Industry News

Given the business model, it was only a matter of time before "used" download store ReDigi was contacted by rights owners. On November 10, the RIAA sent a cease-and-desist letter to the company on behalf of the four of its members: Universal Music, Sony Music Entertainment, Warner Music Entertainment and EMI Music North America.

The letter states "there can be no doubt that ReDigi's conduct constitutes willful copyright infringement." The RIAA demands that ReDigi cease and desist its infringing activities, quarantine copies of its members' sound recordings on its servers and remove the names and likenesses of artists signed to RIAA members.

ReDigi disagrees with the RIAA's stance, however. In a response to the RIAA letter, an excerpt of which was posted at the New York Times, the company defends its technology as "far superior" to any other secondary market. "ReDigi is a strong ally to R.I.A.A. and copyright holder, antipiracy initiatives by providing an elective tool for people to remove previously pirated music from their devices, thereby helping significantly reduce the number of pirated tracks in the music ecosphere," it states.

ReDigi is effectively a used MP3 store that allows users to sell their unwanted music downloads for credit against purchases made at the store. Earlier this year, the Cambridge, Mass.-based raised $535,000 in a $1.5 million funding round from an unspecified investor.

The RIAA and ReDigi have differing opinions on the interpretation of Section 109 of the Copyright Act, or the "first sale doctrine." The first sale doctrine is what allows for the sale of a copyrighted work - a used CD, for example - without permission. In its letter to ReDigi, the RIAA argues Section 109 allows the owner of a particular copy or phonorecord to sell that particular copy. "It does not permit the owner to make another copy, sell the second and destroy the original," the letter states.

But ReDigi doesn't believe its system actually creates copies of copyrighted works. In a conversation with Billboard.biz last month, CEO John Ossenmacher described the process as an instantaneous, simultaneous transaction. "When our transaction goes from one person to another, there's no copying involved in that transaction." He added, "We believe [the first sale doctrine] absolutely applies" to digital goods. "There's a lot of stuff we won't take. What we take is anything we believe absolutely falls under first-sale doctrine."

ReDigi's system allows its users to sell songs by uploading them to the service, after which the ReDigi removes the files from the user's computer. For each song uploaded the seller earns a Redigi coupon to purchase a song at a discounted price. Sellers get credits when the songs they upload sell to other users. Credits can also be purchased using a credit card or PayPal.

As of Monday night, ReDigi claimed to have over 8,500 songs for sale. Its top songs are popular songs such as Katy Perry's "E.T.," Wiz Khalifa's "Friendly" and Lady Gaga's "Born This Way." Each can be purchased for just 59 cents, or 70 cents less than they would cost at iTunes. Songs that are not currently in stock can be put on backorder and purchased after being sold by another ReDigi user.