Court Rules Against ReDigi Efforts to Resell Digital Music

ReDigi Logo

(from Billboard.biz, April 1, 2013) Capitol Records won their case against ReDigi Inc., a company that sought to build a marketplace for consumers to sell their “used” digital songs, on March 30.

This was a closely followed case by those in the music and movie business because the outcome had the potential to sway billions of dollars in future sales of digital content.  Had the ruling by Judge Richard J. Sullivan gone the other way, consumers would have been able to purchase perfect digital copies of “pre-owned” music at potentially significant discounts from iTunes, Amazon, and elsewhere.  For example, ReDigi priced tracks between 49 cents and 79 cents.  Unlike iTunes sales, where rights holders get 70% of each sale, labels don’t get any of the proceeds from ReDigi sales.  The company did claim they set aside 20% of each sale into an “escrow account” for artists whose works were sold.

Sullivan issued a partial summary judgment agreeing with the Universal Music Group label’s arguments that ReDigi had infringed on Capitol Records’ copyrights.  ReDigi had claimed that the “first sale doctrine,” which allows consumers to legally resell CDs and DVDs, could also be applied to digital copies, but the judge concluded that the doctrine did not apply to digital media.

“A digital recording purchased from iTunes is simply not akin to a used book or a physical CD or vinyl record,” Lawrence Iser, a copyright attorney with Kinsella Weitzman Iser Kump & Aldisert in Santa Monica, California, said.  Iser also noted that ReDigi’s service, which claims to fully delete the digital tracks from the seller’s computer, violates an aspect of copyright law that prevents the company from storing a copyrighted file that it did not purchase or have the license to hold on its own servers.  ReDigi creates a new phonorecord of the recording, or plainly a reproduction, which infringes the copyright holder’s exclusive right of reproduction.

That doesn’t necessarily put an end to digital resale models.  In recent months Amazon and Apple have filed patent applications for digital management technologies that would allow companies and consumers to “loan” copies of digital media.