ReDigi, the world’s first and only online marketplace for digital used music may soon be dead. After just a year and half in existence, a federal court in New York has ruled in Capitol Records’ favor that ReDigi’s business model constitutes copyright infringement.
ReDigi users create an account and download the “ReDigi Marketplace App.” This App scans a user’s media library and identifies the eligible files: those downloaded from iTunes or acquired from other ReDigi users, but not files originating from a compact disc. All eligible files, a user chooses to submit for resale, are then transferred from the user’s library to a cloud server. A user may continue to listen to his music, uploaded to the cloud server, via internet streaming, but only until the selected track is purchased by a ReDigi shopper, usually for 49¢ to 79¢. After that, the user has parted with the file and no longer has access to the song. Unless, of course, the user made a copy of the track and then stored that track somewhere else, such as on another hard drive or compact disc.
Part of the court’s problem with ReDigi was the ease with which a user could infringe various copyright protections, perhaps rendering this first-ever online marketplace a digital black market of sorts. The court recognized the frailty of ReDigi’s safeguards but focused more on the ways in which ReDigi infringed Capitol Records’s copyrights, specifically the exclusive rights of reproduction (by transferring files from a user’s hard drive to the cloud server), distribution (by selling the unlawfully-reproduced files on ReDigi’s website), and public performance (by streaming free thirty-second song clips and exhibiting album artwork on ReDigi’s website without permission).
Among other defenses, ReDigi tried to rely on the first-sale doctrine, which provides that once a copyrighted work is sold, that work can be distributed through resale. It is this doctrine that allows us to browse the stacks of used books and records stores. Thus, according to ReDigi, if it’s perfectly legal to re-sell the compact disc single of Water Liars' “Linens,” why not the digital file? Because the first-sale defense only applies to copies “lawfully made” under the Copyright Act, and the digital reproduction that occurs—at least according to the court—during the journey from the user’s media library to the cloud server, is a violation of the copyright holder’s exclusive right of reproduction.
To accept the court’s holding, you have to agree with its conclusion that ReDigi’s technology does not allow for a digital file to be transferred from a user’s hard drive to the cloud server without it being reproduced. Other courts may may well come to a different conclusion on this point; perhaps if it were possible to restrict a user’s ability to copy the files they intend to sell on ReDigi such that those files were literally the only files that existed, a court would be more inclined to treat ReDigi as a digital equivalent of dropping off old records at Grimey’s New & Preloved Music.
This creates difficult technology questions, but those questions can doubtlessly be answered.
Still, there seems to be a bigger reason that would explain ReDigi’s failure: at least in theory, downloads from the iTunes Store cannot be lawfully sold because they were never purchased. First, the iTunes Store Terms and Conditions—which admittedly no one except lawyers like me have ever read or will ever read, explicitly provide that the purchase of digital content is “for end user use only.” The end user is the one who presses the “download” button. Furthermore, the terms and conditions enumerate several “Usage Rules” by which purchasers must comply. The first of these is, “You shall be authorized to use iTunes Products only for personal, noncommercial use.” Among the other Usage Rules are restrictions on how many devices a user can store digital content and how many times a playlist of songs can be burned.
Second, given the enormous number of use restrictions imposed by these terms and conditions on its digital content, a download from iTunes or other online music stores such as Amazon or Google is likely more properly characterized as a license than a sale. A license does not extinguish the original copyright holder’s right of distribution, which is why the first-sale doctrine is inapplicable to licenses. This view is quickly gaining acceptance, and the result is important in the context of resale. A license is, essentially, permission to do certain things. The iTunes terms and conditions set out in great detail the parameters of the permissible uses you can make of your download, and selling it is not included. The other major music download players have similar limitations. Have a look at their Terms of Use:
Amazon: “You may not redistribute, transmit, assign, sell, broadcast, rent, share, lend, modify, adapt, edit, license or otherwise transfer or use the Music Content.”
Google Play Store: “You may not sell, rent, lease, redistribute, broadcast, transmit, communicate, modify, sublicense or transfer or assign your rights to Products to any third party without authorization, including with regard to any downloads of Products that you may obtain through Google Play.”
Amazon and Google even more explicitly prohibit the resale of downloads than Apple. Unless and until any of these online music stores offer its users a right to resell as part of the license, ReDigi, the first ever online marketplace for digital used music, will likely be the last.
