ReDigi Patent Could Violate Copyright Laws, Bring Suits, Say Critics; CEO Disagrees
Digital resale company ReDigi’s new patent may violate the first-sale doctrine and the right of distribution of copyright holders, said critics and academics in interviews Thursday. Maintaining that the approved patent doesn’t permit copying of media files, ReDigi CEO John Ossenmacher cited the exclusionary rights that protect consumers after the first sale. The company was awarded a patent for the “management and resale of digital content” Wednesday. ReDigi’s cloud-based system makes copies of media files, but not between consumers, said Joe Hall, Center for Democracy and Technology chief technologist. “Space-shifting,” the equivalent of transferring media files from one’s desktop to laptop and the basis of ReDigi’s system, presents a fair-use question, said Derek Bambauer, a University of Arizona law professor specializing in Internet law and intellectual property.
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ReDigi is “definitely getting sued” over the patent’s technology, predicted Bambauer. The patent uses cloud services “like a bailment system” to “evade” or “satisfy,” depending on the party, the first-sale doctrine when applied to digital media, he said. The legality of ReDigi’s patent will hinge on whether only one digital copy of a product is in the cloud and whether the uploaded copy is “lawful,” he said. The approved patent won’t change the way ReDigi does business, but ownership of the patent -- which allows copyless exchanges of digital goods -- is “pretty significant,” said Ossenmacher. The first-sale doctrine comes with the exclusionary right that says once copyright holders are paid a royalty on the sale of their item, whether the item is digital or not, “they are no longer entitled to any future royalties or payments for that item,” said Ossenmacher. In ReDigi’s model, copyright holders and creators take a cut of resale revenue, “which they were never able to do before,” he said.
The American Association of Independent Music is “totally against ReDigi’s position,” said President Rich Bengloff. If a company distributes or transfers a copyrighted work that was made “unlawfully,” even if the retailer hasn’t copied the work, the company “nevertheless infringes the distribution right by the sale,” he said. Bengloff said the Copyright Office also appears to be against the resale of digital works, citing Register of Copyrights Maria Pallante’s “Next Great Copyright Act” speech as evidence (http://1.usa.gov/1n1MBQG). “Less progressive and monopolistic concerns of those who wish to try and impede progress will find themselves going the way of Blockbuster and Kodak,” said Ossenmacher. It’s not up to technology to stay with the law, “it’s up to the law and society to keep up with technology,” he said.
Universal Music Group’s Capitol Records was granted summary judgment in a suit against ReDigi over copied files found to be copyright-infringing (CED April 8 p10). Ossenmacher said ReDigi is still planning its appeal. Capitol Records didn’t comment.
ReDigi’s patent is “essentially a cloud-enabled” digital media manager, which controls who has access to media files, said Hall. “They say it is ‘copyless’ but the copy is still made,” and is “mediated” by the cloud, not the buyer and seller, he said. The patent has “a lot of features” that “mimic physical goods in the digital space,” he said. The consumer using ReDigi’s system is “space-shifting,” no different than transferring a media file from a laptop to a phone, said Bambauer. In a filing in MGM v. Grokster, the seminal Supreme Court case on file-sharing and copyright, RIAA agreed that space-shifting falls under fair use, but later, took the position that space-shifting is a “licensed or authorized use,” he said. Whether it’s fair use or not may depend on the “facts of the use,” Bambauer said. Copyright holders will probably “argue that uploading a file merely for the purposes of a commercial transaction is not fair use,” even if uploading the same file for enjoyment away from the home is fair use, he said.
Copyright owners will “remain skeptical” that files can be transferred “without making a copy,” said Corynne McSherry, Electronic Frontier Foundation intellectual property director. She said the debate around ReDigi’s patent should advance the conversation on how the “first sale doctrine continues its vital role in the digital age.”