to sell VTRs as long as there are substantial non-infringing uses, and the copyright claim will have to be brought against the infringing users.
That does not mean the courts won't find this is an "anticircumvention device" or will find that the takedown is improperly executed. They may very well rule it is an illegal anticircumvention device, Betamax happened before DMCA, and didn't decide anticircumvention.
But to my knowledge, in Sony one of the opinions spoke about "jamming" with hypothetical language, stating that it could be possible for Sony to build a box that jams unauthorized copying and I'm not aware of landmark cases that would have solidified those concepts.
If RIAA has accurately characterized the key rotation mechanism in YouTube then youtube-dl may well be ruled a circumvention device and that could be the end of it, fair use or no.
The letter makes two claims, "copyright infringement" which might be substantiated by the readme, (but not against youtube-dl authors, perhaps against their users) and "anticircumvention [sic]" which is the meat of their real issue.
The making of a copy is not outside of fair use unless it fails the balance test, aka "four factors."
Sony Betamax disagrees with you, if we can agree that youtube is similar to a broadcast medium and that youtube-dl is similar to a "VTR" from that case, aka VCR, unless there are other substantial differences that I'm missing.
Making a copy is only infringing if it isn't for fair use, and Betamax ruled that time shifting could be fair use.
One of the four factors is market impact, so how is the market for this content impacted by this taking a permanent copy? It would be impacted if the purpose and character of the copy was inconsistent with fair use, but remember youtube-dl hasn't taken or shared any permanent copies.
So unless you think that youtube-dl has made a copyright violation (which I think we've established they haven't) then youtube-dl is Sony Betamax, permitted to sell VTRs as long as there are substantial non-infringing uses, and the copyright claim will have to be brought against the infringing users.
That does not mean the courts won't find this is an "anticircumvention device" or will find that the takedown is improperly executed. They may very well rule it is an illegal anticircumvention device, Betamax happened before DMCA, and didn't decide anticircumvention.
But to my knowledge, in Sony one of the opinions spoke about "jamming" with hypothetical language, stating that it could be possible for Sony to build a box that jams unauthorized copying and I'm not aware of landmark cases that would have solidified those concepts.
If RIAA has accurately characterized the key rotation mechanism in YouTube then youtube-dl may well be ruled a circumvention device and that could be the end of it, fair use or no.