Reselling copies of MP3s you legally purchased violates copyright, according to a ruling made over the weekend by a New York district court judge. The ruling is a victory for Capitol Records, a subsidiary of Vivendi, and marks a devastating loss to ReDigi, a website that lets users resell copies of their legally purchased MP3s. The decision applies only to the New York jurisdiction for now, but could serve as a model for other states, and it's highly unlikely they would rule any differently.
Capitol first sued ReDigi in early 2012, and ReDigi sought to have the case dismissed under the longstanding American "first sale" doctrine, which says that copyright on physical goods applies only through the first time it's sold by the seller to the first customer. After that, the customer may resell a good to anyone else without fear of copyright infringement.
Capitol’s copyrights have been infringed
But because in this case ReDigi makes a copy of the songs in question, the judge found that the company was violating Capitol's song copyrights. As the ruling states:
"Capitol did not approve the reproduction or distribution of its copyrighted recordings on ReDigi’s website. Thus, if digital music files are 'reproduce[d]' and 'distribute[d]; on ReDigi’s website, within the meaning of the Copyright Act, Capitol’s copyrights have been infringed."
Now the case proceeds on to the damages phase, where the court will decide how much ReDigi owes Capitol in damages and whether will be shut down entirely. We've reached out to both companies for more information on what they plan to do next and will update when we hear back.
Update: ReDigi has issued a statement on the matter, pointing out that the ruling applies to the 1.0 version of its service, and that the 2.0 iteration — which is currently in operation — is not impacted. We're reproducing the statement in its entirety below.
We are disappointed in Judge Sullivan's ruling regarding ReDigi's 1.0 service technology. For those who are unaware, ReDigi 1.0 was the original beta launch technology, which has been superseded by ReDigi 2.0. The updated service incorporates patent pending "Direct to Cloud Technology" and "Atomic Transfer Technology" that the court stated are not affected by its recent ruling. Judge Sullivan specifically stated that, referring to ReDigi 2.0, "the court will not consider it in this action," and "while ReDigi 2.0, 3.0, or 4.0 may ultimately be deemed to comply with copyright law — a finding that the Court need not and does not now make."
The case has wide ranging, disturbing implications that affect how we as a society will be able to use digital goods.The Order is surprising in light of last month's United States Supreme Courts decision in Kirtsaeng v. Wiley & Sons, which reaffirmed the importance and applicability of the First Sale Doctrine in the United States of America. Also, within the past year the European Court of Justice has also favorably underscored the importance of the "first sale" or the "copyright exhaustion" doctrine and its direct application to digital transactions.
ReDigi will continue to keep its ReDigi 2.0 service running and will appeal the ReDigi 1.0 decision, while supporting the fundamental rights of lawful digital consumers.