ReDigi, the company that calls itself "your favorite pre-owned record store, but for digital music files," is pushing back against a massive copyright infringement lawsuit launched by Capitol Records. In its answer to the complaint, ReDigi's lawyers insist that Capitol's core argument is false; no "copying" takes place in the resale process that ReDigi facilitates between buyers and sellers of digital tunes.

In fact, Capitol's accusations "reflect a profound misunderstanding of how ReDigi works and have no merit," insists the plea from ReDigi attorneys to the United States District Court Southern District of New York. But the request for the court to squelch the suit does acknowledge that some copying "arguably takes place," that being the upload into or the download from the user's ReDigi cloud locker, "both of which are obvious fair uses."

At a fraction of the price

As already noted, ReDigi bills itself as a sort of online used record shop, allowing users to sell digital files acquired from iTunes "at a fraction of the price currently available" via that venue. The startup says that it does this via its "forensic Verification Engine"—software that analyzes each upload to make sure that it is a legally acquired track. Songs ripped from CDs are excluded. Once a tune is classified as kosher, ReDigi software deletes it from the uploader's synced gadgets or computer.

But none of this impressed the Recording Industry Association of America, which sent the company a cease-and-desist-then-roll-over-and-die note in mid-November. The RIAA letter called the First Sale doctrine irrelevant in this case. The bottom line (to the trade association) is that the process of transferring a file to ReDigi's cloud represents an act of copying. First Sale permits a user to sell their copy of an item, not a copy of the copy.

"Thus, even if ReDigi's software and system works as described by ReDigi (i.e. that it deletes the original copy before it makes the sale), ReDigi would still be liable for copyright infringement," the RIAA letter warned. Stop what you are doing, the group demanded, quarantine the site and hand over "an accounting of all sales achieved and revenue generated" from RIAA member sound recordings through the ReDigi service, "so that we can discuss a resolution of our Members' claims."

No more Mr. Nice Guy

That little love note arrived even before the Capitol Records lawsuit, which more or less echoes RIAA's opening arguments, with some embellishment.

"While ReDigi touts its service as the equivalent of a used record store, that analogy is inapplicable," the suit contends. "Used record stores do not make copies to fill their shelves. ReDigi is actually a clearinghouse for copyright infringement and a business model built on widespread, unauthorized copying of sound recordings owned by Plaintiff and others."

Borrowing from ReDigi promotional literature, Capitol insists that the company is about copying from the moment a user uploads a song to the moment she buys one:

The track "store" in and offered to consumers from ReDigi's "cloud" is necessarily a copy of the user's original file, which ReDigi purportedly deletes from the user's hard-drive. No tangible, material object is transferred to the ReDigi "cloud"; rather, the user's original file is duplicated and then stored by the ReDigi service, regardless of whether the user's original file remains on his or her computer or is deleted. A second copy is then made when a ReDigi transaction is consummated. As the press release continues, "When the song is purchased, the track and license will be instantly transferred to its new owner." The so-called sale, in other words, can only be accomplished by the creation and transfer of yet another copy of what was once the original user's digital file.

Some of the Capitol suit can probably be brushed aside. The filing warns that Amazon.com prohibits customers of its MP3 Music Service from selling their files. But ReDigi insists it doesn't accept Amazon-purchased tunes.

Then the action contends that "it is questionable whether ReDigi can effectively determine whether files were lawfully obtained in the first place." Perhaps not, but last we checked, the question was not whether ReDigi is doing anything "questionable," but whether the company is doing something that is illegal.

Essential step?

Which brings us to ReDigi's response. First, as noted earlier, the company is deploying some kind of fair use defense. We contacted ReDigi's lawyers to get a better sense of how this might work, but not surprisingly, they didn't want to talk. "At this time as we are in litigation over these issues, we cannot comment on the legal arguments except as they are made in court," a ReDigi spokesperson told us.

So we checked in with IP attorney Rick Sanders, who in a review of ReDigi predicted that the firm might offer a fair use argument in a lawsuit. Sanders emphasized that he doesn't know how ReDigi plans to elaborate on this in court, but the generic fair use case is pretty straightforward. "In order to make anything we have to make copies of it," Sanders noted. Thus, technology companies have "generalized fair use principles to make intermediate copies in order to exercise some right that they have been given." In this case, that would be the right of resale based on the First Sale doctrine.

Second, ReDigi is deploying the "essential step" defense. This is embedded in Section 117 of the Copyright Act, as so:

(a) Making of additional copy or adaptation by owner of copy. Notwithstanding the provisions of section 106 [ 17 USC 106 ], it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided: (1) that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner [italics ours]

ReDigi argues that "since an mp3 file is a computer program," the essential step clause protects the company from liability. And on top of that, Capitol's claim "would be barred by Plaintiff's failure to have even attempted to comply with the DMCA"—presumably because the company never bothered to send notice and takedown requests to the defendant.

It sings and speaks

How does the government define a computer program? Section 101 of the Copyright classifies it this way: "A 'computer program' is a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result."

Sanders also predicted that essential step might come into play, although as he noted in our interview, a lot of "open questions" are raised in this defense, such as "when is digital content a computer program and when is it just data?" But he seems to lean towards the position that a music file is about more than just data:

The data is not "dumb": it sings, it speaks. Yes, an application must translate its wonders for a computer, but isn't the content a file that tells the computer what to do? Perhaps just as important, digital content is protectable data. It might look like 0's and 1's, but it reproduces protectable works, like music, books and movies. If the essential step defense didn't give you a right to make an intermediate copy of the content file, you couldn't enjoy the copyrightable work.

ReDigi also defends its use of 30-second sample streams, which are provided by an "outside, licensed provider," the company notes, and adds that it offers no public streaming itself. But between the fair use and essential step questions, there will plenty for the court to grapple with.

Capitol wants the maximum statutory award of $150,000 per allegedly illegally downloaded tune. ReDigi is asking the court to dismiss the case and award "attorneys' fees, costs, disbursements, and such other and further relief as to the Court seems proper."