Supreme Court Declines to Hear ReDigi First Sale Doctrine Case

June 28, 2019 Despite the potentially important impact of the Second Circuit’s decision in Capitol Records, LLC v. ReDigi Inc. on the digital music industry, the United States Supreme Court has denied ReDigi’s petition to review the Second Circuit’s refusal to apply the First Sale Doctrine to the transfer of digital music files.

By: Rohini Roy

Despite the potentially important impact of the Second Circuit’s decision in Capitol Records, LLC v. ReDigi Inc. on the digital music industry, the United States Supreme Court has denied ReDigi’s petition to review the Second Circuit’s refusal to apply the First Sale Doctrine to the transfer of digital music files.

In its petition for certiorari, ReDigi raised critical questions about the aftermath of the Second Circuit’s ruling. For instance, Circuit Judge Pierre Leval’s opinion suggested that the First Sale Doctrine could still protect music file owners by placing “50 or 100 (or more) songs on an inexpensive device such as a thumb drive and sell it.” ReDigi, however, challenged the circular reasoning embedded in this suggestion, stating, “unlike the situation with CDs or DVDs, the only way a purchaser can 'place 50 to 100 (or more) songs on an inexpensive device, such as a thumb drive' is by the creating what the Court of Appeals considers 'new' copies and hence infringing reproductions.” The Supreme Court was evidently not persuaded that this copying constituted creation of “new” copies such that the First Sale Doctrine should not apply.

Moreover, the ReDigi decision’s impact is not limited to digital music files; indeed, its effects have seeped into the digital publishing industry.

In its amicus brief filed in 2017, the Association of American Publishers urged the Second Circuit to find against ReDigi. The AAP explained that a finding in favor of ReDigi would be “catastrophic for the entire publishing industry” since used electronic books act as perfect substitutes for new copies and “digital ‘lending’ allows multiple readers to access a single digital copy simultaneously.” Now that the Supreme Court has allowed the Second Circuit’s decision to stand, authors and publishers will now inevitably rely on ReDigi to require copyright holder to grant permission or be paid royalties for privately lending or reselling e-books.

A silver lining remains, however, in that ReDigi’s stripping of First Sale protection may not extend to technologies that can transfer prior-owned digital files without creating a “new” copy that runs afoul of the copyright laws. With the assistance of our Intellectual Property and Technology team, businesses in the digital file resale industry (music or otherwise) can still create resale platforms that simultaneously comply with the Second Circuit’s decision and facilitate legal sharing of music files and electronic books. Visit our IP & Technology Practice page to find an attorney in your area.