Resale Market for Digital Purchases Deemed to Violate Copyright Act

Walking around a flea market or garage sale will inevitably take you for a stroll down memory lane as you come across someone selling old records, cassette tapes, CD’s and maybe even an 8-track or two.  Reselling old music is a common occurrence as technology changes and we clean out our closets.  ReDigi took that very idea of a resale market for music, and digitized it.  They developed a service that allows consumers to sell their old digital music files.

ReDigi’s system allows users to upload their digital music files and sell them to others at a discounted rate of around 49 cents – 79 cents.  Considering a new track on iTunes costs users around $1.29, this is a significant discount. When a user sells a music file on ReDigi, the system deletes the uploaded file from the sellers’ hard drive.  ReDigi requires that the money earned by the seller from the sale of the digital file be used towards a future purchase by the seller of a digital track uploaded by other ReDigi users.

However, in January 2012, Capital Records filed a copyright infringement lawsuit against ReDigi claiming that in order for ReDigi’s service to work, they must first make a copy of the digital file to be uploaded to their servers, an act which violates the Copyright Act.

Earlier this year, U.S. District Judge Richard J. Sullivan agreed with Capital Records, saying that ReDigi’s service infringed Capital’s copyright, regardless of whether the files were deleted from the sellers’ computers.

While it seems that ReDigi lost the first battle, Amazon and Apple are both currently pursuing patents for an “electronic market place for used digital objects”.  It will be interesting to see how this new market will unfold.

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