Old Law, New Technology: Court Blocks the Sale of Pre-Owned Digital Music

by Paul Rubell, Esq.

A federal judge in New York recently ruled that the sale of pre-owned digital music violates the U.S. Copyright Act.  The court’s decision in Capitol Records, LLC v. ReDigi Incwas a victory for the owners of digital music, by shutting down an online marketplace for pre-owned music that was purchased lawfully, and then re-sold.  The decision has broad implications for the future of downloadable content of all sorts, extending far beyond music.

What is pre-owned digital content?  This term refers to music, movies, podcasts, apps, and games that have been purchased and downloaded via iTunes, Kindle, Android, or other means, and later re-sold to others.

ReDigi is an online cloud-based service that allows its customers to buy, sell, and store pre-owned digital music files.  ReDigi’s customers can purchase the “used” music at a significant discount from the original retail price.

For decades, people have sold their music at garage sales and flea markets on CD, cassette tapes, vinyl records, and 8-track tapes.  More recently, “hard” copies of music have been sold via eBay and Craigslist.

all-things-capitol-lp-1

ReDigi created a new outlet for people who store their music collections on portable devices such as iPods, smartphones, and computers for easier access, better organization, portability, and wireless streaming.

The recording and movie industries have been troubled about the dwindling market for the sale of music and media.  In this important new court case, Capitol Records contended that ReDigi’s store was undermining the value of copyright protection, and that it is being harmed commercially.

Judge Sullivan agreed with Capital Records.  He ruled that:

“[b]ecause this is a court of law and not a congressional subcommittee or technology blog, the issues are narrow, technical, and purely legal.”

For this reason, the court had no choice but to decide the case based on existing law.

The court had to determine whether the sale of pre-owned digital music is protected by the “first sale doctrine”. This exception to the Copyright Act permits someone who has lawfully purchased a copyrighted work, such as a music CD, to resell it.  This doctrine permits used book and record stores to flourish.

Capital Records convinced the court that the first sale doctrine does not protect online resales.  It is not technologically possible to resell a digital music file without “reproducing” the binary computer file, the media giant argued.  Reproducing is not the same thing as reselling, and the copyright laws prohibit photocopying of physical books en masse.  This is the same argument that dealt a death blow to Napster back in 2001, when peer-to-peer file sharing was ruled illegal.

Using the same logic, selling apps and other digital content would also run afoul of the Copyright Act, even though the content was already paid for at the time of initial purchase and download.  ReDigi’s business is very different than Napster’s free upload/download system.

napster

Napster was a music give-away; in contrast, ReDigi facilitated the resale of purchased music files.

According to the court, people who purchase digital media sacrifice some of their ownership rights; rights that they keep with respect to their vinyl albums and CDs.

Judge Sullivan has urged Congress to wake up to the new world order of digital music.  Music in the cloud, accessed on mobile devices, is here to stay.

Old laws need to catch up with the technology of today and tomorrow.

 

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