We’ve all been there. You had to have the latest release by Mariah Carey (you may begin thinking up an excuse for that), and you went on Amazon and purchased the CD. After listening to it a couple of times (and experiencing a case of buyer’s remorse), you decide that you want to sell the CD. Under the Copyright Act’s First Sale Doctrine (which I discussed in another context in a prior blawg post ), it is perfectly legal to do so. You may sell it, rent it or give it away and you owe the copyright owner nothing further.
However, what if, instead of purchasing the Mariah Carey album in CD format, you elected to purchase the mp3 version on iTunes. Can you sell the mp3s just as you can sell the CD? According to a Federal court in New York in the case of Capitol Records LLC v. ReDigi Inc., the answer is “no.”
Capitol Records sued startup company ReDigi, claiming that ReDigi had infringed Capitol’s copyrights. ReDigi, which calls itself “the world’s first pre-owned digital marketplace,” was founded in 2011. ReDigi’s platform allows listeners to swap music tracks for substantially less than the traditional $.99 cost to purchase new on iTunes. ReDigi makes its money by charging fees on each transaction conducted on its platform.
Capitol Records’ lawsuit claimed that the Copyright Act’s First Sale Doctrine is not applicable to sales of “used” digital copies. The court agreed. It distinguished the situation of the resale of physical CDs (which, of course, are bought and sold in used music stores all the time) from the attempted creation of a marketplace for digital copies. Because ReDigi’s service requires the seller to upload the digital music on ReDigi’s servers, the court held that this was creating a new copy of the music. As a result, the First Sale Doctrine did not apply. The court found that in ReDigi’s situation, the original digital copy is reproduced when it is uploaded to ReDigi’s cloud service. ReDigi argued that there was no reproduction because the original digital copy would be removed as part of the process of reselling a digital file on its service. The court was not persuaded by that argument and, instead, simply focused on the fact that an unauthorized reproduction had been made. It stressed that the First Sale Doctrine only applies to the resale of lawfully made copies.
For reasons that are not clear, the court did not focus on another key issue raised by digital resales—whether the “purchaser” of digital music is an owner of a copy or merely a licensee of the copyright holder. iTunes and similar services make it clear that the content they offer is licensed, not sold. The First Sale Doctrine only applies to copyrighted works that have been purchased. This factor alone could have been enough to rule in favor of Capitol.
Instead, the court quoted and appeared to place a good deal of emphasis on a 2001 United States Copyright Office report to Congress that argued forcefully against allowing for a right to resell digital works. The report stated, in part:
“Physical copies of works degrade with time and use, making used copies less desirable than new ones. Digital information does not degrade, and can be reproduced perfectly on a recipient’s computer. The ‘used’ copy is just as desirable as (in fact, is indistinguishable from) a new copy of the same work. Time, space, effort and cost no longer act as barriers to the movement of copies, since digital copies can be transmitted nearly instantaneously anywhere in the world with minimal effort and negligible cost. Then need to transport physical copies of works, which acts as a natural brake on the effect of resales on the copyright owner’s market, no longer exists in the realm of digital transmissions.”
Clearly, the Copyright Office’s position was based, in large part, on the assumption that people selling digital copies would simply retain the original digital copy. Compare this to the situation of the resale of a CD in which that particular physical copy is sold. In my view, a key fact here is that the original owner of a CD no longer possesses that copy after it is sold. At the time of the 2001 report, a good technical solution to ensure that the original digital copy would be deleted in such a transfer situation did not exist. However, technology has advanced and there are more viable (albeit, imperfect) ways to assure that the original is deleted today. Nonetheless, this decision in favor of the copyright owners clearly draws the distinction between the treatment of digital and physical copies.
I believe this case could have a wide reaching impact beyond music to other types of digital works, such as games, movies and books.
