ReDigi, an online platform that allows users to buy and sell pre-owned digital content directly from other consumers, is asking the Supreme Court to overturn a ruling finding that its services were not protected by the Copyright Act’s first sale and fair use doctrines.
Have you ever sold old or unworn clothes? Think of ReDigi like that – but instead of clothes, you are selling unwanted digital media like music, ebooks, games or apps. The founders of ReDigi, John Ossenmacher and his daughter, founded the company in October 2011 describing it as “simply the cyber-version of a used record store.” The company claimed that “everything it does is perfectly lawful because its technology first validates, then transfers your music to its servers without copying.” But record companies disagreed. In 2012, Capitol Records, who owned the copyright in some of the musical works in ReDigi’s files, sued the company for copyright infringement, alleging that it violated Capitol Record’s reproduction and distribution rights in the underlying works. The Second Circuit, in affirming the Southern District of New York’s decision, sided with the record label and held that ReDigi’s service was not protected by either the first sale doctrine or the fair use doctrine.
The first sale doctrine, codified under §109(a) of the Copyright Act, allows owners of a copy of a sound recording, without the permission of the copyright owner, to sell the copy. ReDigi thought they could capitalize on this provision through its technology that allowed users to sell copies of their music files to other users. But the problem was that when a user sold a track, a new copy of the digital music file was placed on ReDigi’s server and the old one was deleted. Thus, the Southern District of New York found that reproduction had occurred, holding that it was “simply impossible that the same material object…could be transferred over the Internet.” The Second Circuit agreed that the program created an unauthorized reproduction, which is not protected by the statute. The court also found that the service was not protected by the fair use doctrine, codified in §107 of the Copyright Act, which allows copying of copyrighted material if it’s for a transformative purpose, such as to comment upon, criticize or parody a copyrighted work. But the District Court said that ReDigi’s platform wasn’t transformative in any way because it simply resold music files in their entirety. The Second Circuit agreed again.
Now ReDigi is making a final plea to the Supreme Court. In its petition for certiorari, ReDigi argues that if the current decision is allowed to stand, it “will upend the reasonable and long-standing expectations of consumers that they may freely alienate their lawfully acquired personal property.” ReDigi argued, among other things, that its software lawfully transfers iTunes music files. In doing so, it analogized its service to the transfer of ownership in a safe deposit box. Just like a bank would transfer ownership of the safe deposit box’s contents by transferring possession of the key, its service transfers ownership of an “iTunes music file by changing only the user identifier information while leaving the data comprising the copyrighted work completely untouched.” Whether its arguments are enough for the Supreme Court to hear ReDigi’s case will likely remain unknown for some time, but this case undoubtedly has important implications for copyright law in the digital era, specifically with regard to how consumers will be able to use digital goods.