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A Flawed Decision Costs ReDigi the First Round of Court Case Over Reselling Digital Music
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  • April 2, 2013
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5069265780_3c7be147e1_mReDigi, a startup that in 2011 launched an online marketplace where users could buy and sell second-hand digital music, violates the copyrights of Capitol Records.

US District Court Judge Richard Sullivan handed down a ruling on Saturday that pretty much ended the case with a decision in favor of Capitol Records. The judge was responding to the summary judgement filings that the 2 parties made last year and it seems he thought that Capitol Records presented a compelling argument.

You can find the ruling here. It give Capitol Records everything they wanted.  ReDigi committed copyright infringement, fair use and the first sale doctrine don’t apply, and ReDigi is liable for direct, secondary, and contributory infringement.

The ruling is 18 pages long and quite technical, but there is one point I wanted to call out. Judge Sullivan pins down exactly why the first sale doctrine does not apply, only his explanation is problematic.

According to the ruling, the song you buy from iTunes cannot be resold unless you want to sell the specific chunk of the hard disk it was sitting on when you first downloaded it (I’m paraphrasing page 6). The judge goes on to exclude situations where users might make copies for themselves and limits the infringement to making a copy on someone else’s hard disk.

This raises some interesting possibilities.  First, it leaves open the possibility that you might burn the music to a CD and sell that. This could be legal. This part of the ruling also leaves a loophole open for a shared streaming service. So long as I still control the music file I uploaded, it could be legal for me to let others stream the music. And then there’s the probability that one can have multiple legal copies of a piece of content; which is is the original?

So is this the end of selling used digital content? Nope. Today’s ruling is a blow to ReDigi’s case but not a fatal one. There are always appeals to higher courts, including the US Supreme Court, so today’s loss is not merely a midpoint and not the end of case. This case could go on for years, though I’m not sure ReDigi can afford to litigate endlessly.

Nor does this ruling end any chance that Amazon or Apple might open a used content market.  As I explained back in February, Amazon is going to need to get permission from the copyright holders before they start allowing customers to resell Kindle ebooks.  Today’s ruling does not change that.

ReDigi was committing copyright infringement because they didn’t have the approval of the copyright holder.  That is what I said Amazon would have to get before reselling used Kindle ebooks, and I am still not wrong.

It is a shame that ReDigi might not have the funds to pursue this case to the US Supreme Court. There are several serious issues with the ruling that I suspect the USSC might overturn.

While I will agree that this ruling looks to be technically correct, it is also backward looking. It correctly applies current law to this case but it ignores the fact that the existing law and previous court decisions did not envision the market situation we find ourselves in today.

Thanks to this ruling, there is a significant difference in the rights you might have over the content you purchase. A significant amount of content was sold in digital form in 2012, including over 40% of the music sold in the US and about 21% of the book market. The sales that make up these market segments come with far fewer rights than if, for example, you bought physical media.

My question is whether that is fair to the consumer. Is it reasonable that the content should come with fewer rights just because it was sold in digital form?

Folks, this question needs to be answered by the US Supreme Court. We are at a watershed moment in the history of copyright, the likes of which has not been seen since Sony vs Universal (the Betamax case).

I want this before the US Supreme Court because a strong argument can be made that a customer should have the same rights over the content they purchase no matter the form it was sold in.

Yes, that goes against the accepted interpretation of current copyright law. But is the intent of the law to block resale of legally purchased content or to allow it?  I say that the precedent points to allowing the resale of content that is legally purchased; that has been clear for over 100 years – for physical media. I think it is time to extend that precedent to digital content as well.

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