throbber
Case 1:12-cv-00095-RJS Document 109 Filed 03/30/13 Page 1 of 18
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`_____________________
`
`No. 12 Civ. 95 (RJS)
`_____________________
`
`
`
`CAPITOL RECORDS, LLC,
`
`
` Plaintiff,
`
`
`VERSUS
`
`REDIGI INC.,
`
` Defendant.
`
`__________________
`
`MEMORANDUM AND ORDER
`March 30, 2013
`__________________
`
`
`
`
`
`
`
`
`
`
`
`
`
`RICHARD J. SULLIVAN, District Judge:
`
` Capitol Records, LLC (“Capitol”), the
`recording label for such classic vinyls as
`Frank Sinatra’s “Come Fly With Me” and
`The Beatles’ “Yellow Submarine,” brings
`this action against ReDigi Inc. (“ReDigi”), a
`twenty-first century technology company
`that touts itself as a “virtual” marketplace
`for “pre-owned” digital music. What has
`ensued in a fundamental clash over culture,
`policy, and copyright law, with Capitol
`alleging that ReDigi’s web-based service
`amounts
`to copyright
`infringement
`in
`violation of the Copyright Act of 1976 (the
`“Copyright Act”), 17 U.S.C. § 101, et seq.
`Now before the Court are Capitol’s motion
`for partial summary judgment and ReDigi’s
`motion for summary judgment, both filed
`pursuant to Federal Rule of Civil Procedure
`56. Because this is a court of law and not a
`congressional subcommittee or technology
`
`blog, the issues are narrow, technical, and
`purely legal. Thus, for the reasons that
`follow, Capitol’s motion is granted and
`ReDigi’s motion is denied.
`
`
`I. BACKGROUND
`
`A. Facts
`
`
` ReDigi markets itself as “the world’s first
`and only online marketplace for digital used
`music.”1
` (Capitol 56.1 Stmt., Doc. No. 50
`
`
`
`1 The facts are taken from the pleadings, the parties’
`Local Civil Rule 56.1 Statements, the affidavits
`submitted in connection with the instant motions, and
`the exhibits attached
`thereto.
` The facts are
`undisputed unless otherwise noted. Where one
`party’s 56.1 Statement is cited, the other party does
`not dispute
`the fact asserted, has offered no
`
`

`
`Case 1:12-cv-00095-RJS Document 109 Filed 03/30/13 Page 2 of 18
`
`(“Cap. 56.1”), ¶ 6.) Launched on October
`13, 2011, ReDigi’s website invites users to
`“sell their legally acquired digital music
`files, and buy used digital music from others
`at a fraction of the price currently available
`on iTunes.” (Id. ¶¶ 6, 9.) Thus, much like
`used record stores, ReDigi permits its users
`to recoup value on their unwanted music.
`Unlike used record stores, however, ReDigi’s
`sales take place entirely in the digital domain.
`(See ReDigi Reply 56.1 Stmt., Doc. No. 83
`(“RD Rep. 56.1”), 4 ¶ 16.)
`
` To sell music on ReDigi’s website, a user
`must
`first download ReDigi’s “Media
`Manager” to his computer. (ReDigi 56.1
`Stmt., Doc. No. 56 (“RD 56.1”), ¶ 8.) Once
`installed, Media Manager analyzes
`the
`user’s computer to build a list of digital
`music files eligible for sale. (Id.) A file is
`eligible only if it was purchased on iTunes
`or
`from another ReDigi user; music
`downloaded from a CD or other file-sharing
`website is ineligible for sale. (Id.) After
`this validation process, Media Manager
`continually runs on the user’s computer and
`attached devices to ensure that the user has
`not retained music that has been sold or
`uploaded for sale. (Id. ¶ 10.) However,
`Media Manager cannot detect copies stored
`in other locations. (Cap. 56.1 ¶¶ 59-61, 63;
`see Capitol Reply 56.1 Stmt., Doc. No. 78
`(“Cap. Rep. 56.1”), ¶ 10.) If a copy is
`detected, Media Manager prompts the user
`to delete the file. (Cap. 56.1 ¶ 64.) The file
`is not deleted automatically or involuntarily,
`though ReDigi’s policy is to suspend the
`accounts of users who refuse to comply. (Id.)
`
` After the list is built, a user may upload
`any of his eligible files to ReDigi’s “Cloud
`Locker,” an ethereal moniker for what is, in
`fact, merely a remote server in Arizona.
`(RD 56.1 ¶¶ 9, 11; Cap. 56.1 ¶ 22.)
`
`
`
`admissible evidence to refute that fact, or merely
`objects to inferences drawn from that fact.
`
`
`
`ReDigi’s upload process is a source of
`contention between the parties. (See RD
`56.1 ¶¶ 14-23; Cap. Rep. 56.1 ¶¶ 14-23.)
`ReDigi asserts that the process involves
`“migrating” a user’s file, packet by packet –
`“analogous to a train” – from the user’s
`computer to the Cloud Locker so that data
`does not exist in two places at any one
`time.2
` (RD 56.1 ¶¶ 14, 36.) Capitol asserts
`that, semantics aside, ReDigi’s upload
`process “necessarily involves copying” a file
`from the user’s computer to the Cloud
`Locker. (Cap. Rep. 56.1 ¶ 14.) Regardless,
`at the end of the process, the digital music
`file is located in the Cloud Locker and not
`on the user’s computer. (RD 56.1 ¶ 21.)
`Moreover, Media Manager deletes any
`additional copies of the file on the user’s
`computer and connected devices. (Id. ¶ 38.)
`
` Once uploaded, a digital music file
`undergoes a second analysis
`to verify
`eligibility. (Cap. 56.1 ¶¶ 31-32.) If ReDigi
`determines
`that
`the file has not been
`tampered with or offered for sale by another
`user, the file is stored in the Cloud Locker,
`and the user is given the option of simply
`storing and streaming the file for personal
`use or offering it for sale in ReDigi’s
`marketplace. (Id. ¶¶ 33-37.) If a user
`chooses to sell his digital music file, his
`access
`to
`the
`file
`is
`terminated and
`transferred to the new owner at the time of
`purchase. (Id. ¶ 49.) Thereafter, the new
`owner can store the file in the Cloud Locker,
`stream it, sell it, or download it to her
`computer and other devices. (Id. ¶ 50.) No
`money changes hands in these transactions.
`(RD Rep. 56.1 5 ¶ 18.) Instead, users buy
`music with credits they either purchased
`
`
`
`2 A train was only one of many analogies used to
`describe ReDigi’s service. At oral argument, the
`device was likened to the Star Trek transporter –
`“Beam me up, Scotty” – and Willy Wonka’s
`teleportation device, Wonkavision. (Tr., dated Oct. 5,
`2012 (“Tr.”), 10:2-12; 28:15-20.)
`
`2
`
`

`
`Case 1:12-cv-00095-RJS Document 109 Filed 03/30/13 Page 3 of 18
`
`B. Procedural History
`
` Capitol, which owns a number of the
`recordings
`sold on ReDigi’s website,
`commenced
`this action by
`filing
`the
` (See
`Complaint on January 6, 2012.
`Complaint, dated Jan. 5, 2012, Doc. No. 1
`(“Compl.”); Cap. 56.1 ¶¶ 68-73.) In its
`Complaint, Capitol
`alleges multiple
`violations of the Copyright Act, 17 U.S.C.
`§ 101, et seq., including direct copyright
`infringement,
`inducement of copyright
`infringement, contributory and vicarious
`copyright infringement, and common law
`copyright infringement. (Compl. ¶¶ 44-88.)
`Capitol seeks preliminary and permanent
`injunctions of ReDigi’s services, as well as
`damages, attorney’s fees and costs, interest,
`and any other appropriate relief. (Id. at 17-
`18.) On February 6, 2012, the Court denied
`Capitol’s motion for a preliminary injunction,
`finding that Capitol had failed to establish
`irreparable harm. (Doc. No. 26.)
`
` On July 20, 2012, Capitol filed its motion
`for partial summary judgment on the claims
`that ReDigi directly
`and
`secondarily
`infringed Capitol’s
`reproduction
`and
`distribution rights. (Doc. No. 48.) ReDigi
`filed its cross-motion the same day, seeking
`summary
`judgment on all grounds of
`liability,
`including ReDigi’s
`alleged
`infringement of Capitol’s performance and
`display rights.4
` (Doc. No. 54.) Both parties
`
`from ReDigi or acquired from other sales.
`(Id.) ReDigi credits, once acquired, cannot
`be exchanged for money. (Id.) Instead, they
`can only be used to purchase additional
`music. (Id.)
`
` To encourage activity in its marketplace,
`ReDigi initially permitted users to preview
`thirty-second clips and view album cover art
`of songs posted for sale pursuant to a
`licensing agreement with a third party. (See
`RD 56.1 ¶¶ 73-78.) However, shortly after
`its launch, ReDigi lost the licenses. (Id.)
`Accordingly, ReDigi now sends users to
`either YouTube or iTunes to listen to and
`view this promotional material. (Id. ¶¶ 77,
`79.) ReDigi also offers its users a number of
`incentives. (Cap. 56.1 ¶ 39.) For instance,
`ReDigi gives twenty-cent credits to users
`who post files for sale and enters active
`sellers into contests for prizes. (Id. ¶¶ 39,
`42.) ReDigi also encourages sales by
`advising new users via email that they can
`“[c]ash in” their music on the website,
`tracking and posting the titles of sought after
`songs on its website and in its newsletter,
`notifying users when they are low on credits
`and advising them to either purchase more
`credits or sell songs, and connecting users
`who are seeking unavailable songs with
`potential sellers. (Id. ¶¶ 39-48.)
`
` Finally, ReDigi earns a fee for every
`transaction. (Id. ¶ 54.) ReDigi’s website
`prices digital music files at fifty-nine to
`seventy-nine cents each. (Id. ¶ 55.) When
`in the Cloud Locker. (Id. ¶¶ 44-52.) However,
`users purchase a file, with credits, 20% of
`because ReDigi 2.0 launched after Capitol filed the
`Complaint and mere days before the close of
`the sale price is allocated to the seller, 20%
`discovery, the Court will not consider it in this action.
`goes to an “escrow” fund for the artist, and
`(See Tr. 19:2-20:3.)
`60% is retained by ReDigi.3
` (Id.)
` ReDigi’s arguments in this round of briefing differ
`markedly from those it asserted in opposition to
`Capitol’s motion for a preliminary injunction. (See
`ReDigi Opp’n to Prelim. Inj., dated Jan. 27, 2012,
`Doc. No. 14 (“ReDigi Opp’n to PI”).) For instance,
`ReDigi no longer asserts an “essential step defense,”
`nor does it argue that “copying” to the Cloud Locker
`for storage is protected by the fair use defense. (Id. at
`
`
`
`3 On June 11, 2012, ReDigi launched ReDigi 2.0,
`new software that, when installed on a user’s
`computer, purportedly directs the user’s new iTunes
`purchases to upload from iTunes directly to the
`Cloud Locker. (RD 56.1 ¶¶ 40-41.) Accordingly,
`while access may transfer from user to user upon
`resale, the file is never moved from its initial location
`
`
`
`
`
` 4
`
`3
`
`

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`Case 1:12-cv-00095-RJS Document 109 Filed 03/30/13 Page 4 of 18
`
`1164, 1174 (S.D.N.Y. 1992). “That is, each
`cross-movant must
`present
`sufficient
`evidence to satisfy its burden of proof on all
`material facts.” U.S. Underwriters Ins. Co.
`v. Roka LLC, No. 99 Civ. 10136 (AGS),
`2000 WL 1473607, at *3 (S.D.N.Y. Sept.
`29, 2000); see Barhold v. Rodriguez, 863
`F.2d 233, 236 (2d Cir. 1988).
`
`
`III. DISCUSSION
`
`Section 106 of the Copyright Act grants
`“the owner of copyright under this title”
`certain “exclusive rights,” including the
`right “to reproduce the copyrighted work in
`copies or phonorecords,” “to distribute
`copies or phonorecords of the copyrighted
`work to the public by sale or other transfer
`of ownership,” and to publicly perform and
`display certain copyrighted works.
` 17
`U.S.C. §§ 106(1), (3)-(5). However, these
`exclusive rights are
`limited by several
`subsequent
`sections
`of
`the
`statute.
`Pertinently, Section 109 sets forth the “first
`sale” doctrine, which provides that “the
`owner of a particular copy or phonorecord
`lawfully made under this title, or any person
`authorized by such owner,
`is entitled,
`without
`the authority of
`the copyright
`owner, to sell or otherwise dispose of the
`possession of that copy or phonorecord.” Id.
`§ 109(a). The novel question presented in
`this action is whether a digital music file,
`lawfully made and purchased, may be resold
`by its owner through ReDigi under the first
`sale doctrine. The Court determines that it
`cannot.
`
`
`A. Infringement of Capitol’s Copyrights
`
`copyright
`for
`claim
`a
`state
`To
`infringement, a plaintiff must establish that
`it owns a valid copyright in the work at issue
`and that the defendant violated one of the
`exclusive rights the plaintiff holds in the
`work. Twin Peaks Prods., Inc. v. Publ’ns
`
`
`
`
`
`4
`
`responded on August 14, 2012 and replied on
`August 24, 2012. (Doc. Nos. 76, 79, 87, 90.)
`The Court heard oral argument on October
`5, 2012.
`
`
`II. LEGAL STANDARD
`
`
`to Federal Rule of Civil
` Pursuant
`Procedure 56(a), a court may not grant a
`motion for summary judgment unless “the
`movant shows that there is no genuine
`dispute as to any material fact and the
`movant is entitled to judgment as a matter of
`law.” Fed. R. Civ. P. 56(a); see Celotex
`Corp. v. Catrett, 477 U.S. 317, 322–23
`(1986). The moving party bears the burden
`of showing that it is entitled to summary
`judgment. See Anderson v. Liberty Lobby,
`Inc., 477 U.S. 242, 256 (1986). The court
`“is not to weigh evidence but is instead
`required to view the evidence in the light
`most favorable
`to
`the party opposing
`summary judgment, to draw all reasonable
`inferences in favor of that party, and to
`eschew credibility assessments.” Amnesty
`Am. v. Town of W. Hartford, 361 F.3d 113,
`122 (2d Cir. 2004) (internal quotation marks
`omitted); accord Anderson, 477 U.S. at 249.
`As such, “if there is any evidence in the
`record from any source from which a
`reasonable inference in the [nonmoving
`party’s] favor may be drawn, the moving
`party simply cannot obtain a summary
` Binder & Binder PC v.
`judgment.”
`Barnhart, 481 F.3d 141, 148 (2d Cir. 2007)
`(internal quotation marks omitted).
`
`
`
`Inferences and burdens of proof on cross-
`motions for summary judgment are the same
`as those for a unilateral motion. See Straube
`v. Fla. Union Free Sch. Dist., 801 F. Supp.
`
`
`
`9-14.) ReDigi has also abandoned its argument that
`the Digital Millenium Copyright Act, 17 U.S.C. §
`512, bars Capitol’s claim. (Id. at 22.) As such, the
`Court will consider only those arguments made in the
`instant motions.
`
`
`
`

`
`Case 1:12-cv-00095-RJS Document 109 Filed 03/30/13 Page 5 of 18
`
`Int’l, Ltd., 996 F.2d 1366, 1372 (2d Cir.
`1993) (citing Feist Publ’ns, Inc. v. Rural
`Tel. Serv. Co., 499 U.S. 340, 361 (1991)). It
`is undisputed that Capitol owns copyrights
`in a number of the recordings sold on
`ReDigi’s website. (See Cap. 56.1 ¶¶ 68-73;
`RD Rep. 56.1 18-19, ¶¶ 68-73; Decl. of
`Richard S. Mandel, dated July 19, 2012,
`Doc. No. 52 (“Mandel Decl.”), ¶ 16, Ex. M;
`Decl. of Alasdair J. McMullan, dated July
`19, 2012, Doc. No. 51 (“McMullan Decl.”),
`¶¶ 3-5, Ex. 1.) It is also undisputed that
`Capitol did not approve the reproduction or
`distribution of its copyrighted recordings on
`ReDigi’s website. Thus, if digital music files
`are “reproduce[d]” and “distribute[d]” on
`ReDigi’s website within the meaning of the
`Copyright Act, Capitol’s copyrights have
`been infringed.
`
`
`1. Reproduction Rights
`
`
`Courts have consistently held that the
`unauthorized duplication of digital music
`files over the Internet infringes a copyright
`owner’s exclusive right to reproduce. See,
`e.g., A&M Records, Inc. v. Napster, Inc.,
`239 F.3d 1004, 1014 (9th Cir. 2001).
`However, courts have not previously
`addressed whether the unauthorized transfer
`of a digital music file over the Internet –
`where only one file exists before and after
`the transfer – constitutes reproduction within
`the meaning of the Copyright Act. The
`Court holds that it does.
`
`that a
`The Copyright Act provides
`copyright owner has the exclusive right “to
`reproduce the copyrighted work in . . .
`phonorecords.”
` 17 U. S. C. § 106(1)
`(emphasis added). Copyrighted works are
`inter alia, “sound
`defined
`to
`include,
`recordings,” which are “works that result
`from the fixation of a series of musical,
`spoken, or other sounds.” Id. § 101. Such
`works are distinguished from their material
`
`
`
`5
`
`embodiments. These include phonorecords,
`which are the “material objects in which
`sounds . . . are fixed by any method now
`known or later developed, and from which
`the sounds can be perceived, reproduced, or
`otherwise communicated, either directly or
`with the aid of a machine or device.” Id.
`§ 101 (emphasis added). Thus, the plain text
`of the Copyright Act makes clear that
`reproduction occurs when a copyrighted
`work is fixed in a new material object. See
`Matthew Bender & Co., Inc. v. W. Pub. Co.,
`158 F.3d 693, 703 (2d Cir. 1998).
`
`The legislative history of the Copyright
`Act bolsters this reading. The House Report
`on the Copyright Act distinguished between
`sound recordings and phonorecords, stating
`that “[t]he copyrightable work comprises the
`aggregation of sounds and not the tangible
`medium of
`fixation.
` Thus,
`‘sound
`recordings’ as copyrightable subject matter
`are distinguished from ‘phonorecords[,]’ the
`latter being physical objects in which sounds
`are fixed.” H.R. Rep. No. 94-1476, at 56
`(1976). Similarly, the House and Senate
`Reports on the Act both explained:
`
`
`the relevant
`together with
`Read
`definitions in [S]ection 101, the right
`“to reproduce the copyrighted work
`in copies or phonorecords” means
`the right to produce a material object
`in which the work is duplicated,
`transcribed, imitated, or simulated in
`a fixed form from which it can be
`“perceived, reproduced, or otherwise
`communicated, either directly or
`with the aid of a machine or device.”
`
`
`Id. at 61; S. Rep. No. 94-473, at 58 (1975).
`Put differently, the reproduction right is the
`exclusive right to embody, and to prevent
`others from embodying, the copyrighted
`work (or sound recording) in a new material
`object (or phonorecord). See Nimmer on
`
`

`
`Case 1:12-cv-00095-RJS Document 109 Filed 03/30/13 Page 6 of 18
`
`Copyright § 8.02 (stating that “in order to
`infringe
`the
`reproduction
`right,
`the
`defendant must embody the plaintiff’s work
`in a ‘material object’”).
`
`
`Courts that have dealt with infringement
`on peer-to-peer (“P2P”) file-sharing systems
`provide valuable guidance on the application
`of this right in the digital domain. For
`instance, in London-Sire Records, Inc. v.
`John Doe 1, the court addressed whether
`users of P2P software violated copyright
`owners’ distribution rights. 542 F. Supp. 2d
`153, 166 & n.16 (D. Mass. 2008). Citing the
`“material object” requirement, the court
`expressly
`differentiated
`between
`the
`copyrighted work – or digital music file –
`and the phonorecord – or “appropriate
`segment of the hard disk” that the file would
`be embodied in following its transfer. Id. at
`171. Specifically,
`
`
`[w]hen a user on a [P2P] network
`downloads a song from another user,
`he receives into his computer a
`digital sequence representing
`the
`sound recording. That sequence is
`magnetically encoded on a segment
`of his hard disk (or likewise written
`on other media). With the right
`hardware
`and
`software,
`the
`downloader can use the magnetic
`sequence to reproduce the sound
`recording. The electronic file (or,
`perhaps more
`accurately,
`the
`appropriate segment of the hard disk)
`is therefore a “phonorecord” within
`the meaning of the statute.
`
`Id. (emphasis added). Accordingly, when a
`user downloads a digital music file or
`“digital sequence” to his “hard disk,” the file
`is “reproduce[d]” on a new phonorecord
`within the meaning of the Copyright Act.
`Id.
`
`
`
`
`6
`
` This understanding
`course,
`is, of
`confirmed by the laws of physics. It is
`simply impossible that the same “material
`object” can be transferred over the Internet.
`Thus, logically, the court in London-Sire
`noted that the Internet transfer of a file
`results in a material object being “created
`elsewhere at its finish.” Id. at 173. Because
`the
`reproduction
`right
`is necessarily
`implicated when a copyrighted work is
`embodied in a new material object, and
`because digital music
`files must be
`embodied in a new material object following
`their transfer over the Internet, the Court
`determines that the embodiment of a digital
`music file on a new hard disk
`is a
`reproduction within the meaning of the
`Copyright Act.
`
`This finding holds regardless of whether
`one or multiple copies of the file exist.
`London-Sire, like all of the P2P cases,
`obviously concerned multiple copies of one
`digital music file. But that distinction is
`immaterial under the plain language of the
`Copyright Act. Simply put, it is the creation
`of a new material object and not an
`additional material object that defines the
`reproduction right. The dictionary defines
`“reproduction” to mean, inter alia, “to
`produce again” or “to cause to exist again or
`anew.” See Merriam-Webster Collegiate
`Edition 994 (10th ed. 1998) (emphasis
`added). Significantly, it is not defined as “to
`produce again while the original exists.”
`Thus,
`the
`right
`“to
`reproduce
`the
`copyrighted work in . . . phonorecords” is
`implicated whenever a sound recording is
`fixed in a new material object, regardless of
`whether the sound recording remains fixed
`in the original material object.
`
`Given this finding, the Court concludes
`that ReDigi’s service infringes Capitol’s
`reproduction rights under any description of
`the technology. ReDigi stresses that it
`
`

`
`Case 1:12-cv-00095-RJS Document 109 Filed 03/30/13 Page 7 of 18
`
`“migrates” a file from a user’s computer to
`its Cloud Locker, so that the same file is
`transferred to the ReDigi server and no
`copying occurs.5
` However, even if that
`were the case, the fact that a file has moved
`from one material object – the user’s
`computer – to another – the ReDigi server –
`means that a reproduction has occurred.
`Similarly, when a ReDigi user downloads a
`new purchase from the ReDigi website to
`her computer, yet another reproduction is
`created. It is beside the point that the
`original phonorecord no longer exists. It
`matters only that a new phonorecord has
`been created.
`
`ReDigi struggles to avoid this conclusion
`by pointing to C.M. Paula Co. v. Logan, a
`1973 case from the Northern District of
`Texas where the defendant used chemicals
`to lift images off of greeting cards and place
`them on plaques for resale. 355 F. Supp.
`189, 190 (N.D. Tex. 1973); (see ReDigi
`Mem. of Law, dated July 20, 2012, Doc. No.
`55 (“ReDigi Mem.”), at 13). The court
`determined that infringement did not occur
`
`
`
`5 It bears noting
`that ReDigi made numerous
`admissions
`to
`the contrary at
`the preliminary
`injunction stage. For instance, in its opposition to
`Capitol’s motion, ReDigi stated that, “The only
`copying which takes place in the ReDigi service
`occurs when a user uploads music files to the ReDigi
`Cloud, . . . or downloads music files from the user’s
`Cloud Locker.” (See ReDigi Opp’n to PI at 9
`(emphasis added).) ReDigi also stated that, after a
`digital music file was uploaded to the Cloud Locker,
`“the copy from which it was made was actually
`deleted from the user’s machine.” (Id. at 14
`(emphasis added).) ReDigi’s officers made similar
`statements in their depositions, and ReDigi’s patent
`application for its upload technology states that “to
`be offered for sale, [a music file] is first copied to the
`remote server and stored on the disc.” (See Capitol
`Mem. of Law, dated July 20, 2012, Doc. No. 49
`(“Cap. Mem.”), at 8-9, n.6 (emphasis added).) But,
`as earlier stated, these semantic distinctions are
`immaterial as even ReDigi’s most recent description
`of its service runs afoul of the Copyright Act.
`
`
`
`
`
`
`because “should defendant desire to make
`one hundred ceramic plaques . . . , defendant
`would be required to purchase one hundred
`separate . . . prints.” C.M. Paula, 355 F.
`Supp. at 191. ReDigi argues that, like the
`defendant in C.M. Paula, its users must
`purchase a song on iTunes in order to sell a
`song on ReDigi.
` (ReDigi Mem. 13.)
`Therefore, no “duplication” occurs. See
`C.M. Paula, 355 F. Supp. at 191 (internal
`quotation marks omitted).
` ReDigi’s
`argument
`is unavailing.
` Ignoring
`the
`questionable merits of the court’s holding in
`C.M.
`Paula, ReDigi’s
`service
`is
`distinguishable from the process in that case.
`There, the copyrighted print, or material
`object, was lifted from the greeting card and
`transferred in toto to the ceramic tile; no
`new material object was created.
` By
`contrast, ReDigi’s service by necessity
`creates a new material object when a digital
`music
`file
`is either uploaded
`to or
`downloaded from the Cloud Locker.
`
`ReDigi also argues that the Court’s
`conclusion would
`lead
`to “irrational”
`outcomes, as it would render illegal any
`movement of copyrighted files on a hard
`drive, including relocating files between
`directories and defragmenting.
` (ReDigi
`Opp’n, dated Aug. 14, 2012, Doc. No. 79
`(“ReDigi Opp’n”), at 8.) However, this
`argument is nothing more than a red herring.
`As Capitol has conceded, such reproduction
`is almost certainly protected under other
`doctrines or defenses, and is not relevant to
`the instant motion. (Cap. Reply, dated Aug.
`24, 2012, Doc. No. 87 (“Cap. Reply”), at 5
`n.1.)
`
`Accordingly, the Court finds that, absent
`the existence of an affirmative defense, the
`sale of digital music files on ReDigi’s
`website infringes Capitol’s exclusive right
`of reproduction.
`
`
`
`7
`
`

`
`Case 1:12-cv-00095-RJS Document 109 Filed 03/30/13 Page 8 of 18
`
`2. Distribution Rights
`
`
`
`In addition to the reproduction right, a
`copyright owner also has the exclusive right
`“to distribute copies or phonorecords of the
`copyrighted work to the public by sale or
`other transfer of ownership.” 17 U. S. C.
`§ 106(3). Like the court in London-Sire, the
`Court agrees
`that “[a]n electronic file
`transfer
`is plainly within
`the sort of
`transaction that § 106(3) was intended to
`reach [and] . . . fit[s] within the definition of
`‘distribution’ of a phonorecord.” London-
`Sire, 542 F. Supp. 2d at 173-74. For that
`reason, “courts have not hesitated to find
`copyright infringement by distribution in
`cases
`of
`file-sharing
`or
`electronic
`transmission of copyrighted works.” Arista
`Records LLC v. Greubel, 453 F. Supp. 2d
`961, 968 (N.D. Tex. 2006) (collecting
`cases); see, e.g., Napster, 239 F.3d at 1014.
`Indeed, in New York Times Co., Inc. v.
`Tasini, the Supreme Court stated it was
`“clear” that an online news database violated
`authors’ distribution
`rights by
`selling
`electronic copies of
`their articles
`for
`download. 533 U.S. 483, 498 (2001).
`
`There is no dispute that sales occurred on
`ReDigi’s website. Capitol has established
`that it was able to buy more than one-
`hundred of its own recordings on ReDigi’s
`webite, and ReDigi itself compiled a list of
`its completed sales of Capitol’s recordings.
`(Cap. 56.1 ¶¶ 68-73; RD Rep. 56.1 ¶¶ 68-
`73.) ReDigi, in fact, does not contest that
`distribution occurs on its website – it only
`asserts that the distribution is protected by
`the fair use and first sale defenses. (See,
`e.g., ReDigi Opp’n 15 (noting that “any
`distributions . . . which occur on the ReDigi
`marketplace are protected”).)
`
`Accordingly, the Court concludes that,
`absent
`the existence of an affirmative
`defense, the sale of digital music files on
`
`
`
`8
`
`infringes Capitol’s
`ReDigi’s website
`exclusive right of distribution.6
`
`
`
`3. Performance and Display Rights
`
`the
`Finally, a copyright owner has
`exclusive right, “in the case of . . . musical
`. . . works, to perform the copyrighted work
`publicly.” 17 U. S. C. § 106(4). Public
`performance includes transmission to the
`public regardless of “whether the members
`of the public . . . receive it in the same place
`or in separate places and at the same time or
`at different times.” Id. § 101. Accordingly,
`audio streams are performances because a
`“stream is an electronic transmission that
`renders the musical work audible as it is
`received by the client-computer’s temporary
`memory. This transmission, like a television
`or radio broadcast, is a performance because
`there is a playing of the song that is
`perceived
`simultaneously
`with
`the
`transmission.” United States v. Am. Soc. Of
`Composers, Authors, & Publishers, 627
`F.3d 64, 74 (2d Cir. 2010). To state a claim
`for infringement of the performance right, a
`plaintiff must establish that (1) the public
`performance or display of the copyrighted
`work was for profit, and (2) the defendant
`lacked authorization from the plaintiff or the
`
`
`
`6 Capitol argues that ReDigi also violated its
`distribution rights simply by making Capitol’s
`recordings available for sale to the public, regardless
`of whether a sale occurred. (See Cap. Mem. 11 n.8
`(citing Hotaling v. Church of Jesus Christ of Latter-
`Day Saints, 118 F.3d 199, 201 (4th Cir. 1997)).
`However, a number of courts, including one in this
`district, have cast significant doubt on this “make
`available” theory of distribution. See, e.g., Elektra
`Entm’t Grp., Inc. v. Barker, 551 F. Supp. 2d 234, 243
`(S.D.N.Y. 2008) (“[T]he support in the case law for
`the “make available” theory of liability is quite
`limited.”); London-Sire, 542 F. Supp. 2d at 169
`(“[T]he defendants cannot be liable for violating the
`plaintiffs’ distribution right unless a ‘distribution’
`actually occurred.”). In any event, because the Court
`concludes that actual sales on ReDigi’s website
`infringed Capitol’s distribution right, it does not
`reach this additional theory of liability.
`
`

`
`Case 1:12-cv-00095-RJS Document 109 Filed 03/30/13 Page 9 of 18
`
`plaintiff’s representative. See Broad. Music,
`Inc. v. 315 W. 44th St. Rest. Corp., No. 93
`Civ. 8082 (MBM), 1995 WL 408399, at *2
`(S.D.N.Y. July 11, 1995).
`
`the
`The copyright owner also has
`exclusive right, “in the case of . . . pictorial
`[and] graphic . . . works[,] . . . to display the
`copyrighted work publicly.” 17 U.S.C.
`§ 106(5).
`
`Public
`display
`includes
`“show[ing] a copy of [a work], either
`directly or by means of a film, slide,
`television image, or any other device or
`process.” Id. § 101. The Ninth Circuit has
`held that the display of a photographic
`image on a computer may implicate the
`display right, though infringement hinges, in
`part, on where the image was hosted.
`Perfect 10, Inc. v. Amazon.com, Inc., 508
`F.3d 1146, 1160 (9th Cir. 2007).
`
`Capitol alleges that ReDigi infringed its
`copyrights by streaming thirty-second song
`clips and exhibiting album cover art to
`potential buyers.
` (Compl. ¶¶ 25-26.)
`ReDigi counters that it only posted such
`content pursuant to a licensing agreement
`and within the terms of that agreement.
`(ReDigi Mem. 24-25.) ReDigi also asserts
`that it promptly removed the content when
`its licenses were terminated, and instead sent
`users to YouTube or iTunes for previews.
`(Id.) Capitol, in response, claims that
`ReDigi’s use violated the terms of those
`licenses and did not cease at the time the
`licenses were terminated. (Compare RD
`56.1 ¶¶ 73-79, with Cap. Rep. 56.1 ¶¶ 73-
`79.) As such, there are material disputes as
`to the source of the content, whether ReDigi
`was authorized to transmit the content, when
`authorization was or was not revoked, and
`when ReDigi ceased providing the content.
`Because the Court cannot determine whether
`ReDigi
`infringed Capitol’s display and
`performance rights on the present record,
`ReDigi’s motion for summary judgment on
`
`
`
`9
`
`its alleged infringement of these exclusive
`rights is denied.
`
`
`B. Affirmative Defenses
`
`
`Having concluded that sales on ReDigi’s
`website infringe Capitol’s exclusive rights
`of reproduction and distribution, the Court
`turns to whether the fair use or first sale
`defenses excuse that infringement. For the
`reasons
`set
`forth below,
`the Court
`determines that they do not.
`
`1. Fair Use
`
`
`“The ultimate test of fair use . . . is
`
`whether
`the copyright
`law’s goal of
`‘promot[ing] the Progress of Science and
`useful Arts’ would be better served by
`allowing the use than by preventing it.”
`Castle Rock Entm’t, Inc. v. Carol Publ’g
`Grp., Inc., 150 F.3d 132, 141 (2d Cir. 1998)
`(quoting U.S. Const., art. I, § 8, cl. 8).
`Accordingly, fair use permits reproduction
`of copyrighted work without the copyright
`owner’s consent “for purposes such as
`criti

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