Second Circuit Bans a Company’s Marketplace for Resale of Digital Music

The United States Federal Court of Appeals for the Second Circuit affirmed a prior ruling by the district court, holding that ReDigi, an online platform for the resale of lawfully purchased digital music files, infringes copyrighted music.

ReDigi sought to create a technology and marketplace for resale of music files. A ReDigi user seeking to resell music would use the ReDigi technology to transfer the music files to ReDigi’s server. The technology was designed so that once the file is transferred to

ReDigi’s server, the copy on the user’s device is deleted. However, ReDigi’s technology allows the new purchaser of the music files to store the purchased file on ReDigi’s server and also subsequently receive and store a copy on the new purchaser’s device.

The Second Circuit found that ReDigi’s technology involved a reproduction of music files. Since such reproduction of copies is not authorized by the copyright owners, ReDigi’s technology was found to be infringing. The Court also dismissed ReDigi’s argument that the copies made are permissible under the fair use doctrine, because it lacks any ‘transformative’ objective that is different in meaning, context or character from the original music file, and because it directly competes with the copyright owners in their primary market.

The Court’s decision noted, as an aside, that a legally viable secondary market can be imagined for “those who cost‐effectively place 50 or 100 (or more) songs on an inexpensive device such as a thumb drive and sell it”, and that “other technology may exist or be developed that could lawfully effectuate a digital first sale”.

CLICK HERE to read the Second Circuit’s Decision in Capitol Records LLC v. ReDigi, Inc.