ReDigi: What Happened & the Consequences for Sharing Music

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After Napster, the popular music sharing website, was shut down by court order back in 2001, finding a way to share or sell digital music online while steering clear of copyright infringement hadn’t been easy—or tried. That is, until a Boston-based company designed a way to circumvent the Napster decision, calling it “the legal alternative to piracy and filesharing sites.” Or so they thought. While confident and hopeful for the legal future of digital music sharing, this year, the federal court dealt the company a fatal blow. While many were surprised by the decision, there still may be a glimmer of hope.

Recycled Digital Music

Boston-based ReDigi offers the following description on the company’s website:

“Our technology gives you the tools to access the ownership rights to your digital property so that you can sell a used mp3 just as you would sell a used CD should you decide you no longer wish to own it.

We are helping you to once again feel good about buying your music legally, and providing a marketplace for you to resell digital media you rightfully own in a way that is legal and beneficial to copyright holders.”

ReDigi states that it never makes copies of music, and describes the technology behind the service as follows:

“Once you upload a song to your Cloud (whether to store or to sell) it is instantaneously removed from your library—as are any “personal use” copies of that song you may have stored elsewhere on your hard drive or synced devices.

If you list that song for sale on the Marketplace and someone purchases it, the song and its corresponding license is instantaneously removed from your Cloud and transferred to the buyer, who then becomes its new owner. This is called an Atomic Transaction. No copies are made during this process.”

In the past, courts have found that the unauthorized duplication of digital music files over the Internet infringes on a copyright owner’s exclusive right to reproduce their work. Many remember Napster, the filesharing service that provided a peer-to-peer (computer-to-computer) connection over the Internet for users wanting to swap audio files directly with other users. Although Napster argued they were not directly involved in the swaps, the company was charged with contributory copyright infringement—first by the heavy metal band Metallica, who discovered a demo of their song “I Disappear” circulating on Napster even before it had been released—and then later by others. After a protracted legal battle, Napster eventually settled the claims and ceased operations, only to later be acquired and reincarnated as a traditional online music store with few hints to its rogue roots.

Capitol Records Lawsuit and “Material Objects”

While the ReDigi website states the company never makes copies of music its users upload, Capitol Records nonetheless believes that ReDigi’s conduct constitutes either direct or contributory copyright infringement. As Capitol owns copyrights for some of the music resold on ReDigi’s website, the company sued ReDigi for copyright infringement in January 2012.

This past March, a preliminary finding for Capitol caused a stir. The U.S. District Court for the Southern District of New York analyzed whether the unauthorized transfer of a digital music file over the Internet, where only one file exists both before and after the transfer, constitutes reproduction within the meaning of the U.S. Copyright Act. One of the exclusive rights granted under Capitol’s copyright is the reproduction right, which grants the copyright owner an exclusive right to reproduce, or make copies of, a copyrighted work. The court therefore needed to analyze whether ReDigi’s electronic file transfer (which deletes the source file and any copies of it from the seller’s computer) violated this exclusive reproduction right.

On this issue, the court concluded that the file transfer does constitute reproduction, reasoning that the number of copies existing after the transfer was not the determinative issue. The issue that defines the reproduction right, the court said, is the creation of “a new material object,” regardless of whether the original “material object” was destroyed at the same time. The court borrowed this “material object” analysis from pre-Internet cases, and in applying this analysis, the court reasoned that the act of writing the digital data that constitutes the songs onto a different hard drive created, in that section of the hard drive, a new “material object.” Once the court found that a new “material object” had been created, the court concluded that the reproduction right had therefore been violated, regardless of whether the initial “material object” had been deleted. The court, therefore, found that an infringement of the reproduction right occurred through the use of ReDigi’s system, unless there was some defense that applied to insulate ReDigi from liability.

Stepping back from the technical details of this analysis, the court’s reasoning in this case is remarkable for its sheer breadth. If the writing of data to a different segment of a hard drive always constitutes a reproduction, then there could never be a transfer of ownership of digital content that would not violate the reproduction right. This is because every such transfer necessarily involves the writing of digital data to a new section of one or another hard drive. This broad conclusion was shocking to many because it seems directly contrary to the well-established “first sale doctrine,” which for decades has allowed for the exchange of used goods without running afoul of the U.S. Copyright laws.

The First Sale Doctrine

ReDigi asserted the “first sale doctrine” as a defense to infringement. In addition to the reproduction right, U.S. Copyright law also gives copyright owners the exclusive right to distribute their works. The “first sale doctrine” basically states that once ownership of a particular copy of a work has been transferred, the copyright owner cannot limit the recipient’s ability to further transfer ownership of that specific copy. This important doctrine, which was first recognized by the U.S. Supreme Court in 1908, and later incorporated into the U.S. Copyright Act of 1976 by Congress, is why we have used book stores, used record stores, and video rental stores in the United States, and why those businesses are not infringing on the rights of copyright owners.

The application of the “first sale doctrine” to digital technologies, however, has been extremely difficult for U.S. courts. The court in the ReDigi case largely avoided this conundrum through its “material object” analysis. The “material object” analysis allowed the court to conclude that ReDigi’s service violated the copyright owner’s reproduction right, which is separate and distinct from the distribution right. As the “first sale doctrine” only serves as a defense to violations of the distribution right, it could not be asserted as a defense by ReDigi in this case. The court was therefore able to easily dismiss ReDigi’s “first sale” defense.

Although the court’s conclusion in this regard is technically correct, many were surprised by the outcome. Again, backing away from the technical nuances of the arguments and looking more generally at the ReDigi transaction, it is difficult to identify how the ReDigi transaction really differs from the resale of a physical compact disc at a used record store. The court seemed to acknowledge this disconnect and encouraged Congress to revise the law to address this issue when it stated in the introduction to its opinion that “Because this is a court of law and not a congressional subcommittee or technology blog, the issues are narrow, technical, and purely legal.”

ReDigi’s Future

The New York federal court ultimately concluded that ReDigi’s business model is fundamentally flawed and its design is incapable of complying with the law, stating that “ReDigi’s business is built on the erroneous notion that the first sale defense permits the electronic resale of digital music. As such, ReDigi is built to trade only in copyright protected iTunes files.”

The court left the door open to a technological revision to ReDigi’s site that might allow for the noninfringing resale of digital music files when it said that “While ReDigi 2.0, 3.0, or 4.0 may ultimately be deemed to comply with copyright law—a finding the court need not and does not now make—it is clear that ReDigi 1.0 does not.” However, these statements ring hollow in light of the court’s “material object” analysis, which basically states that any time a song file’s data is written to a buyer’s computer an infringing copy has been made.

However, ReDigi cannot be written off yet. The litigation continues; the final outcome is pending, and the New York court’s decision could be overturned on appeal. Further, ReDigi is now a corporate member of the Congressional Internet Caucus Advisory Committee and will likely be requesting that Congress amend the U.S. Copyright law to address these issues. Only time will tell what this means for audio copyright holders and the possibility of the legitimate resale of digital audio files in the United States.

As with any original creative work, federal copyright registration is key to being able to successfully sue infringers in federal court. Enhance your rights by registering your work for federal copyright protection.