ReDigi, which describes itself as ‘the world’s first pre-owned digital marketplace’ has suffered a significant setback in its attempts to develop a legal online market for pre-owned digital works such as music. According to a ruling made public on 1 April, US District Judge Richard Sullivan said that since reselling digital works inevitably requires making a copy of the original work, the first sale doctrine cannot apply. “According to the court,” commented Corynne McSherry on the EFF blog, “when it comes to music, you may have bought it, but you don't own it, at least if the ‘it’ is an mp3 file rather than a CD.”
ReDigi makes some effort to protect the interest of the copyright owner in the resale of copyright goods within the first sale doctrine. That doctrine allows the buyer to resell purchased goods (such as a CD). However, Judge Sullivan’s ruling ties that to physical goods that do not require a copy of the copyrighted goods to be made. ReDigi’s method is to make a copy of the digital work, ensure that the original is immediately deleted, and then allow the resale of a single copy.
According to the court, explains McSherry, “The first sale doctrine simply doesn’t apply to digital goods, because there is no way to ‘transfer’ them without making copies. When users upload their music the cloud, they are making a copy of that music, whether or not they subsequently (or simultaneously) delete it from their own computers, and the first sale doctrine doesn’t protect copying, only distributing.”
Sullivan’s ruling says, "It is beside the point that the original phonorecord no longer exists. It matters only that a new phonorecord has been created."
ReDigi is ‘disappointed’ in the ruling. “The case has wide ranging, disturbing implications that affect how we as a society will be able to use digital goods,” it said in a statement yesterday. It points to last month’s Supreme Court decision in Kirtsaeng v. Wiley & Sons which reaffirmed the applicability of the First Sale Doctrine in the US, and the European Court of Justice which “has also favorably underscored the importance of the ‘first sale’ or ‘copyright exhaustion’ doctrine and its direct application to digital transactions.”
However, the company points out that the ruling concerns ReDigi 1.0 only, which has been superseded by ReDigi 2.0. ReDigi 2.0 “incorporates patent pending ‘Direct to Cloud Technology’ and ‘Atomic Transfer Technology’ that the court stated are not affected by its recent ruling. Judge Sullivan specifically stated that; referring to ReDigi 2.0, ‘the court will not consider it in this action’ and ‘while ReDigi 2.0, 3.0, or 4.0 may ultimately be deemed to comply with copyright law – a finding that the Court need not and does not now make’.”
ReDigi affirmed that it will keep ReDigi 2 running, and will appeal the ReDigi 1 decision. In the meantime, the question of damages and injunctive relief remain open. Capitol sought damages of $150,000 per infringement – a level that could threaten the future of the company irrespective of ReDigi 2.0.