You Can’t Buy “Rasberry Beret” at the Second Hand Store: Court Nixes Site for Re-Selling Digital Music

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Ever bought a song or an album on iTunes and, after a while, decided you didn’t like it? Did you wish you could sell it somewhere, to someone, for something, the way you might have done with an old vinyl record or CD?

A company called ReDigi figured out a novel way for iTunes music purchasers to do just that. For now, though, it’s been shut down.

The way it worked was that music owners, using ReDigi’s Music Manager software, uploaded unwanted songs to ReDigi’s cloud locker. Music Manager made sure that the iTunes songs being uploaded were lawfully purchased in the first place. It also uploaded the songs in small packets. As a packet was uploaded to ReDigi, the same packet was deleted on the music owner’s computer. This process ensured that the complete song never existed in two places at the same time. It also ensured that the music owner didn’t retain on her computer a copy of the song she was selling. Once ReDigi had the song on its cloud server, it re-sold the music to a new owner. The proceeds of the sale got split between ReDigi, in the form of a transaction fee, and the original owner, in the form of credits used to purchase other music.

Sounds pretty great, right?

Users got to sell used digital copies of music the same way they used to sell used albums and CD’s. (Bonus: no warped albums or scratched CD’s!) New music gets purchased by people who want it. And record companies have some assurance, because of the Music Manager software, that there aren’t bootleg copies of songs being retained by owners who sell a single copy to ReDigi.

What could go wrong? Well, a lot.

First, Capitol Records, which sued ReDigi, claimed that just because a music seller got rid of all the copies of a song on her computer didn’t mean that she didn’t have an undisclosed bootleg copy on her hand-held or some other device not registered with ReDigi through Music Manager. So, the risk that a music owner would both keep a copy of a song and sell the same song to ReDigi was real.

Second, the business model isn’t legal – at least according to the US District Court for the Southern District of New York and, now, the U.S. Court of Appeals for the Second Circuit. The problem for ReDigi is in applying the “First Sale Doctrine.”

The First Sale Doctrine

The First Sale Doctrine says, essentially, that once a lawful purchaser buys a “particular copy or phonorecord [i.e., the digital recording of a song]” of a song, they have the right to “sell or otherwise dispose of the possession of that copy or phonorecord.” According to the Second Circuit, though, “that copy or phonorecord ” means just what it says – that specific copy. It doesn’t mean the copy that ReDigi makes when it uploads the song from a user’s computer or phone. That the uploaded copy and the now-deleted copy on the user’s machine are, in every respect, identical, just means that the former is a really good copy of the original. It doesn’t mean the new phonorecord on ReDigi’s server is the “particular phonocopy” that the original owner bought from iTunes. (As an aside, “phonorecord” sounds like it was made up by someone who thinks the internet is a “series of tubes,” right?)

So, if a user has the right to sell her copy of her phonorecord of, say, “House of the Rising Son,” but can’t upload it to ReDigi to sell it, how useful is that right?  The US Court of Appeals for the Second Circuit say says that there is a solution to this problem.  Instead of efficiently uploading her copy to ReDigi, she should just plan more carefully when she buys that sad song of debauchery, loss, and sin.  First, she could save her new purchase to a cheap thumb drive with a bunch of other songs and create just that one copy of the song.  Second, when she wanted to sell that mournful, tragic phonorecord, she could just mail the whole thumb drive to ReDigi.  In this way, the purchaser avoids making any new, illegal, phonorecords.

The Court’s solution is unsatisfactory for a number of reasons.

Who wants to save their music to a flash drive? Who wants to mail digital music anywhere? Why would anyone deliver a thumb drive by pony express or carrier pigeon when the internet was made for the purpose of quickly and easily delivering data electronically? How would music companies be assured, without using ReDigi’s Music Manager software, that the seller hadn’t kept a bootleg copy of the song? Finally, once ReDigi received the thumb drive, could it permissibly make copies of new phonorecords to load the snail-mail delivered songs to its own cloud servers so that customers might buy them?

If it sounds like the law hasn’t caught up with the market demand for resale of digital media, that’s correct. The Second Circuit’s opinion makes clear that it’ll be up to Congress to change the law if there’s a change to be made. In the meantime, you might consider a Spotify subscription.

Opinions in Capitol Records, LLC v. ReDigi, Inc.:

March 30, 2013U.S. District Court for the Southern District of New York
December 12, 2018U.S. Court of Appeals for the Second Circuit

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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