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A Startup Asks: Why Can’t You Resell Old Digital Songs?

ReDigi has technology that helps transfer ownership of digital media—but it’s already being sued by the record industry.
August 15, 2012

In the iTunes store, the hit song “Someone Like You” by Adele sells for $1.29. Head over to ReDigi, an online marketplace where people can resell the music files they’ve purchased, and there’s the track for only 59 cents.

It’s the very same soulful tune. The difference is that ReDigi calls the copy on its site “used” or “recycled” (it was originally sold on iTunes). These are terms usually applied to physical goods like worn novels or unwanted CDs, not the growing volume of songs, books, and games composed of easily shared, everlasting bits. ReDigi’s plans—and the legal debate they have generated—touch on the changing nature of ownership in an increasingly digital age (see “A Cloud over Ownership”).

The Massachusetts-based startup is applying a concept of ownership ingrained in U.S. law: that a person who buys creative work can resell the originally purchased copy. “You buy it, and you own it. You should be able to sell it,” says ReDigi chief technology officer Larry Rudolph, who is also a computer science researcher on leave from MIT. “If you steal it, you shouldn’t be able to sell it. It’s very simple.”

But Capitol Records, a division of the music giant EMI, is now suing ReDigi, accusing it of being a “clearinghouse for copyright infringement.” The Recording Industry Association of America has also sent the company a cease-and-desist order. “While ReDigi touts its service as the equivalent of a used record store, that analogy is inapplicable: used record stores do not make copies to fill up their shelves,” Capitol’s filing states.

This is the first U.S. case to tackle the question of whether legally purchased digital media files can be resold, and it strikes “at the heart of the future business models of creative industries,” says Jason Schultz, a digital-copyright expert at the UC Berkeley School of Law. Unlike previous subjects of the music industry’s ire, such as Napster, ReDigi has a fair chance of winning in court, he believes.

A trial before a judge is set for October, and Schultz says the outcome will affect big companies that sell media files for purchase or offer consumer cloud storage services, such as Google, Apple, and Amazon. U.S. District Judge Richard Sullivan denied Google’s request to offer its own opinion to the court.

ReDigi launched its service last fall. A user downloads its software to determine which of his or her music files are eligible for resale. The company uses digital forensic analysis to verify that the person legally owns a file (rather than having ripped it from a CD or pirated it online): its “verification engine” looks at data associated with the file to determine what its original source is, who acquired it and when, and whether it has been moved from other computers—erring on the side of caution by deleting a song if there is ambiguity, says CEO John Ossenmacher. The company then deletes all copies from the person’s synched devices while transferring the original to its own cloud servers. A digital signature attached to the file makes it easy for its service, like an antivirus program, to detect a copy of the file on a person’s synched devices after it is uploaded.

ReDigi’s legal case may hinge on a technicality: whether the company is actually making a copy of the song when it moves the file it to its cloud servers, in which case it would be violating the letter of a copyright law written in the 1970s.

The company, which plans to expand its music storage service and marketplace to e-books and games, hopes technology can address that problem. While it can’t literally move a file’s digital bits from one place to another, it has adopted methods originally developed in the banking industry to ensure that a digital song or book, just like digital money, is never in two places at once. Once someone else buys a user’s file, ReDigi transfers the license and deletes it from its servers. The technology can’t, however, ensure that someone hasn’t previously stored a copy elsewhere.

Like any secondhand seller, ReDigi offers only as many copies as it has in stock from users, and the latest releases may not be available. When a song isn’t offered, ReDigi allows people to use credits from selling their songs to purchase new ones on iTunes. For now, ReDigi accepts only files purchased through iTunes, which has terms of service that give the purchaser clearer file ownership than Amazon’s, Schultz says.

The company takes a percentage of each sale, and it recently started a program to offer a cut to artists, who wouldn’t normally profit from a market in used books or records. Ossenmacher says record companies could eventually get a share as well. “This is not a fly-by-night thing,” he says. “We learned about the law and technology. We want to do this as correctly as possible.”

Today, the average person owns around $500 worth of purchased media files, according to Ossenmacher. Whether that value is increasing or decreasing is open to question, though, as subscription-based or pay-per-use streaming services become more popular. And sometime it’s in dispute which ownership model applies; for example, libraries have balked at book publishers’ demands that they repurchase an e-book after a given number of loans.

Schultz believes the question of who owns a media file, as addressed in this case, may help resolve such disputes. “That’s really what’s at stake here,” he says. “Are we shifting to a world where every single time you want to use some copyrighted content or media you have to pay, like on a toll road? Or do you actually own something, and you decide how you want to use it?”

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