When ReDigi launched in late 2011, it offered people the ability to sell their unwanted digital tracks, much as they can sell used vinyl albums or CDs.
To accomplish this, ReDigi enabled users to upload their legally purchased iTunes tracks to a platform, where the music could then be transferred to new purchasers. ReDigi also said it deleted the originals from users' hard drives -- though the company could not guarantee that people hadn't made copies before uploading the tracks.
Not surprisingly, the record industry didn't think much of ReDigi's business model. Capitol sued ReDigi for copyright infringement, arguing that it was actually selling illegal copies of the tracks users initially purchased.
The record label prevailed in its lawsuit, ultimately obtaining a judgment against ReDigi for $3.5 million in damages. ReDigi and one of its founders, John Ossenmacher, declared bankruptcy last year.
But the company is still hoping to be vindicated in court. In February, ReDigi asked an appellate court to reverse the trial judge's decision -- which, according to the company, leaves consumers unable to re-sell digital music, short of selling their hard drives or other physical equipment.
"One does not need an advanced degree in economics to realize that no secondary market for previously purchased iTunes music files can ever develop if consumers are required to give away their computer hard disks as part of any resale," the company argues.
A host of outside observers, including the American Library Association and Internet Archive are backing Redigi. They argue that a victory for the company would also benefit libraries by clarifying that services like e-book lending are legal.
ReDigi also argues that its service is protected by fair use principles, noting that consumers already have the right -- known as the "first sale" right -- to re-sell physical products. The company said its service "further(s) the public interest by extending reasonable first sale protection to all lawful owners of copyrighted iTunes music files."
Capitol disagrees. The record label argues in court papers filed last week that ReDigi was a "profiteer" that exploited copies of the label's music.
"By simply duplicating sound recordings to undersell Capitol’s legitimate retailers, ReDigi surely undermined incentives for artistic creativity," Capitol argues. "Its commercial service was far removed from the kinds of illustrative fair uses the statute identifies, such as 'criticism' or 'scholarship,' and thus did nothing to add to the store of creative works or serve the purposes of promoting 'the useful arts.'"
The Copyright Alliance, which represents organizations including the Motion Picture Association of America and Recording Industry Association of America, plans to file a friend-of-the-court brief backing Capitol.