Capitol Records v. ReDigi: The First Sale Doctrine and MP3s

The Southern District Court of New York has granted summary judgment in favor of the copyright holder in Capital Records v. ReDigi regarding the reproduction and distribution rights, essentially holding that consumers cannot resell their legally purchased MP3s. Summary judgment was denied regarding infringement of the plaintiff’s performance rights.

The opinion by Judge Richard J. Sullivan begins by specifically noting at the outset that the issues in this case are “narrow, technical, purely legal.” The court found that (1) ReDigi infringed upon Capitol Records’ rights of reproduction and distribution, and (2) ReDigi could not benefit from the fair use defense or the first sale doctrine.

ReDigi is a music resale website that allows users to sell mp3s originally purchased from iTunes or other ReDigi users; the ReDigi receives a fee on every transaction. The website validates the mp3s to ensure that the user has not retained copies on his computer. Once a file is validated, ReDigi “migrates” it to its “Cloud Locker,” or remote server. It is this migrating process that was at issue in the case. Plaintiff Capitol Records asserts that the process “necessarily involves copying,” and thus constitutes infringement. Defendant ReDigi, asserts that the process is “analogous to a train,” with pieces or packets being moved from one location to another, so that the data exists only in one place at a time.

The Court specifically focused on the reproduction right, noting that the Copyright Act address the creation of new material object, rather than the creation of an additional object, and thus rejecting ReDigi’s argument. The Court found that “ReDigi’s service by necessity creates a new material object when a digital music file is either uploaded to or downloaded from the Cloud Locker.”

The Court also found that ReDigi was not entitled to benefit from the fair use defense regarding the reproduction and distribution rights. The Court agreed with Plaintiff Capitol Records’ assertion that uploading and download incident to sale are not covered by the fair use defense. Finally, the Court found that ReDigi could not benefit from the first sale doctrine.

For more information:

“Capitol wins digital records lawsuit vs ReDigi start-up,” April 1, 2013, http://www.reuters.com/article/2013/04/01/us-capitolrecords-redigi-lawsuit-idUSBRE9300GB20130401