Digital Resale & Copyrights: Why the Second Circuit Won’t Buy It
In 2011, ReDigi Inc. introduced technology that effectively attempted to establish a secondary market for “used” digital music files, where owners who had legally downloaded music files from iTunes could sell the music that they no longer wanted. In a nutshell, the system allowed the owner of a digital file to transfer the music to ReDigi’s cloud storage locker, from which ReDigi could then sell it to a willing buyer for a lower price than the cost of an “original” purchase from the iTunes Store. When a sale was made, Redigi would retain 60% of the sales price, while the seller and artist got 20% each. Although the process of transferring a file from an owner’s personal computer to ReDigi required that it be reproduced on ReDigi’s server, the system removed the file from the owner’s personal computer as the file was moved. Capitol Records, the copyright owner of many music files sold over the ReDigi system, sued ReDigi for copyright infringement, alleging that the company reproduced and distributed its copyrighted works without permission.