Vivendi Wins Copyright Ruling in Used-Digital-Song Case

ReDigi Inc., an online service that lets people buy and sell second-hand digital songs, violates the copyrights of Vivendi SA (VIV)’s Capitol Records, a federal judge ruled.

U.S. District Judge Richard Sullivan in Manhattan ruled in Capitol’s favor without a trial, saying the litigation will continue to determine whether the site should be shut down and monetary damages assessed. In a separate ruling, also dated March 30, Sullivan denied ReDigi’s request to dismiss the case.

Record companies have sued many online music services to prevent erosion of sales of CDs and digital songs. Capitol sued ReDigi last year, claiming that it infringes copyrights by allowing unauthorized copying of digital music files. ReDigi argued that it’s protected by the Copyright Act’s first-sale doctrine, which lets legitimate buyers of music resell it.

“The novel question presented in this action is whether a digital music file, lawfully made and purchased, may be resold by its owner through ReDigi under the first-sale doctrine,” Sullivan said in his ruling. “The court determines that it cannot.”

ReDigi, based in Cambridge, Massachusetts, argued it makes no unauthorized copies of songs. The company said it provides digital music storage and a marketplace for tracks legitimately bought from Apple Inc.’s iTunes.

Sale Process

“The technology behind our sale process does not involve the making of even a single copy,” John Ossenmacher, the chief executive officer and a founder of ReDigi, said in court papers.

ReDigi said in a statement that the court’s ruling applies only to its original technology and not to its updated offering, which it calls ReDigi 2.0.

“ReDigi will continue to keep its ReDigi 2.0 service running and will appeal the ReDigi 1.0 decision,” the company said in its e-mailed statement.

Maria Ho-Burge, a spokeswoman for Capitol’s record company, Universal Music Group, said the company had no comment on the ruling.

ReDigi allows users to upload tracks to its site where buyers can download them for 59 cents to 79 cents each. ITunes charges 99 cents for most tracks and the music companies take about 70 cents from each transaction. The labels receive no revenue from a ReDigi resale. ReDigi takes 60 percent of the proceeds of each sale, according to today’s ruling.

While ReDigi said in court papers that it was protected from liability by the first-sale doctrine, the label argued that the online service isn’t selling an original track purchased from iTunes but rather a digital copy of it.

Capitol is seeking statutory damages of as much as $150,000 from ReDigi for each track infringed. Capitol recordings sold by by the online service include Coldplay’s “Clocks,” Lady Antebellum’s “Need You Now” and Nat King Cole’s “The Christmas Song,” according to the complaint.

The case is Capitol Records v. ReDigi, 12-00095, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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