The “Used” Digital Music Case

Capitol Records, LLC v. ReDigi Inc., 934 F. Supp. 2d 640 (S.D.N.Y. 2013)

The Facts

  • A New Kind of Used Record Store
    Music is now bought and sold digitally. ReDigi set up a marketplace for selling “used” digital songs. It removes the song from the seller’s iTunes account, “migrates” it to the ReDigi Cloud Locker, where it can be sold on the ReDigi marketplace.

  • Digital First Sale Theory
    The “first sale” doctrine (17 U.S.C. § 109) grants the right to resell copies of copyrighted works, like old books or records, without the authorization of the copyright owner. ReDigi tested that the first sale doctrine protected the resale of digital songs.
  • No Taste for the Record Label
    The proceeds from ReDigi music sales are split 20% to the seller, 20% to an escrow fund for the artist, and 60% to ReDigi. None of the proceeds went to the record company.
  • The Record Label Doesn’t Like That
    The record label brings a lawsuit, claiming that the first sale doctrine doesn’t apply to ReDigi’s resale of digital songs.

The Holding

  • Infringement
    Digital songs have physical manifestations, which exist on the servers where they are stored. The “migration” required as part of the ReDigi service necessarily makes new copies of the song, as material objects cannot be transferred over the Internet. The first sale doctrine is a distribution right, not a copying right, and does not protect ReDigi’s resale of songs.

A Lesson

The first sale doctrine can apply to digital works, but only to their physical transfer. This decision gives companies like ReDigi a roadmap for digital redistribution business models under the first sale doctrine. ReDigi has changed its service so that users purchase songs through iTunes directly to the Cloud Locker. When the buyer wants to sell, access to the Cloud Locker copy is transferred to the new owner, but no copy is made – only access to the copy. The decision forecloses one method of digital first sale, but sanctions another.

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