Original URL: http://www.theregister.co.uk/2012/01/16/2nd_hand_mp3s/
Flog secondhand MP3s at your peril - law guru
Upstart startup sued for reselling music files
Opinion Redigi, an American startup company, has found itself in trouble for selling legally downloaded digital music tracks secondhand. Last week it was on the receiving end of a copyright infringement suit in the US.
The arguments that will run in the US court are similar to those that would be used here in the UK, and it is clear that the service Redigi offers  through its website would break UK laws.
First of all, copyright law mostly does not allow the reproduction of a digital file on someone else's computer, even if the original copy was lawfully downloaded and is subsequently deleted.
Just as in the US, it is not permitted to reproduce musical or other works in any form, without the copyright owner's consent. The act of copying a digital music file for sale, even if the original was lawfully obtained from a download service such as iTunes, is copyright infringement under current UK legislation.
UK laws are changing to make some copying of files legal, but even under this planned relaxation, the resale of lawfully purchased MP3s will not be allowed in the UK.
A Government-commissioned report on intellectual property by Professor Ian Hargreaves proposed the introduction of a private copying exception, allowing individuals to make some copies of copyright-protected material. This won't make services like Redigi's legal, though, as it only will allow private copying by individuals and their immediate family for their own use.
So why are previously-owned CDs allowed to be resold without there being a breach of the copyright laws? This is down to the 'exhaustion of rights' principle which allows an 'original' copy of something to be resold.
This is the legal principle - called the 'first sale doctrine' in the US – that Redigi is trying to rely on in its case. But it doesn't extend to digital files –because the act of transmitting the file from one person to another necessitates the making of a copy, which is in breach of the rights holder's copyright.
So, is there any way these files can be resold that will not fall foul of the rules? There is, but it requires such an odd series of events that it becomes completely impractical.
If the original file was downloaded onto an external hard drive or a memory stick in the first place, and not onto a computer's hard drive, then that actual hard drive or memory stick could be sold with the material on it without the law being broken. This is because their sale would not necessitate the making of a further copy.
In practice, though, few people will want their music to be stored in this way, and it means that a person would have to sell whatever music happened to be in one drive in one block. Very few people are likely to go to the effort of doing this to make just a few pence per track.
Even then, they might be breaking contract, rather than copyright, law. If someone did go to the trouble of downloading MP3s onto an external drive for resale to seek to get round the copyright laws they would likely be in breach of the terms and conditions of their download service. iTunes in the UK, for example, clearly states that music is licensed to users on a purely personal and non-commercial basis. Its terms also prohibit the sale of downloaded material.
With the increase in the use of music downloads and the application of the laws to digital media largely untested by the courts it was inevitable that companies would attempt to enter the secondhand download market. It was also inevitable that the creative industries would not take long to seek to strike them down. It looks like the law is definitely on their side.
Copyright © 2012, OUT-LAW.com 
Claire McCracken  is a technology law specialist at Pinsent Masons, the law firm behind OUT-LAW.COM. OUT-LAW.COM is part of international law firm Pinsent Masons.