Is reselling an MP3 copyright infringement. Capital Records v. ReDigi

A copyright is a set of exclusive rights granted to the creator of a new artistic work. Artistic works such as photographs, movies and music are all eligible for copyright protection. United States copyright law grants a creator of an artistic work a copyright when the work is recorded. A copyright owner can register their copyright to strengthen their claim to the copyright and get additional rights, but registration is not necessary for a copyright to be granted. A copyright grants the copyright owner the exclusive right to reproduce, distribute, preform, display, transmit and make derivative works based on the original work. If someone other than the copyright owner attempts to exercise one of these exclusive rights that can be considered copyright infringement. A copyright owner can sue to stop copyright infringement with an injunction and to get monetary damages for copyright infringement which has occurred.

Copyright law does not grant a copyright owner an absolute monopoly over their works. There are some important limitations to the exclusive rights granted to a copyright owner. Many people are familiar with the concept of fair use, which allows copying of copyrighted material done for a limited and transformative purpose, such as to comment upon, criticize, or parody a copyrighted work.

Another important limitation to the exclusive rights granted by copyright is the first sale doctrine. The first sale doctrine, codified at 17 U.S.C. § 109, provides that an individual who knowingly purchases a copy of a copyrighted work from the copyright holder receives the right to sell, display or otherwise dispose of that particular copy, notwithstanding the interests of the copyright owner. The right to distribute ends, however, once the owner has sold that particular copy. See 17 U.S.C. § 109(a) & (c). Since the first sale doctrine never protects a defendant who makes unauthorized reproductions of a copyrighted work, the first sale doctrine cannot be a successful defense in cases that allege infringing reproduction.

Copyright law was written long before computers and the internet were household appliances. For this reason copyright law has many unanswered questions when computers are involved. The first sale doctrine is relatively clear when it comes to tangible objects like a compact disk which contains copyrighted music. When the owner of a compact disk sells the compact disk they hand the compact disk to the new owner. That sale is not copyright infringement because it is protected by the first sale doctrine.

Digital music presents a challenge to copyright law because the file, such as an MP3, that contains the copyrighted music is intangible. By the nature of how computers function, to transfer from a seller to a buyer, the MP3 must be reproduced. The portion of the computer that contains the copyrighted music cannot be cut out of the seller’s computer and shipped to the buyer because of the nature of how data is stored in a computer. This means the copyrighted material must be reproduced on the buyer’s computer.

Capitol Records, LLC v. ReDigi Inc., 16-2321 (2nd Cir. 2018) is a recently decided case which deals with this exact issue. The plaintiff in this case is a record company which owns copyrights or licenses in sound recordings of musical performances. The defendant is a company that would resell MP3s which contained the copyrighted music owned by the plaintiff. The defendant would broker the sale of an MP3, reproduce the MP3 on the buyer’s computer and then delete the original file from the seller’s computer. The defendant claimed that their business was no different than a used record store and was protected by the first sale doctrine. The plaintiff disagreed, because the defendant’s system could be circumvented to allow the seller to retain a copy of the MP3, and sued for copyright infringement. The district court sided with the plaintiffs and the defendants appealed to the Court of Appeals for the Second Circuit.

The Second Circuit affirmed the district court’s findings. While the Second Circuit’s opinion indicated that they agreed with the spirit of ReDigi’s business of enabling the resale of legally purchased MP3s, it was not enough to persuade the court. The plain reading of the copyright statute which creates the firs sale doctrine, does not protect the reproduction of a copyrighted work to resell it. The Second Circuit stated that Congress must amend the copyright statute to broaden the first sale doctrine, not the courts.

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