I don't think that's the mechanism. Many big name sites that lost rankings are not using copied content
Tedster, they might not have copied content but their content is published everywhere and this update seem to have impacted sites whose content are republished partially/fully through feed aggregators or copycats.
AlyssaS has a good point on the dial down of internal links
1) It impacts site owners (many of them individuals) who usually don't get the external links as compared to articles from big business houses.But where do the big business houses get the links from?
1)Their own blog/site farms.
2) They also get the bulk of the external links from people who prefer to link to authoritative sources than the sites they often refer to as "Source" at the bottom of their pages.
Yes, they do link back to the original source at the bottom but they often do it with just the blog name. Some like eHow take it to the extreme of crediting you with JS links as googlebots are "link blind" to those neat designs. Why do people prefer linking to them and not the original source?
They are authority sites in the eyes of google and google/Matt Cutts encourage people to link to authority sites.
Hence, they get the external links while our poorer "Source" doesn't get them. As time passes by, pages from our poorer "Source" get buried while pages on those big authority sites remain on top of SERPS. What form of SEO does the poorer "Source" resort to?
Highlighting his Popular pages on Home page and sitewide. What has google done now?
Through this update, google is helping the authoritative ones further by dialing down internal links. Internal links
are the poorer "sources" best form of SEO and they link to their best content to keep themselves afloat in the SERPS. What is stated in google's official blog?
This update is designed to reduce rankings for low-quality sites
The poorer "Source" fall within this block.They often have internal links to their best pages which they want to highlight on Home page/sitewide.
Why do they want to highlight?
Because it got referred by the "authoritative sites".
At the same time, it will provide better rankings for high-quality sites
The authoritative sites/blogs get the external links
at the expense of the poorer "Source" and get a further boost from google through this update.
We can’t make a major improvement without affecting rankings for many sites.
Through this update, Google was targeting content farms that keep themselves afloat through lots of internal links.But in the process they are also killing our poorer "Source".
The above google statement does seem to be an admission of the fact that they are aware of how the "internal links dial down" will destroy the poorer "source"
The net result:
1) Authoritative Sites which re-post stuff in other "Source" sites flourish in this update, as they have the bulk of external links
2) Authoritative sites that get a lot of external links through their own site/blog farms flourish in this update. I guess dial down of internal links may be an understatement.