Can Digital Media Files Legally Be Resold?

In the United States, it is well-settled that a person who purchases a legally-made (i.e. not a counterfeit or an infringing article) music CD, a DVD, a book, or really almost any physical object protected by copyright can legally resell such item.  This is true because of a doctrine of copyright law known as the “first sale doctrine.”  A critical aspect of the first sale doctrine is that the purchaser cannot make copies of the purchased item for resale.

The first sale doctrine means that someone who legally buys a CD or DVD or book can legally resell such item as long as is the original and not a copy.  Indeed, we all likely have seen the robust sales of used CDs and DVDs and books at places like swap meets.  But as we all know, we now are in a time when digital media has started to predominate over physical media.  For example, most people now download their music and movies using services like iTunes instead of buying physical CDs and DVDs.  Likewise, more and more people digitally download books and read them on devices like the Kindle instead of buying hard copies of the books.

So the question arises: can a person who has legally downloaded a digital file resell such file?  The determination of whether a person can legally resell second-hand digital files raises a number of interesting issues, such as whether the transfer can be done without making a copy of the digital file that is sold, whether such sales are prohibited by the user agreement of the service from which the digital file was downloaded in the first place (i.e. the iTunes agreement) and whether the first sale doctrine even applies to the resale of digital files at all.

Not too long ago, a company called ReDigi launched a service intended to allow the owners of digital files to resell such files through ReDigi’s online marketplace in a manner that ReDigi believed was legal and did not constitute illegal file sharing.  More details about ReDigi’s service can be found at the company’s website: www.redigi.com.

ReDigi was sued for copyright infringement by Capitol Records.  Capitol Records won the first battle in the litigation, with a New York federal court recently finding that ReDigi could not legally facilitate the resale of iTunes digital files.  Information about the court’s ruling can be found here: http://www.nbcnews.com/technology/no-you-cant-re-sell-digital-music-online-judge-tells-1C9145353.  But we are sure this is just the first battle in what will be a long war by ReDigi and others to find a way to legally get involved in what could be an extremely lucrative market for used digital music and other media files.

As we frequently have warned, the financial penalties that can arise from illegal file sharing and illegal file downloading can be severe so please consult with experienced copyright counsel before engaging in such conduct.

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