April 03, 2013, 11:01 AM — A federal court's ruling against MP3 resale service ReDigi could be bad news for Apple and Amazon, who've both considered setting up their own stores for second-hand digital content.
As Ars Technica reports, U.S. District Court judge Richard Sullivan ruled that users aren't allowed to resell their old MP3 files under existing copyright law. The court granted a request by Capitol Records for summary judgment against RiDigi, which means there will be no trial. ReDigi itself is liable for secondary copyright infringement, and Capitol will likely seek payment for damages.
ReDigi lets music owners sell their MP3 files, and lets buyers purchase those files for as low as $0.49 per track. RiDigi also offers a syndication service for artists that lets them collect 20% of all pre-owned music sales revenue.
ReDigi argued that it doesn't technically copy music files, but instead transfers them to its own servers. To make sure the original owner doesn't hang onto a copy, RiDigi monitors the seller's computer for unauthorized tracks. Judge Sullivan didn't buy that argument, ruling that RiDigi was "distributing reproductions of the copyrighted code embedded in new material objects, namely, the ReDigi server in Arizona and its users' hard drives."
Fallout and recovery
While the ruling is bad news for ReDigi's users, it's safe to assume that most people haven't heard of the service. The larger impact may be on Apple and Amazon. Both companies have patented their own systems for second-hand digital content sales, so they're at least interested in the concept.
Perhaps Apple and Amazon's systems could succeed in court where ReDigi failed, either with tweaks to their legal arguments or with more resources at their disposal for the defense.
But with a precedent now set against MP3 resales, it seems more likely that Amazon and Apple will try to work out deals with the entertainment industry instead. Both patents seem designed to pacify rights holders, with Amazon allowing "thresholds" on the number of transfers between users, and Apple offering a way to pay the original publisher when a transfer occurs. Also, because iTunes and Amazon rely more on cloud-based storage for songs, it'll be easier for those companies to remove content from sellers' collections. In theory, could also remotely delete files from iOS devices and Kindles.
The ReDigi ruling doesn't kill the idea of second-hand MP3 sales. It just makes it much more difficult for any tech company to pull off without the support of major media companies.