Southern District of New York Holds Copyright First Sale Doctrine Does Not Apply to Digital Music Files; Resale of Digital Music Through Transmit-and-Delete Process Violates Copyright Law

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In Capital Records, LLC v. ReDigi Inc., 12 Civ. 95, (Mar. 30, 2013) (“Capital Records v. ReDigi”) Judge Sullivan of the Southern District of New York held that the copyright “first sale doctrine is limited to ‘material items’” and cannot apply to digital files. ReDigi, Inc. (“ReDigi”) advertises1 its cloud based service as a sort of storage locker and used book store for digital music files. Through ReDigi a user could “store, stream, buy and sell your legally purchased pre-owned music.” Important to the legal context for this business is ReDigi’s contention that, through the careful design and operation of a file transfer system for digital files, ReDigi’s used file business should be subject to the same ‘first sale’ protections from copyright infringement as the operators of used physical books and records. Judge Sullivan rejected this argument.

Facts and Procedural History -

ReDigi offers a service that allows users to sell digital music files that they have obtained either through iTunes or through ReDigi itself. To sell music using ReDigi, users download ReDigi’s “Media Manager” to their computer, which finds eligible music on the user’s computer. The user then has the ability to upload the music to ReDigi’s servers and sell it to other users for credits. When a piece of music is sold to another user, ReDigi transfers a copy of the file to the buyer’s computer and the Media Manager finds and erases any copies of the music on the seller’s computer. However, the Media Manager cannot erase copies of the file that are not on the seller’s computer.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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