Court Finds No Digital Re-Sale Right for iTunes Music

by Foley Hoag LLP - Trademark, Copyright & Unfair Competition

iTunesOne reason to buy physical books and music CDs rather than Kindle books and iTunes files is that when you own a physical copy of the book or music CD, you can lend it to friends.  You could also, if you chose, sell your copy.  These are rights guaranteed by the first sale right in Section 109 of the Copyright Act.  When you buy a Kindle book or an iTunes song (or more accurately, when you license them), you have no practical way to lend or sell them.  ReDigi is a service that is designed to allow iTunes users to sell iTunes music.  However, according to Judge Richard J. Sullivan in his summary judgment order handed down earlier this year in Capitol Records v. ReDigi (a case in the U.S. District Court for the Southern District of New York), sale of a digital music file by ReDigi constitutes copyright infringement.

How ReDigi Works

ReDigi is an online service that bills itself as the legal alternative to file sharing sites.  It allows users to purchase and sell validly purchased used iTunes digital files.  To use the ReDigi Service, ReDigi users must download ReDigi “media manager” software to their computers.  The software locates validly purchased iTunes songs, copies them to ReDigi’s cloud server, and deletes them from the user’s own computer.  The ReDigi user can then stream the music to any device, or instead sell the songs to other ReDigi users in exchange for credits that can be used to buy used music from others using the ReDigi service.

Lawsuit by Capitol Records

Capitol Records sued ReDigi for copyright infringement, alleging unauthorized reproduction and distribution of Capitol’s copyrighted sound recordings.  In deciding summary judgment motions, Judge Sullivan found that the ReDigi system violated Capitol’s exclusive right to reproduce the copyrighted recordings, because transfer of the music file from the user’s computer to the ReDigi file server necessarily involved making a new copy.  Although ReDigi had argued that there was no true copying taking place because the file was merely being transferred from one place to another, Judge Sullivan parsed the Copyright Act precisely to find otherwise.  The reproduction right, he found, was the right to reproduce the sound recording in a physical object (in this case, the hard drive of a computer).  The file transfer necessarily involved the reproduction of the recording in a new physical object (ReDigi’s server hard drive, as opposed to the user’s hard drive), and as such an unauthorized reproduction had taken place.

Copyright First Sale Doctrine

ReDigi had argued that its distribution of the used digital files was protected by the Copyright Act’s first sale right.  However, Judge Sullivan did not agree.  Firstly, ReDigi could not avail itself of the first sale right because the copies it distributed had not been “lawfully made”; they were infringing copies made when ReDigi violated the reproduction right.  In addition, the judge held that the first sale right only applies to a physical object in which the copyrighted work is embodied – the “copy or phonorecord” referred to in Section 109.  In order words, in the realm of digital music, the first sale right would allow you to sell your entire iPod or computer with music on it, but not the digital files themselves.  The judge made it clear that he would not be swayed by policy arguments, and that it was up to Congress to act if the first sale right is to be extended to digital files.

A Changed ReDigi Service

Naturally, because business moves faster than the law, the court’s decision in this matter is already somewhat moot; ReDigi has already released a new version of its service in which the iTunes files are transferred directly from iTunes to the ReDigi server.  In addition, this case has not been fully resolved.  There remain a number of issues that were not resolved on summary judgment.  The court docket shows that the parties have conducted mediation, and discovery appears to be continuing.

Interestingly, others may be planning to enter the digital resale market.  CNBC has reported here that Amazon has been awarded a patent for a secondary market for digital objects, and that Apple has received a similar patent.   However, until a fully legitimate digital re-sale market emerges, buying a physical copy of a book or music CD may remain the safest way to lend or re-sell such copyrighted works.

Image courtesy of fdecomite.


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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