What If You Could Legally Resell Your Digital Music? ReDigi May Have Found The Solution.

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Here’s an interesting piece of news that’s sure to reignite debate over consumers’ rights in the digital age: A Boston-based startup called ReDigi has this week launched an eMarketplace that allows users to resell their digital music — as well as buy new and used songs for cheap. (This latter feature will be turned on in the next few weeks.)

While the idea of a secondary resale marketplace for digital content no doubt sounds appealing, given the tumultuous (and lawsuit-heavy) history of the sale and distribution of music on the Web, there are a number of tricky legal issues in play. Namely, with the rise in the digital distribution of music, movies, software, and more, there has come surfeit legal confusion over whether or not the so-called “first sale doctrine” applies to digital transactions.

Basically, under the first-sale doctrine, once the person who owns the rights to, say, a CD sells a copy of that work, the owner relinquishes control of that individual copy. Once that copy is in a new user’s hands, they own it and can do with it as they please, including reselling, lending, or giving it away.

However, Some have claimed that the first-sale doctrine does not apply to digital downloads, for instance, when that digital property has been licensed to the buyer, rather than explicitly sold. In the case of Vernor Vs. Autodesk, the software corporation sued Timothy Vernor (an online software reseller) for reselling its software on eBay, saying that, under the terms of use, the software had been licensed to him, not sold; thus, they claimed that he did not own the right to the software and could not lawfully resell their product.

In 2008, the Washington District Court sided with Vernor, ruling that the software was in fact sold, upholding Vernor’s right to resale. However, that decision was subsequently overturned in September 2010 by the 9th U.S. Circuit Court of Appeals. Which was followed on October 4th of this year by the Supreme Court’s decision to decline hearing the case, allowing the Court of Appeals’ verdict to stand — a decision which can obviously have significant (negative) implications for sites like ReDigi, consumers, and beyond.

Obviously, there are conflicting precedents for the first-sale doctrine in our evolving digital landscape, and these questions of ownership and right to resale tend to descend into gray areas and legal quagmires that often result in the sputtering and collapsing of those companies attempting to create legal secondary markets for resale.

Of course, ReDigi is not naive to the context here and claims that it has done its due diligence with a number of law firms in Boston, New York, and LA, and has in fact created a marketplace that both protects the rights of the consumer as well as conforms with current laws and supports the wishes of the music industry. Though achieving the latter certainly has to be akin to pulling a rabbit out of a hat.

ReDigi hopes to succeed where others have failed by designing a marketplace that is not about file sharing, but is instead a method of “facilitating the legal transfer of music between two parties”. Really, the key here is that the startup’s technology is able to actually verify that a track was properly purchased (or acquired) by the person looking to resell, and manages items posted for sale within the sellers’ music libraries to prevent multiple copies from being auctioned. (Which should, in practice, protect the seller from copyright infringement.)

The other feature that works in ReDigi’s favor is that, once the digital transaction has been completed, the track is thereby deleted from the seller’s music library as well as any mobile devices that are synced with their music player. The copies of songs that are on sale are held by ReDigi up until the transfer takes place; once the song is purchased, the actual track as well as the license are then transferred to the new owner, whereupon all copies of the track on the seller’s account are deleted.

As ReDigi is a completely free service with no subscription, installation, initiation, or upgrade fees — and users get free private cloud storage so that they can buy (this feature is coming soon), sell, or listen to their music anytime anywhere — this will no doubt have great appeal to consumers. Plus, ReDigi already has a catalog of over 11 million songs.

After all, how many of us have accumulated years worth of MP3s and digital songs that we no longer listen to? I know that I, for one, have several GBs of music that I would gladly resell and not bat an eyelash when ReDigi deletes those songs from my players and devices.

This is probably why ReDigi was able to attract 120,000 social network followers pre-launch and is in the process of closing a $1.5 million round of funding from a host of angel investors.

On the other hand, the startup claims that users will be able to buy pre-owned digital music from resellers “at a fraction of the price currently available on iTunes”, which is sure to raise the eyebrows of both Apple, music labels, and copyright owners.

ReDigi certainly has a lot going for it, as the process of reselling music is fairly simple. All one has to do is download the free “ReDigi Music Manager”, drag songs for resale from their music library (iTunes, Windows Media Player, etc.), and drop them onto the ReDigi icon located on their desktop. With a verification engine in place to determine that the seller is actually an authentic license holder, and the ability to delete sold copies from the seller’s devices, this may work towards mollifying the concerns of the music industry.

But, again, one notices the use of “license holder”, which thanks to the muddied perspective of the law, may still put ReDigi in danger if the powers that be decide to call their lawyers.

While ReDigi’s investors — and the team that has been working on this solution for the last few years — have clearly thought long and hard about this problem, having designed the marketplace to address the legal concerns of the music industry (as well as to pay out a sizable chunk of the proceeds from sales and resales to artists and labels), it would be surprising if we don’t hear ReDigi’s name along with the word “lawsuit” sometime in the future.

For more, check out ReDigi at home here, and please weigh in to let us know what you think. Does ReDigi have a shot at transforming the resale of digital content — or are they destined for a legal morass?