A Blow to Digital Music Resellers

You can sell used books on Half.com and used furniture on Craigslist—but used MP3s? Not so fast. In Capitol Records, LLC v. ReDigi, Inc., Judge Richard J. Sullivan of the Southern District of New York recently ruled that ReDigi—an online marketplace touted as "the world's first, real legal alternative to expensive online music retailers and to illegal file sharing"—violates federal copyright law.

The ReDigi 1.0 platform allowed users to upload and resell their legally purchased music, and ReDigi emphasized that it deleted the user's file once it was offered for sale. But this wasn't enough to avoid copyright liability.

That's because, according to Judge Sullivan, the process of moving a digital music file from one hard drive (the user's computer) to other hard drives (ReDigi's server and, eventually, the buyer's computer) involves rewriting the file. And this rewriting constitutes unauthorized reproduction of the copyrighted work. The final number of MP3s that exist is irrelevant. The copyright concern is that unauthorized copies were made along the way.

ReDigi's defense hinged on the "first-sale doctrine," which gives the owner of a "lawfully made" work the right to sell that item to someone else, irrespective of the copyright owner's wishes. But the court ruled that as unauthorized reproductions, ReDigi music files are not "lawfully made" for first-sale purposes.

Judge Sullivan thus found ReDigi liable for direct, contributory and vicarious copyright infringement. ReDigi—like Napster before it—was deemed guilty of encouraging its users to break the law.

How a digital resale service can avoid copyright liability is not yet clear. A legal service may sell access to a single, stationary file, or may require copyright owners' blessing. But if the ReDigi ruling stands, one thing is clear—"moving" a copyrighted digital file from one computer to another can have serious legal consequences, even if the original file was legally purchased.