Out-Law News 4 min. read

Redigi could defend against copyright infringement claims if EMI case was heard in UK, says expert


A US company that sells second hand legally-downloaded digital music tracks could defend itself against claims that it is guilty of copyright infringement if current legal proceedings brought by one of the world's biggest record companies were being heard in the UK, an expert has said.

Cloud storage provider Redigi sells second hand tracks that users have legally downloaded from Apple's iTunes service. The company is being sued in a US district court by EMI over claims that it is infringing the record company's copyrights.

Hearings in the US trial began on Friday. However, intellectual property law specialist Iain Connor of Pinsent Masons, the law firm behind Out-Law.com, said that Redigi could point to recent findings by the European Court of Justice (ECJ) in order to support its case if the issue were before the UK courts.

Redigi's ability to defend itself in a UK hearing would rest on whether it could prove that those selling second hand tracks through its service had not made copies of the music they are selling, Connor said.

"If this case was heard in the UK, Redigi would make their case on the basis that their business of re-selling MP3 files is exactly the same from a legal stand point as the resale of used software and so arguments made before the European Court in the Oracle v UsedSoft case are applicable," Connor said. "The judges in the UsedSoft case said that software owners ‘exhausted’ their distribution right on first sale leaving others free to trade in second hand software."

"MP3 music files are analogous to the Oracle software because on first sale, buyers are given an unlimited, perpetual licence to play the music in exchange for a one-off fully paid fixed fee meaning under UK law, applying the UsedSoft principles, Redigi would be allowed to continue to operate provided Redigi could show that the original owner had deleted the MP3 files being resold and not kept any copies," he added.

In July the ECJ ruled that software owners exhaust their rights to control the resale of their copyrighted products after they have sold them within the EU, regardless of whether the sale concerns a physical product or one downloaded from the internet. It said that, as a result, the original purchaser of the software can sell on 'used' copies of the software to others but that they must delete any copy they have made for their own use when they make that sale.

The ECJ's judgment was issued on its reading of the EU's Computer Programs Directive. The Directive provides content creators with exclusive rights to control "any form of distribution to the public, including the rental, of the original computer program or of copies thereof". However, that right is 'exhausted' following the "first sale" of a copy of their computer programs under the terms of the Directive "with the exception of the right to control further rental of the program or a copy thereof".

The ECJ ruled, though, that the 'first acquirer' of Oracle's software had to, at the moment of re-sale, make "unusable" any copy they had downloaded in order to avoid infringing the rights of the copyright owner to control the reproduction of their software. This was because the Computer Programs Directive provides copyright protection to "the expression in any form of a computer program" and generally provides rights holders with the exclusive right to authorise reproductions and "the translation, adaptation, arrangement and any other alteration of a computer program and the reproduction of the results thereof".

"The original acquirer of a tangible or intangible copy of a computer program for which the copyright holder's distribution right is exhausted ... who resells that copy must, in order to avoid infringing that rightholder's exclusive right of reproduction of his computer program ... make the copy downloaded onto his computer unusable at the time of its resale," the ECJ said in its ruling.

In the US case Redigi has claimed that what it does is legal because it is protected by the US' 'first sale' doctrine.

Under US copyright law copyright owners have exclusive distribution rights to their works, but under the 'first sale doctrine' those who subsequently buy a legitimate copy of a copyrighted work and sell it on are exempt from the original owners' claims of infringement. The doctrine's exemption does not apply to licensing agreements.

Users of Redigi upload their files for storage in their own private cloud. They can then 'stream' the music from there to listen to or list the tracks for sale. Redigi only allows files that are legally downloaded to be stored and do not allow tracks to be copied from CDs and other media and uploaded to the cloud. Redigi takes a percentage cut from the sale of the second hand tracks and users earn credits which they can use to buy new music.

The company has previously admitted that whilst it has a system for verifying whether music files have been illegally copied, it cannot guarantee that its customers do not make copies of their files and store them on other devices before selling them through the company.

In the US hearing Redigi has argued that no copies of the original tracks are made when users upload the material to its servers. Instead it said the files merely "migrate" from users' computers to the cloud, according to a report by the Bloomberg news agency.

"There is no copy involved,” the company's lawyer argued, according to the report. "The actual file is being transported. That’s how the technology works."

However, EMI is claiming $150,000 for each track that it says Redigi is infringing.

"You are selling and distributing that recording,” EMI's lawyer told the US court, according to Bloomberg. "In order to do that, you have to make a copy and that is a violation of the reproduction right of the [US] Copyright Act.”

Earlier this year EMI applied for a preliminary injunction to ban Redigi from operating its business while the court determined whether the company is liable for copyright infringement, but a US district judge rejected the application and said the issue should be determined at trial.

Redigi has outlined plans to provide a service for the sale of second hand e-books which it said will be available "soon".

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.