Court slams shut music locker ReDigi, says “first sale” doesn’t apply

A court ruled on Saturday that “music locker,” ReDigi, which offers consumers a way to resell music they had purchased from iTunes, is liable for copyright infringement. The ruling is likely to force the service to shut down and also dims the prospect for a mainstream marketplace for used digital goods.

In case you’re unfamiliar, ReDigi touts itself as a legal source of second-hand music. It works by inviting users to upload iTunes tracks to a cloud-based “locker” where other users can purchase them. When someone buys a track, the song is transfered to the purchaser’s locker and Redigi performs a sweep of the seller’s computer to ensure they haven’t held onto a copy — an arrangement that ReDigi argues makes it akin to a used record store.

Capitol records sued Redigi, claiming that the service had sold more than 100 of its copyrighted recordings without permission. After refusing to issue a preliminary injunction in February, 2012, a New York federal judge this weekend ultimately sided with Capitol.

In his ruling, US District Judge Richard Sullivan roundly disagreed with Redigi’s record store theory, arguing that that its “first sale” defense (a copyright defense that lets people sell used works) did not apply because the works in question were not legally obtained in the first place. Instead, Sullivan argues that Redigi had made illegal copies of the songs that it was then offering for sale. Rejecting the record store analogy, the judge offered a metaphor of his own:

The first sale defense does not cover this any more than it covered the sale of cassette recordings of vinyl records in a bygone era

Sullivan’s skepticism also appeared to be driven by the economics of Redigi’s model in which the start-up takes a 60% cut of each transaction, dividing the remaining 40% between the seller and a fund for artists.

The ruling, which relies heavily on the technical fact that the Redigi model relies on making a copy, is likely to please copyright owners while disappointing technology enthusiasts who argue that consumers should have a right to resell digital media in the same way as records or books. Sullivan acknowledged that the Copyright Act is unfriendly to digital reselling but suggested the issue was one for Congress, not courts, to address.

The ruling — which you can read in full below — did not include damages or an injunction but it’s a safe bet these are coming soon since Sullivan found Redigi liable on summary judgment for several types of copyright infringement and also for contributory and vicarious infringement too (meaning that Redigi is guilty, like music-sharing service Napster, of encouraging its users to breach copyright). Redigi, in other words, is unlikely to get up off the legal mat anytime soon.

The decision may also mean that any future digital resale market is likely to be created by the likes of Amazon, which recently obtained a patent for an “electronic marketplace.” Such a service would likely operate in conjunction with copyright owners. In the meantime, there is likely to be heated debate over the “ticking time bomb over digital goods.”

Redigi Capitol