Court Rules Against Digital Music Resale Service

Can you legally re-sell digital goods like the music files you've downloaded from iTunes? That was the question in Capitol Records, LLC v. ReDigi Inc., 2013 WL 1286134 (S.D.N.Y. Mar. 30, 2013). The court held that the resale of copies of digital music files, as facilitated by the defendant's technology, was not permissible. The Court also found that, because the resale of digital music via ReDigi's online marketplace involved the making of unauthorized copies of digital files, ReDigi was liable for copyright infringement. Here's a summary.

ReDigi is a startup company that bills itself as "The World's First Pre-Owned Digital Marketplace." As described in the Court's opinion, files purchased from iTunes or the ReDigi online marketplace could be uploaded to ReDigi's "Cloud Locker," and, as part of that uploading process, ReDigi's service caused uploaded music files to be deleted from the uploader's personal computer. An uploaded music file could then be sold to a purchaser for download to his own personal computer or device.

ReDigi argued that this system of uploading and deleting digital files made a consumer's resale of music files via the ReDigi online marketplace essentially identical to a resale of a physical compact disc, a practice that would be permissible in the context of other online marketplaces (such as E-Bay). Indeed, resale of certain traditional media, such as lawfully made compact discs and LPs, is generally permissible without the permission of the copyright owner under copyright's First Sale doctrine.

ReDigi argued that its system of uploading digital files to a cloud-based server, and automatically deleting them from the uploader's personal computer, is best characterized as "migrating" a user's file. However, to Capitol Records, and to the Court in this...