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Citigroup’s Capitol Loses Bid to Close Song Reseller ReDigi

Feb. 7 (Bloomberg) -- Citigroup Inc.’s Capitol Records, a music label set to be acquired by Vivendi SA, lost a bid to have online music reseller ReDigi Inc. shut down.

U.S. District Judge Richard Sullivan declined to issue the preliminary injunction Capitol sought at a hearing yesterday in federal court in Manhattan, saying Capitol didn’t prove irreparable harm. He also called ReDigi’s motion to dismiss the case “premature.”

Capitol, which is now part of EMI Group, said the service infringes copyrights to its songs by allowing unauthorized copying of digital music files. In its complaint, Capitol said that EMI recordings sold by ReDigi include Coldplay’s “Clocks,” Lady Antebellum’s “Need You Now” and Nat King Cole’s “The Christmas Song.”

Ray Beckerman, a lawyer for Cambridge, Massachusetts-based ReDigi, told the judge that the company “doesn’t infringe anyone’s copyrights.” The company stated in court papers that it provides digital music storage and a marketplace for songs legitimately bought from Apple Inc.’s iTunes.

“An injunction would put us out of business, pure and simple,” John Ossenmacher, chief executive officer and a founder of ReDigi, said in a declaration filed in court. “The technology behind our sale process does not involve the making of even a single copy.”

‘Very Pleased’

Ossenmacher, who was in court yesterday, said he was “very pleased” with Sullivan’s ruling.

Capitol claimed in its suit, filed in January, that ReDigi allows users to upload song tracks to its site, where buyers may download them for about 79 cents each. ITunes charges 99 cents for many songs, and music companies take about 70 cents from each transaction.

The labels get no revenue from a ReDigi sale, according to Capitol’s complaint. ReDigi takes a fee of as much as 15 percent of each download, according to the complaint. The user who uploaded the song collects the rest.

“This is being touted to the public as legal,” Richard Mandel, a lawyer for Capitol, told the judge. “It’s creating confusion in the public’s mind. There is a real risk that the infringement is going to become very widespread.”

First-Sale Doctrine

ReDigi said in court papers that it’s protected from liability by the first-sale doctrine, which allows people who lawfully purchase music to sell it to whomever they wish.

Capitol said the item being sold is a digital copy, not an original song acquired on iTunes. Capitol is seeking damages of as much as $150,000 for each song infringed.

EMI is the fourth-largest recording company in the world. New York-based Citigroup Inc. acquired EMI when the former owner, Terra Firma Capital Partners Ltd., defaulted on bank-issued debt. Paris-based Vivendi’s Universal Music Group, the largest record company, agreed in 2011 to buy EMI’s recording unit for 1.2 billion pounds ($1.89 billion). The purchase awaits regulatory approval.

The case is Capitol Records v. ReDigi, 12-cv-95, 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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