Selling Used Digital Music: It’s Now or Never?

by Riveles Wahab LLP
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Seller of “Used” MP3’s Avoids Preliminary Injunction.

Controversial purveyor of “used” digital music files ReDigi escaped a crushing blow to its business in early February when a Southern District of New York judge declined to issue a preliminary injunction ordering it to cease doing business. The injunction was sought by Capitol Records, which has sued ReDigi for direct and secondary copyright infringement. The judge declined to speculate as to the eventual victor, but did find that Capitol Records had shown a likelihood of success on the merits by having a compelling argument on its face. The preliminary injunction denial was largely based on a lack of irreparable harm, since money damages were an adequate remedy for any harm that may have been caused by ReDigi’s business model and ReDigi kept careful records from which any eventual damages could easily be calculated.

The way that ReDigi’s used MP3 service works is carefully constructed to give it the best legal defense possible to a copyright infringement claim. All ReDigi users are required to download its “Music Manager” program in order to resell their music files. The user may then upload eligible files into the user’s Cloud Locker. The only eligible music files for resale are iTunes files, since unlike digital music purchased from Amazon, iTunes music files are actually purchased and not licensed. This also avoids users profiting off of illegally downloaded files or music they still own because it was ripped from a CD. Once the eligible files the user has selected for sale are uploaded, the copies on the user’s computer and synched devices are automatically wiped, although the user may still stream the music files from his or her Cloud Locker through ReDigi while they remain unsold. When another user buys a song, the “owner” of the file in ReDigi’s cloud database is changed from the seller to the purchaser. No copy is made immediately upon sale, only a change in which user has permission to stream or download the file. The owner of a digital file stored in a Cloud Locker may download it to his or her computer at any time, and the copy on the Cloud Locker server will immediately be wiped. ReDigi earns up to a 15% commission on the music files sold through its service.

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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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