Court rules against ReDigi

The resale locker, ReDigi, has been convicted of copyright infringement by the US District Court of New York in its case with Capital records.   ReDigi proposes to the user to sell the digital audio tracks that they do not want anymore, as if they would resale a CD.  On January 2012, Capitol Records filed a suit against ReDigi.

On 30 March 2013, the District Judge, Richard Sullivan, granted Capitol’s motion and denied ReDigi’s one.  His memorandum and order document is extremely interesting as it sheds some light on the rationales behind his decision.  He summarizes the question: Can a digital music file, lawfully made and purchased, be resold by its owner?  The Court determines that it cannot.

The first issue was to know if ReDigi violates Capitol Records’ reproduction rights.  According to the Court, the transfer of a music file to a new hard drive is equivalent to a physical copy.

Because the reproduction right is necessarily implicated when a copyrighted work is
embodied in a new material object, and because digital music files  must be embodied in a new material object following their transfer over the Internet, the Court determines that the embodiment of a digital music file on a new hard disk is a reproduction within the meaning of the Copyright Act.

According to the judge, any transfer from one computer to another computer or server is a reproduction, regardless that the initial one has been erased and does not anymore exist.

The second issue was about the applicability of fair use.   As the operation is related to a sale, according to the judge, it falls out of the scope of fair use.  Furthermore, this sale may be slightly detrimental to the initial market.

In sum, ReDigi facilitates and profits from the sale of copyrighted commercial recordings, transferred in their entirety, with a likely detrimental impact on the primary market for these goods. Accordingly, the Court concludes that the fair use defense does not permit  ReDigi’s users to upload and download files to and from the Cloud Locker incident to sale.

The third issue was about the first sale.  In a nutshell, if you have purchased a physical item, you can resale it.  ReDigi defends that it is applying the first sale doctrine.   The judge believes that the first sale is only applicable to physical goods.

… the first sale defense is limited to material items, like records, that the copyright owner put into the stream of commerce. Here, ReDigi is not distributing such material items; rather, it is distributing  reproductions  of the copyrighted code embedded in new material objects, namely, the ReDigi server in Arizona and its users’ hard drives.

ReDigi complained that the law was not taking into account technological changes and became ambiguous.  the judge estimates that it is still not ambiguous.  Although technical changes may render a law unsatisfactory to consumers is not an argument.  Furthermore, changing it is a legislative prerogative.

The judge decided that ReDigi directly infringed Capitol distribution and reproduction rights.  The judge decided that ReDigi was not liable for its users’ direct infringements.

Thus, some interesting outcomes to keep in mind.

  • Transferring a digital from a copyrighted piece of content is a reproduction, even if the source piece of content has been deleted.  This may be extremely controversial, for instance when buffering a file during progressive download are you making a reproduction?   Have you the reproduction rights?  I am sure that we will have additional debates on this topic.
  • First sale doctrine is only valid for physical goods.   Will the US Congress propose an evolution to cover digital goods?

This is a serious stroke against ReDigi but also to a potential new market of “digital” songs.   We will wait for its reaction.  Next post, I will examine the ideas of two big players who wanted to enter this arena: Apple and Amazon.


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