Digital Music File Resales Infringe Record Labels’ Copyrights

On December 12, 2018, the Second Circuit Court of Appeals affirmed a district court’s ruling favoring several major record company plaintiffs in a copyright infringement case against a digital music resale site.  Defendant ReDigi, Inc. resells digital music files on the Internet.  ReDigi permits individuals who purchase digital music files from iTunes to install ReDigi’s “Music Manager” software, which analyzes the files to determine whether they are lawful purchases.  If so, the seller then transfers the eligible files to ReDigi’s remote server, after which ReDigi breaks the music into packets, makes a temporary copy of the packets, and sends a command to delete the digital file on the seller’s device where the music was purchased.

Although ReDigi takes measures to prevent duplication of files, ReDigi’s software does not prevent sellers from saving digital music files on unconnected devices prior to the sale. This circumvents the platform’s efforts to prevent duplication.

Capitol Records and other record companies successfully sued ReDigi for copyright infringement and obtained $3.5 million in damages. The district court held that ReDigi’s resales of digital music files infringed the plaintiffs’ reproduction control under the first sale doctrine, found in Section 106 of the Copyright Act.  Because the files are unlawful reproductions, they are not subject to resale rights.

The Second Circuit affirmed the district court, holding that ReDigi “effectuate[d] an unlawful reproduction” of phonorecords that resulted in a reproduction of the files by fixing them both in ReDigi’s server and in the new purchaser’s device.  Even though ReDigi’s software deleted the file in the seller’s device, the storage of the file in ReDigi’s server and potentially in a new purchaser’s device resulted in creation of new phonorecords.

The Second Circuit declined to take a position on whether establishing a market for digital music files would be productive for modern copyright law.  However, it recognized that such a market would differ from other second-hand markets: digital music files, unlike books, movies, and other materials subject to copyright, are in the same condition when resold.