Digital Content Not Subject to First Sale Doctrine

The Federal District Court in New York has ruled that the resale of digital music infringed the copyrights held by the music rights-holders’ in Capitol Records LLC v. ReDigi Inc, U.S. District Court, Southern District of New York, No. 12-00095.
The Defendant ReDigi provided a service allowing purchasers of songs from iTunes to upload their music to ReDigi’s server in order to sell or exchange the digital music purchased from Plaintiff Capitol Records. ReDigi received a portion of the fee generated from the transaction. The Court decided that unlike material objects such as CDs, DVDs and books, digital content was non-transferable as it was incapable of being placed in the stream of commerce without copying. Likening it to a phonorecord, the Court said it mattered little that the original was destroyed if a new one was created. Therefore the First Sale Doctrine allowing for the resale of purchased material items did not apply.

The case dealt a blow to those embracing a secondary market for digital purchases. Their position argued that unlike goods embodied in a tangible medium of expression, such as a CD, digital goods were not copies subject to copyright law. Therefore, any transfer by the first sale owner fully relinquishing the right to the music file on a cloud-based server did not result in copyright infringement. As it’s likely that this case will be appealed to the 2nd Circuit, stay tuned for further developments.