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Capitol Records sues ReDigi

EMI label alleges copyright infringement by 'used' digital music site

Alleging a new frontier in music piracy, EMI Music’s flagship label Capitol Records has filed a copyright infringement suit against digital music resale company ReDigi.

The suit, filed late Friday in New York federal court, claims that Cambridge, Mass.-based ReDigi — established in October as a marketplace for “used” digital music files — is nothing more than “a clearinghouse for copyright infringement and a business model built on widespread, unauthorized copying of sound recordings.”

In early November, the RIAA, which represents the four U.S. major label groups, fired a warning shot across ReDigi’s bow with a cease-and-desist letter disputing the company’s legal right to resell digital music. Capitol is the first major label to pursue legal action against the firm.

On its Web site, ReDigi touts itself as “the worlds (sic) first real LEGAL ALTERNATIVE: to expensive online music retailers and to illegal file sharing for music lovers who want to own their music. Is ReDigi Legal? YES it is!”

However, Capitol’s complaint depicts the company as the disseminator of multiple illegal copies of music files, and disputes ReDigi’s right to resell them under the so-called “first-sale doctrine” that protects the redistribution of physical albums and other legally purchased copyrighted material.

According to the action, users employ ReDigi’s proprietary software to designate songs they wish to sell from their computers. Tracks are then allegedly removed from the user’s computer and synced devices, stored on ReDigi’s server and offered for sale on the company’s web site.

The suit says, “The track ‘stored’ in and offered to consumers from ReDigi’s ‘cloud’ is necessarily a copy of the user’s original file, which ReDigi purportedly deletes from the user’s hard drive. No tangible, material object is transferred to the ReDigi ‘cloud.’?”

The suit adds that a second copy is then made when a ReDigi transaction is finalized:

“The so-called sale … can only be accomplished by the creation and transfer of yet another copy of what was once the original user’s digital file.”

Capitol’s action claims that even if music files were lawfully obtained, their resale is forbidden: “For example, Amazon.com … expressly prohibits users of its MP3 music service from any redistribution, transfer or sale of recordings downloaded via that service.”

ReDigi typically resells tracks for 79¢ (vs. the 99¢ usually charged at minimum by such online stores as iTunes and Amazon), and takes a fee of 5% to 15%, according to the suit.

Capitol flatly contests ReDigi’s assertion that its resale activity is protected under the first-sale doctrine.

“ReDigi … is not an ‘owner’ of any such lawfully made copy, nor is ReDigi disposing of the actual ‘particular copy purchased by a user,” the suit alleges. “Rather, ReDigi and its users are making and distributing unauthorized copies of that original file.”

Capitol’s action seeks preliminary and permanent injunctive relief; any profits attributable to ReDigi’s alleged infringements; maximum statutory damages of $150,000 per copyrighted work infringed; and compensatory and punitive damages to be determined at trial.

ReDigi has consistently maintained that its activities do not violate copyright statutes.

Its site states that its software “facilitates the ‘verification’ and ‘hand off’ of a digital music file from the seller to the buyer, ensuring both that the file is from a legitimate source and eligible for resale on ReDigi, and that any additional copies of a sold file that have been made by the seller … are also deleted.”

In a November interview with the New York Times, the company’s CEO John Ossenmacher said, “ReDigi is a marketplace that gives tools to be in compliance with copyright law.”

Ossenmacher said in a statement, “It’s a meritless case. We will defend it, and the digital rights of consumers vigorously.”

It remains to be seen if the other major labels or their imprints will lodge their own complaints against ReDigi. Spokesmen for Universal Music Group, Warner Music Group and Sony Music Entertainment all declined to comment.

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