Music resale service ReDigi loses copyright fight with Capitol Records

Updated A US District Court in New York has ruled that ReDigi, an online marketplace that allows users to sell their purchased music files, violates copyright law.

Cambridge, Massachusetts–based ReDigi, which launched its service in October 2011, claimed to be "the world's first, real legal alternative to expensive online music retailers and to illegal file sharing."

The recording industry disagreed, however, and in January 2012 Capitol Records filed suit against the company, alleging mass copyright infringement.

Things were looking good for ReDigi for a brief time. Capitol had asked the court for an injunction that would have shut down the service immediately, but a judge denied that request, saying the issues would need to be decided at trial. Now that trial has taken place, and ReDigi's luck seems to have run out.

ReDigi's defense hinged upon its argument that digital files are covered under the "first-sale doctrine", which states that a legitimate purchaser of a copyrighted work has the right to sell that item to someone else, irrespective of the copyright owner's wishes.

To add weight to that claim, ReDigi supplied its users with a Marketplace app that purported not only to verify that each music track offered for sale had been legitimately purchased, but to delete music files from sellers' PCs once their transactions closed.

"In this way, ReDigi gives digital goods 'physicality,' bringing the familiar process of selling a physical good (CD, vinyl, book, etc.) into the digital age," the company argued in its legal disclaimer.

But in an 18-page ruling on Saturday, District Judge Richard J. Sullivan found that despite the technical measures it had erected, ReDigi's service infringed on copyright owners' exclusive rights to reproduce and distribute their works:

ReDigi stresses that it "migrates" a file from a user's computer to its Cloud Locker, so that the same file is transferred to the ReDigi server and no copying occurs.

However, even if that were the case, the fact that a file has moved from one material object – the user's computer – to another – the ReDigi server – means that a reproduction has occurred. Similarly, when a ReDigi user downloads a new purchase from the ReDigi website to her computer, yet another reproduction is created. It is beside the point that the original phonorecord no longer exists. It matters only that a new phonorecord has been created.

Sullivan further ruled that because songs sold on ReDigi are not unique physical items but "reproductions of the copyrighted code embedded in new material objects, namely, the ReDigi server in Arizona and its users' hard drives," the first-sale doctrine does not apply.

ReDigi's argument that any copying done by its service was protected under the "fair use" provision of copyright law didn't fly, either. In fact, Judge Sullivan ruled that copyright infringement was pretty much ReDigi's entire purpose, writing that the service "is not capable of substantial noninfringing uses."

As a result, the judge found that ReDigi was liable not only for directly infringing copyrights itself, but also for contributing to infringement carried out by its users and profiting thereby.

Just how much ReDigi will end up owing Capitol Records has yet to be decided. The record label had sought $150,000 per infringement, a sum that would surely bankrupt the startup.

The trial is not over yet, either. Citing legal matters still outstanding, Judge Sullivan has ordered both parties in the case to submit a letter discussing next steps by no later than April 12.

Neither party to the case has responded to The Reg's request for comment. ®

Update

Following the initial publication of this story, ReDigi issued a statement on the matter. In short, the company said it is "disappointed" with Judge Sullivan's ruling, but pointed out that the ruling only pertains to the earlier version of ReDigi's service, dubbed "ReDigi 1.0." The new 2.0 version is based on different, patent-pending technology, the company said, and as such is not a subject of the current lawsuit.

"ReDigi will continue to keep its ReDigi 2.0 service running and will appeal the ReDigi 1.0 decision, while supporting the fundamental rights of lawful digital consumers," the company said.