ReDigi

History

ReDigi launched its public beta site in October 2011. It is the brainchild of entrepreneur John Ossenmacher and long time academic Larry Rudolph. Ossenmacher, along with his daughter, had the idea of creating an online "drop box" where people could donate their unwanted digital media. Rudolph, who at the time was working on a virtual phone project, understood the importance of giving a feeling of physicality to virtual objects.

Along with a team of top programmers, mathematicians and legal advisors, the Ossenmachers and Rudolph built ReDigi.

Services offered

ReDigi offers four main services

Cloud Storage for verifiable music that was legally purchased through iTunes or ReDigi

Cloud Streaming for listening to stored music on-the-go

Buying pre-owned music directly from other users on ReDigi

Selling pre-owned music straight from the users' Cloud space on ReDigi

Technology

ReDigi's technology is patent-pending. It was built by a team of programmers including former MIT faculty and graduates. Key features of the ReDigi system include:

The Media Manager An application that allows users to access the full range of ReDigi's offerings including cloud storage and selling music. The application helps users identify which of their songs are legally eligible for cloud storage and resale and helps users organize and track account activity including stored music, pending sales, completed sales and purchases made on the Marketplace.

The Verification Engine A tool used to analyze the user's music library to determine which songs are eligible for cloud storage and resale. The process is proven to be extremely accurate. Details about the analysis process and its ability to achieve such accuracy have not been publicly disclosed, as it is proprietary information to the company.

Currently ReDigi only accepts verifiable music that was legally purchased by the user on iTunes or ReDigi. Songs that were illegally obtained or ripped from a CD, for example, are not eligible.

The Cloud ReDigi states that it is the only cloud service technology that verifies all music uploaded for storage to ensure that the user legally obtained it. Music selected for cloud storage is systematically removed from the user's library and synced devices so that the only copy that exists is stored in the user's Cloud space on ReDigi. Users can keep their music in storage for streaming and listening on-the-go, or sell any of their stored music in the Marketplace.

The Marketplace Songs that are stored on ReDigi's cloud have already been verified and are eligible for resale. The seller remains the owner of the songs he/she has listed for sale on the marketplace until there is a buyer. When buyer and seller agree to a transaction, the music file and corresponding license are transferred from the seller to the buyer. The buyer becomes the new owner of the music file and the seller is no longer able to access it. ReDigi calls this process the Atomic Transaction as no copies of the music file are made during the transaction.

2012 lawsuit

In January 2012, Capitol Records sued ReDigi in New York Federal Court stating that Redigi was liable for contributing to copyright infringement demanding that ReDigi remove Capitol-owned material and pay $150,000 per track. On February 6, 2012, U.S. District Judge Richard Sullivan denied the preliminary injunction.

Vicarious Infringement

Vicarious liability for copyright infringement exists where the defendant "has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities." In ReDigi, the court held ReDigi vicariously liable because it "exercised complete control over its website's content, user access, and sales," and financially benefited from every sale due to its 60% transaction fee.

On March 30, 2013, the judge granted in part a summary judgment motion in favor of Capitol Records. The court stated:

"ReDidi has vicariously infringed Capitol's copyrights" and found RediGi guilty of direct contributory infringement.

ReDigi seeks judicial amendment of the Copyright Act to reach its desired policy outcome. However, "[s]ound policy, as well as history, supports [the Court's] consistent deference to Congress when major technological innovations alter the market for copyrighted materials. Congress has the constitutional authority and the institutional ability to accommodate fully the varied permutations of competing interests that are inevitably implicated by such new technology. Sony, 464 U.S. at 431. Such deference often counsels for a limited interpretation of copyright protection. However, here, the Court cannot of its own accord condone the wholesale application of the first sale defense to the digital sphere, particularly when Congress itself has declined to take that step."

Legal aspects

A number of interesting legal questions are raised by the resale of digital audio files. In the US, the first-sale doctrine means that if you own an object, you have the right to sell it. That raises the question of whether a file on a computer is an object. In 2008, in the case of London-Sire Recordings, Inc. v. Doe 1 it was decided that it is as long as the file has been obtained legally, and that the first sale doctrine should apply.

In the case of AAC files bought from iTunes, however, a pre-requisite of selling music through the ReDigi system, there is a question of whether the buyer actually owns the file. In 2010, the 9th circuit appeals court ruled that the iTunes terms of service clearly state that an iTunes purchase counts as a license rather than a sale, but there are ongoing court cases to establish this. The recent class action suit of Rick James vs. Universal is one such case. Universal claims that a digital download constitutes a sale for one likely reason: when it comes to royalties paid to artists, payout percentages for a sale are significantly lower than a license.

Much of the Capitol v. ReDigi preliminary hearing was focused on the aspect of the selling process. In the oral argument, Capitol claimed that it is perfectly acceptable to sell an iPod containing copyrighted music, but that to do it without a transfer of the physical medium that the files are on constitutes a copyright infringement. This is a legal gray area that is debated, but it is relevant because ReDigi are claiming that their technology allows them to avoid any unauthorised copies of files being created in the sale process.

On April 20, 2013, United States District Court, Southern District of New York has ruled that ReDigi is engaged in illegal activity. Judge Richard J. Sullivan wrote that "ReDigi has vicariously infringed" on copyrights and found ReDigi guilty of direct contributory infringement.

Subsequently, ReDigi's appeal was rejected by the appellate court.

Consumer rights

ReDigi has become the center of debate over consumer rights in the digital age. While ReDigi has created a way for consumers to exercise a non-right to resell an unauthorized copy of a digital purchase (see the Capitol Records v. ReDigi ruling on Page 5), opponents including RIAA and Capitol Records (EMI) believe that the reality of uploading and downloading files from the authorized original are indeed copies of one-another by each transfer, and therefore are non-inventoried items, not physical objects in copyright law.

However, in Europe, the European Court of Justice ruled on July 3, 2012, that it is indeed permissible to resell software licenses even if the digital good has been downloaded directly from the Internet, and that the first-sale doctrine applied whenever software was originally sold to a customer for an unlimited amount of time, as such sale involves a transfer of ownership, thus prohibiting any software maker from preventing the resale of their software by any of their legitimate owners. The court requires that the previous owner must no longer be able to use the licensed software after the resale, but finds that the practical difficulties in enforcing this clause should not be an obstacle to authorizing resale, as they are also present for software which can be installed from physical supports, where the first-sale doctrine is in force. The ruling applies to the European Union, but could find indirectly its way to North America; moreover the situation could entice publishers to offer platforms for a secondary market.