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Digital resale website ReDigi has lost its appeal in a copyright dispute with Capitol Records and Virgin Records.
The ruling was issued yesterday, December 12, by the US Court of Appeals for the Second Circuit.
Virgin and Capitol brought the suit for copyright infringement in the US District Court for the Southern District of New York in January 2012. Four years later, in 2016, the district court found in favour of the record companies, awarding damages of $3.5 million and ordering ReDigi to cease operating its resale service.
ReDigi is a “digital marketplace” where users re-sell lawfully purchased digital copies of goods, such as songs. Virgin and Capitol argued that ReDigi facilitated the unauthorised re-sale of their copyright-protected material.
Appealing against the district court’s decision, ReDigi argued that its business was lawful under the ‘first sale’ doctrine, whereby the purchaser of a copyright-protected product retains the right to sell, display or dispose of that product.
The Second Circuit rejected ReDigi’s argument that the service merely transferred files rather than creating an authorised reproduction. The court found that the storing of “the digital file in ReDigi’s server, as well as in the new purchaser’s device, creates a new phonorecord, which is a reproduction”.
The court also found that ReDigi’s service did not qualify as ‘fair use’ of copyright-protected material because it had no “transformative” impact on the product, but merely reproduced it.
According to the ruling, ReDigi’s replica products were re-sold in direct competition with the original creators of the work, and this outweighed any ‘fair use’ by ReDigi’s service.
Capitol Records, Virgin Records, ReDigi, copyright infringement, resale, music