Is It Illegal to Resell “Used” Digital Music?

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April 3 2013 2:28 PM

Is It Illegal to Resell “Used” Digital Music?

A federal judge in New York says yes.

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When you purchase a lawfully produced music CD, you are entitled under U.S. copyright law “to sell or otherwise dispose” of it without seeking permission from the copyright holders. Without the protection of this “first-sale” doctrine, simple acts such as donating a used book to a library or selling old music CDs on eBay would constitute copyright infringement. But what happens if you purchase a song through an online store such as iTunes? Does the first sale doctrine protect the right to resell digitally purchased works as well?

According to a March 30 ruling [PDF] from a federal judge in New York, the answer is no. Back in October 2011, a startup company called ReDigi launched an online digital marketplace enabling users to “sell their legally acquired digital music files, and buy used digital music from others at a fraction of the price currently available on iTunes.” ReDigi created a website to facilitate resales, plus a downloadable “Media Manager” designed to ensure that users would not retain copies of songs they had sold.

In January 2012, Capitol Records filed a complaint [PDF] in a New York federal court alleging that “ReDigi is actually a clearinghouse for copyright infringement and a business model built on widespread unauthorized sound recordings owned by” Capitol and others. In this week’s ruling, Judge Richard J. Sullivan agreed. ReDigi’s service, he wrote, “infringes Capitol’s exclusive right of reproduction” as well as its “exclusive right of distribution.” And Judge Sullivan went further, concluding that “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.”

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The ruling doesn’t address a key question implicated in digital resales: When are people who “purchase” a song for download from a retailer owners of a copy of the song, and when are they simply licensees? After all, the first-sale doctrine applies to sales. For music provided using license-based delivery models in which buyers don’t own the downloaded content, there’s a reasonable argument that the first-sale doctrine doesn’t apply.

ReDigi was well aware of this potential hurdle and argued to the court in a brief [PDF] filed last year that the iTunes terms of sale, in contrast with the terms of use for Amazon’s online music store, provide for a transfer of title that allows iTunes customers to subsequently resell their songs. But the court’s March 30 ruling doesn’t address the license/sale distinction. Rather, it focuses on the undisputable technical fact that when a digital song is sold on the secondary market, a copy is created on the purchaser’s computer (or cloud-based locker). That copy, ruled the judge, is an unauthorized reproduction.

The decision quotes from—and is clearly influenced by—a 2001 U.S. Copyright Office report to Congress [PDF] that argued strongly against allowing consumers the right to resell digital works:

“Physical copies of works degrade with time and use, making used copies less desirable than new ones. Digital information does not degrade, and can be reproduced perfectly on a recipient’s computer. The ‘used’ copy is just as desirable as (in fact, is indistinguishable from) a new copy of the same work. Time, space, effort and cost no longer act as barriers to the movement of copies, since digital copies can be transmitted nearly instantaneously anywhere in the world with minimal effort and negligible cost. The need to transport physical copies of works, which acts as a natural brake on the effect of resales on the copyright owner’s market, no longer exists in the realm of digital transmissions.”

All of these statements are true. But isn’t the ability to create copies of works that don’t degrade over time, on balance, a positive development as opposed to something to be feared? Don’t the upsides of technologies that can allow information to be moved instantaneously and at negligible cost outweigh the downsides?

The Copyright Office’s 2001 opposition to a digital first-sale doctrine was grounded in part on the legitimate concern that people might resell copies of digital works while also retaining them. The technology to ensure that the seller’s copy was deleted was deemed “not viable at this time.” However, that is no longer true. As indicated by ReDigi’s service—and by a digital resale patent from Amazon and a patent application from Apple—there are solutions that can help ensure that a single digital sale by a retailer doesn’t turn into multiple digital copies in the secondary market. Are these solutions perfect? Of course not. But do they represent good-faith efforts to harness technology in a way that respects the rights of owners of legitimately purchased content as well as those of copyright holders? Yes, they do.

Copyright holders have every right to expect legal protection from piracy and other improper uses of their intellectual property. But people who make legitimate purchases of digital content have rights as well—rights that are not fully respected under current copyright frameworks.

Of course, if copyright holders provide consent, then digital resales can be legally conducted even without a change in copyright law. In this respect, Apple’s recently published patent application is intriguing, because it describes mechanisms for content creators, publishers, and retailers to share in the proceeds from digital resales. While this raises concerns from a policy standpoint (because it allows double- and triple-dipping on revenues from downstream sales of the same piece of content), it’s a solution that can enable a lawful secondary market in digital works without waiting for Congress to act. We shouldn’t be surprised if Apple is busy negotiating deals with copyright holders that will allow it to introduce a digital resale service in the iTunes store.

If that happens, the “most offered for resale” list could provide an interesting new source of data on artist and song popularity.

This article arises from Future Tense, a collaboration among Arizona State University, the New America Foundation, and Slate. Future Tense explores the ways emerging technologies affect society, policy, and culture. To read more, visit the Future Tense blog and the Future Tense home page. You can also follow us on Twitter.

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