Capitol Records, LLC v. Redigi Inc.

Filing 187

ORDER: The Clerk of the Court is respectfully directed to docket on ECF the four attached letters, which were submitted to the Court before electronic docketing of letters was required in the Southern District of New York. (As further set forth in this Order.) (Signed by Judge Richard J. Sullivan on 2/17/2016) (tro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

I

CAPITOL RECORDS LLC,
Plaintiff,
No. 12-cv-95 (RJS)
ORDER

-v-

REDIG! INC. , eta/. ,
Defendants.

RICHARD J. SULLIVAN, District Judge:
The Clerk of the Court is respectfully directed to docket on ECF the four attached letters,
which were submitted to the Court before electronic docketing of letters was required in the
Southern District of New York.
SO ORDERED.
DATED:

February 17, 20 16
New York, New York

it /
'

~~
-

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~~-..j
. . . .7

RI HARDJ. SULLIVAN
UNITED STATES DISTRICT JUDGE

DSL
Davis Shapiro & Lewit, LLP
New York

I

Beverl y Hills

August 2, 20 13

VIA ELECTRONIC MAIL
Hon. Richard J. Sull ivan, U.S.D.J.
[e-mail]
Re:

Capitol Records, LLC v. ReDigi Inc. ( 12CY0095) (RJS)

Hon. Judge Sullivan:
We represent defendant ReDigi Inc., (" ReDigi'') in the above referenced action. We write in
accordance with Rule 2.A of Your Honor 's Individual Practices to respectfully request a pre-motion
conference in anticipation of making a motion to exclude certa in categories o f tracks from being
considered in any calculation of damages at trial.
Plaintiff Capitol Records, LLC (''Capito l") has stated its intent to pursue statutory damages
at trial for each work all egedly " infringed" pursuant to 17 U.S.C. § 504(c). Capitol further intends
to include in the calculation of "works infringed" (i) a ll tracks that were offered for sale by
customers through the ReDig i marketplace, but never so ld; and (ii) the approximately 134 works
that Capitol purchased through its investigator Ms. Coleen Ha ll prior to commencing the instant
action. It is ReDigi' s position that ne ither of the aforementioned instances const itute
1
·'infringements" and as such should not be included in any ca lculation of statutory damages at trial.
Capito l' s position that the tracks offered for sale (i.e. ·'made available"), but never sold. are
" infringements" is based on the theory that tracks offered for sale constitute a "distribution" in
violation of 17 U.S.C. I 06(3). This contention was a lready addressed by this Court in the March
30, 20 13 Memorandum and Order, when the Court noted that .. a number of courts, including one in
this di strict. have cast significant doubt on this ' make available' theory'" . .. but " because the Court
concludes that actual sales o n ReDig i' s website infringed Capito l's distribution right, it does not
reach this additional theory of liability" . See 3/30/13 Order at 8, n.6. Cases from this and other
circuits have consistently held that there can be no distribution where no sale occurred . See LondonSire Records, Inc.. 542 F. Su pp. 2d at 169 (defendants cannot be liable for violating the plaintiffs'
distribution right unless a "distribution" actually occurred); Nat/ Car Rental Sys., Inc., v. Computer
Assocs lnt 'I, Inc., 99 1 F.2d 426, 434 (8th C ir. 1993) (stating that infringement of the di stribution
right requires the actual dissemination of copies or phonorecords); Elektra Entm 't Grp. , Inc. v.
Barker, 55 1 F. Supp. 2d 234.243 (S .D.N.Y. 2008) (the support in the case law for the ·' make
available" theory of liability is quite limited). Under re levant law, it is not a violation of the
distribution right to merely make a work available, where no sale or transfer of ownership is
consummated and this Court has a lready declined to decide that making a work avai lable is an
infringement. As such, tracks that were mere ly offered for sale through the ReDigi marketplace,
1

While the anticipated motion wi ll focus on the aforementioned two issues. ReDigi does not concede that any other
instance is an infringement.
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but never sold , cannot be considered as ·' infringements" for the purposes of calculating statutory
damages at trial in this action .
Similarly, the works downloaded by Capitol's investigator paralegal Ms. Coleen Hall
should not be considered in any potential calculation of statutory damages. Prior to filing the
instant action, Capitol, through one of its employees downloaded approximately 134 musical tracks
as part of its " investigation" of the ReDigi system. Now, Capitol intends to seek an award of
statutory damages on the 134 musical tracks it had its own paralegal download. It is ReDigi ' s
position that the tracks Capitol itself purchased and downloaded should not be part of any potential
damages calculation for statutory damages. To count these works as " infringements'' for the
purpose of determining a statutory damage award, would reward Capitol for downloading far more
works than necessary to determine the functionality of the ReDigi website. Furthermore, allowing
Capitol to recover a statutory damage award for works where its own employee was actually the
infringer, would encourage future copyright plaintiffs' to engage in the infringing activity more than
necessary during " investigations", so that they could artificially inflate the potential statutory
damage award. Such a precedent would encourage companies, like Capitol here, to have interns
and paralegals download hundreds or even thousands of their own works so that the potential
recovery is larger, when such activity is completely unnecessary to accomplish the goal of
'· investigating," what they consider to be a potentially infringing service.
We appreciate the Court' s time and consideration in this matter, and should the Court need
any further information. we are available at the Court' s convenience.
Respectfully submitted,
DAVIS SHAPIRO & LEWIT LLP

Gary Adelman, Esq.
Cc:

Jonathan Z. King, Esq.
Richard Mandel, Esq.

Cowan, Liebowitz & Latman, P.C.
1133 Avenue of the Americas
New York, NY 10036

[phone] Tel
[phone] Fax
www.cll.com
Richard S. Mandel
(2 12) 790-9291

[e-mail]

August 2, 2013

By E-mail {[e-mail])
Hon. Richard J. Sullivan, U.S .D.J.
United States Courthouse
Southern District of New York
500 Pearl Street
New York, NY 10007
Re:

Capitol Records. LLC v. ReDigi Inc., 12 cv. 0095 CRJS)

Dear Judge Sullivan:
We represent plaintiff Capitol Records, LLC ("Capitol") and write in accordance with~~
4 and 6 of the Joint Amended Case Management Plan (the "CMP," Docket No. 111) and Rule
2.A ofthe Court's Individual Practices regarding Capitol's proposed motion to amend its
complaint. Capitol wishes to amend its complaint to: (I) supplement the list of its copyrighted
recordings that have been infringed; (2) join the principals of defendant ReDigi, Inc. ("ReDigi")
as additional defendants; and (3) eliminate portions of its complaint no longer necessary to
resolution of this dispute. Capitol ' s proposed First Amended Complaint is attached. Pursuant to
Paragraph 6 of the CMP, we understand that the August 9, 2013 post-discovery conference will
also serve as a pre-motion conference to address this proposed motion.
Paragraph 4 of the CMP provides that Capitol may move to join parties or amend
pleadings "with leave of the Court, in accordance with Fed. R. Civ. P. 15(a)(2)." Rule 15(a)(2),
in tum, provides that the Court "should freely give leave when justice so requires." As this
Court has held, leave will be " liberally granted," except in cases of"undue delay, bad faith or
dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments
previously allowed, undue prejudice to the opposing party by virtue of allowance of the
amendment, or futility of amendment." See,~. Bush v. Hom, 2009 WL362513 (S.D.N.Y.
Feb. 13, 2009) (citations omitted). None of the listed exceptions apply to Capitol's meritorious
and narrow amendments, which are the first it has sought in this case. These amendments are
necessary to conform Capitol's claims to evidence adduced during damages discovery, require
no further discovery, and will not delay the case schedule.
Capitol first proposes to supplement the list of its sound recordings infringed via
ReDigi's 1.0 service. The list attached to the original complaint identifies recordings known to
have been infringed at the time of Capitol's initial pleading. Discovery has revealed that since
that time, ReDigi users have offered for sale or sold many additional Capitol recordings. Capitol

29503/003/1414628.1

Cowan, Liebowitz & Latman, P.C.
Hon. Richard J. Sullivan, U.S.D.J.
August 2, 2013
Page 2
thus proposes to amend its complaint to account for the full universe of recordings at issue from
ReDigi 's inception until it discontinued ReDigi 1.0 following the Court's summary judgment
ruling. The parties expressly anticipated such an amendment in their joint submission to the
Court: "Because of the dynamic nature of the ReDigi website at issue in this case, the parties
contemplate that the list of plaintiffs recordings allegedly infringed will have to be
supplemented prior to a final adjudication in the case based on information obtained through
discovery." CMP ~4.
While supplementing the list of works at issue should thus be non-controversial in
principle, Capitol anticipates one area of dispute based on discussions with opposing counsel.
Capitol contends that each track that a user either offered for sale or actually sold is actionable,
while ReDigi insists that only those actually sold constitute infringement. ReDigi' s narrowing
interpretation does not comport with the Court's conclusion on summary judgment that ReDigi
violates the reproduction right when users upload recordings from their home computers to
ReDigi ' s cloud server, absent some affirmative defense. Under the Court's logic, ReDigi can
enjoy no fair use defense for such reproductions where the very purpose of such uploads was to
offer those tracks for sale to other ReDigi users. Capitol should be permitted to assert all such
tracks in its amended complaint, and will be prepared to discuss this issue further to the extent
necessary at the pre-motion conference.
Capitol's second proposed amendment seeks to join ReDigi's two founders, John
Ossenmacher and Larry Rudolph, as defendants. Discovery has confirmed that both are
personally liable as a legal matter and that, contrary to its earlier protestations, ReDigi itself has
insufficient funds to satisfy even a modest damage award in this case. Thus, as the parties move
to the remedy phase of this case, Capitol seeks to join these individuals as jointly and severally
responsible for Capitol's damages. The relevant facts and legal authorities are as follows.
In defending against Capitol's motion for a preliminary injunction, ReDigi argued
vociferously that money damages would be available to remedy any infringement. See
Declaration of John Ossenmacher (Docket No. 15) ~I 0 ("Even if plaintiff were right that
ReDigi's used music marketplace business somehow infringes its copyrights, this infringement
would be fully compensable in damages. ReDigi keeps detailed records of all of the purchase and
sale transactions ... "); Defendant's Memorandum of Law in Opposition to Plaintiffs Motion for
Preliminary Injunction (Docket No. 14) at 2 ("It is evident that this is about nothing but money
for the Plaintiff, and that if they were to win on the merits an award of statutory damages would
more than make them whole"). However, during recent depositions addressed to damages and
remedies, ReDigi acknowledged that it is operating at a huge loss, has extremely limited funds in
its accounts, and has no concrete promise of any future capital infusion. That financial status
makes it highly unlikely that ReDigi will be able to pay statutory damages for each of the many
hundreds of recordings at issue.
As a substantive legal matter, Ossenmacher and Rudolph clearly satisfy the standards for
personal liability insofar as they "participate in, exercise control over or benefit from an
infringement." Arista Records LLC v. Lime Group LLC, 784 F.Supp.2d 398,439 (S.D.N.Y.

29503/003/ 1414628.1

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Hon. Richard J. Sullivan, U.S.D.J.
August 2, 2013
Page 3
2011) (citations omitted); Arista Records LLC v. Usenet.com, Inc., 633 F. Supp. 2d 124, 158
(S .D.N.Y. 2009). ReDigi's founders conceived of the ReDigi "used marketplace" and its
methodology. Mr. Rudolph was the architect of the infringing software. Mr. Ossenmacher
operates the business day-to-day, with final say over all strategic, marketing, financial,
personnel, and operational decisions. They jointly own a majority interest in the company,
which is essentially comprised of the two of them and a handful of programmers under their
direction. As this Court held, "ReDigi's founders built a service where only copyrighted work
could be sold" and "programmed their software to choose copyrighted content." See Summary
Judgment Memorandum and Order (Docket No. 109) at 14. This control over every aspect ofthe
business renders them personally liable. See,~. Lime Group, 784 F. Supp. 2d at 438-39 (CEO
who "conceived of' infringing technology and was "ultimate decisionmaker" on strategic and
business planning personally liable for infringement); Microsoft Corp. v. Tech. Enters., LLC,
805 F. Supp. 2d 1330, 1333 (S .D. Fla. 2011) (corporate officer personally liable where he "was
the moving force behind his company's infringement" and "[was] the only person involved in the
business decisions"); Usenet.com, 633 F. Supp. 2d at 158-59 (director and sole shareholder
responsible for strategic, marketing and technical decisions personally liable).
Moreover, adding ReDigi's founders as parties imposes no delay or prejudice. Capitol
seeks no additional discovery or other extensions, and has established strong grounds for their
personal liability. If Capitol were unable to include them now, it would need to file a separate
action against them personally to preserve its ability to obtain meaningful financial redress.
While the parties were focused on obtaining a quick resolution of the underlying liability issues
last year, now that the case has moved on to remedies, ReDigi's founders should be added as
parties so that Capitol has the remedial resources ReDigi promised last year.
Finally, in the interests of efficiency, Capitol also seeks to eliminate aspects of its
complaint no longer germane to this dispute. Since Capitol has now elected to seek statutory
damages for infringement of its federally copyrighted works, it eliminates claims for other
species of damages (such as profits or actual damages) for federal copyright infringement.
Capitol's claims for violation ofthe performance and display rights are also effectively mooted
by the Court' s summary judgment ruling. Since those claims relate to the same recordings as to
which Capitol has already established violations of the reproduction and distribution right, proof
of infringement of these additional rights is no longer necessary for Capitol to seek statutory
damages for each of those recordings. Capitol, accordingly, elects not to pursue those claims.
We assume ReDigi will gladly accept such narrowing amendments.
Respectfully,

RichardS . Mandel
cc: Gary Adelman, Esq.

29503/003/ 1414628.1

DSL
D:n is S h a pir o & Lcw it , LLI'
New York

I Beverly

Hill s

August 7, 2013

VIA ELECTRONIC MAIL
Hon. Richard J. Sullivan, U.S.D.J.
[e-mail]
Re:

Capitol Records, LLC v. ReDigi Inc. ( 12CV0095) (RJS)

Hon. Judge Sullivan:
We represent defendant ReDigi Inc., ("ReDigi") in the above referenced action. We write in
accordance with Rule 2.A ofYour Honor's Individual Practices in response to Plaintiff Capitol
Records, LLC's ("Capitol") letter dated August 2, 2013 regarding Capitol's request to: (i) amend its
Complaint to supplement the list of copyrighted recordings that have been allegedly infringed; and
(ii) join the principals of ReDigi as defendants in the within action. 1
It is ReDigi's position that Capitol should not be given leave to amend its Complaint to
include tracks that were merely offered for sale through the ReDigi marketplace. Capitol's
contention that tracks merely "made available" are infringements was already addressed by this
Court in the March 30, 2013 Memorandum and Order, when the Court noted that "a number of
courts, including one in this district, have cast significant doubt on this ' make available' theory" ...
but "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". See 3/30/ 13 Order at 8, n.6 .
See also London-Sire Records, Inc., 542 F. Supp. 2d 153, 169 (D. Mass. 2008) (defendants cannot
be liable for violating the plaintiffs' distribution right unless a "distribution" actually occurred) ;
Nat/ Car Rental Sys., Inc., v. Computer Assocs Int'l, Inc., 991 F.2d 426, 434 (8th Cir. 1993) (stating
that infringement of the distribution right requires the actual dissemination of copies or
phonorecords); Elektra Entm 't Grp., Inc. v. Barker, 551 F. Supp. 2d 234, 243 (S.D.N.Y. 2008) (the
support in the case law for the "make available" theory of liability is quite limited). This Court has
already declined to decide that making a work available is an infringement. As such, tracks that
were merely offered for sale through the ReDigi marketplace, but never sold, cannot be considered
2
as "infringements" for the purposes of calculating statutory damages at trial in this action.
Capitol is now claiming that these tracks that were merely "made available" should be added
to the damages calculation by arguing that the Court "conclu[ded] on summary judgment that
ReDigi violates the reproduction right when users upload recordings from their home computers to
ReDigi's cloud server absent some affirmative defense." See 8/2/ 13 Cap. Let. at 2. Although the
Court found that a reproduction occurred during the upload process, the decision is clear that an
infringement only occurs through sale. Contrary to Capitol's mis-paraphrasing of the Courts
1
Capitol has also stated its intent to eliminate the portions of its complaint that relate to the alleged infringement of its
display and performance rights. ReDigi has no objection to this.
2

ReDigi does not concede that any other instance is an infringement that warrants damages.
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Page 2 of3

decision the Court found that "absent the existence of an affirmative defense the sale of digital
music files on ReDig i's website infringes Capitol's exclusive right of reproduction." See 3130113
Order at 7 (emphasis added). Buttressing this conclusion, when discussing the applicability of fair
use the Court noted it was only uploading to and downloading form the Cloud locker " incident to
safe" that fell outside of the ambit of fair use. ld at 10. The Court' s Order did not find that uploads
to the cloud that were never actually sold were infringements. In fact the Order specifically
declined to make this finding, and instead found that it was the sale on ReDigi's website that
infringed the exclusive right of reproduction. As the Court has already decided that mere uploads
that were offered for sale and never sold are not infringements, it would be futile and a waste of
resources for Capitol to be allowed to supplement their Complaint to add these tracks now.
Next, Capitol ' s request to add John Ossenmacher and Larry Rudolph as defendants in the
instant action should be denied, as neither the spirit nor the letter of the law support allowing
Capitol to implead Mr. Ossenmacher and Mr. Rudolph at this stage. First, contrary to Capitol ' s
statement, Mr. Rudolph and Mr. Ossenmacher do not satisfy the legal standard for personal liability.
Individually, neither Mr. Ossenmacher nor Mr. Rudolph own a controlling share ofReDigi.
Moreover, although Mr. Ossenmacher and Mr. Rudolph exercise some decision making power, they
are not solely in charge of the company-they sit on a board that is comprised of 4 active members.
Lastly, neither individual has been paid a salary or received any other form of remuneration from
ReDigi, and as such haven not benefitted from the allegedly infringing activity.
The facts here are wholly unlike the cases cited by Capitol and other cases where imposition
of liability on individuals may have been appropriate. C.f Arista Records LLC v. Lime Grp. LLC,
784 F. Supp. 2d 398,438 (S.D.N.Y. 2011) (imposing individual liability on CEO who knew about
infringement being committed through Lime Wire, actively marketed Lime Wire to Napster users,
operated multiple companies as one, and owned majority share of Lime Wire); Arista Records LLC
v. Usenet.com, Inc., 633 F. Supp. 2d 124, 158 (S.D.N.Y. 2009) (individual defendant Reynolds was
moving force behind entire business of both corporate defendants, was the sole employee of
company who carried out business of defendant companies, director and sole shareholder of both
companies and encouraged employees to take steps that were found to intend to foster
infringement); Microsoft Corp. v. Tech. Enterprises, LLC, 805 F. Supp. 2d 1330, 1333 (S.D. Fla.
2011) (individual defendant was moving force behind his company's infringement, owned 99
percent of company and was the its only employee); Stumm v. Drive Entm't, Inc., 00 CIV. 4676,
2002 WL 5589 (S.D.N.Y. Jan. 2, 2002) (individual liability was appropriate for CEO who was the
only employee receiving a salary). The contrast between the above cases and the facts here is stark.
Unlike these cases, neither Mr. Ossenmacher nor Mr. Rudolph have received financial benefit, are
not the only persons in control of the company, and do not own a controlling interest ofReDigi.
Additionally, unlike the file sharing cases cited to by Capitol, here ReDigi' s entire purpose was to
provide a lawful service. Although the Court has found that parts of the original ReDigi 1.0
technology were infringing, this was a case of first impression and cannot, under any stretch of the
imagination be compared to situations where the individuals in the cases cited by Capitol
intentionally provided a known infringing service for their own personal financial gain. As such
there is no reason to implead Mr. Ossenmacher and Mr. Rudolph.

Second, and also contrary to Capitol 's representations, ReDigi could satisfy a modest
damage award in this matter. Although Capitol would like to pretend there are "many hundreds" of
tracks at issue-there are not. 3 In reality the number of tracks at issue in this litigation is very
3

Capitol 's statement that there are "many hundreds" of works at issue is an exaggeration based upon Capitol's attempt
to include the 134 tracks downloaded by their own investigator and the tracks that were offered for sale through the

August 7, 2013
Page 3 of3

limited--well under one hundred. In light of the limited number of works at issue, ReDigi could
4
absolutely satisfy a modest damage award. Capitol is not in a position of not being able to obtain
meaningful financial redress. Capitol's request to add Mr. Ossenmacher and Mr. Rudolph as
defendants in this action is legally without merit and seems motivated by an intention to harass and
exert pressure and stress on ReDigi ' s officers. As such Capitol's request should be denied.
We appreciate the Court' s time and consideration in this matter, and should the Court need
any further information, we are available at the Court's convenience.
Respectfully submitted,

D~HAPIRO & LEWIT LLP

Gary Adelman, Esq.

Cc:

Jonathan Z. King, Esq.
Richard Mandel, Esq.

ReDigi marketplace but never sold. As set forth above, the Court has already declined to find that the latter of the two
constitutes infringement. As to the tracks downloaded by Capitol itself, for the reasons set forth in ReDigi's August 2,
2013 letter to the Court, Capitol shou ld not be a llowed to include these tracks in any calculation of statutory damages.
To do so would reward Capitol for downloading over a hundred tracks, which was far more than was even arguably
necessary for investigation purposes. Given the high number of tracks, it appears as if Capitol intentionally downloaded
an extremely high number of tracks for the purpose of driving up a damage award and allowing Capitol to include these
tracks would only encourage copyright plaintiffs to attempt to artificially inflate potential statutory damages to the point
where they become punitive. Such a ruling would serve no legitimate purpose.
4

" In awarding statutory damages, the courts may consider, among other factors, the expenses saved and the profits
earned by the defendant, the revenues lost by the plaintiff, the deterrent effect on the defendant and third parties, the
defendant's cooperation in providing evidence concerning the value of the infringing material, and the conduct and
attitude of the parties." See Smith v. NBC Universal, 06 C IV. 5350, 2008 WL 483604 (S.D.N.Y. Feb. 22, 2008). Here
a ll of these factors point in favor of a minimal statutory damage award. ReDigi has not "profited" from the
infringement or saved expenses, it designed a system that it believed to comply with the law and any monies earned
from actual customers are so limited at this point it has not been able to recoup any expenses. Plaintiffs have not "lost
revenues" either. Immediately after receiving the Court' s 3/30/ 13 Order, ReDigi disabled its 1.0 migration technology,
cancelled any offers for sale for any tracks that were uploaded using the 1.0 technology, and replaced all tracks that
users had purchased using the 1.0 migration technology, by purchasing those tracks from iTunes and having the
replacement tracks delivered directly from iTunes to the ReDigi cloud locker. ReDigi did all of this at its own cost, and
as ReDigi purchased these replacement tracks from iTunes, Capitol has already recovered any revenues it could claim to
have "lost". There is no lack of evidence concerning the value of tracks sold through ReDigi , and Capitol surely could
have pursued actual damages. The conduct of ReDigi and the need for a deterrent, similarly point to a minimal damage
award. ReDigi has at all times tried to comply with copyright law in designing its system, has promptly complied with
all Court Orders and a large award here would have a chilling effect on the development of new technologies, like
ReDigi that are trying to develop lawful services where the law is at best uncertain. Given the facts here, ReDigi
believes that the bare minimum of statutory damages would be appropriate and it could certainly satisfy such an award.

Cowan, Liebowitz & Latman, P.C.
1133 Avenue of the Americas
New York, NY 10036
[phone] Tel
[phone] Fax
www.cll.com

Richard S. Mandel
[phone]

[e-mail]

August 7, 2013
By E-mail ([e-mail])

Hon. Richard J. Sullivan, U.S.D.J.
United States Courthouse
Southern District ofNew York
500 Pearl Street
New York, NY I 0007
Re:

Capitol Records, LLC v. ReDigi Inc., 12 cv. 0095 CRJS)

Dear Judge Sullivan:
We represent plaintiff Capitol Records, LLC ("Capitol"), and write in accordance with
Rule 2A of the Court's Individual Practices in response to ReDigi's pre-motion letter dated
August 2, 2013, which requested a pre-motion conference concerning ReDigi's contemplated
motion to exclude certain categories of tracks from being considered in any calculation of
damages at trial. For the reasons set forth below, ReDigi's proposed motion is without any
merit.
ReDigi first contends that recordings which were offered for sale via the ReDigi website,
but which were never actually sold, should not be considered for statutory damages purposes
because no distribution occurred. While Capitol continues to maintain that making the
1
recordings available for sale is sufficient to constitute a violation of the distribution right, and
the Court's March 30, 2013 summary judgment order expressly refused to resolve that issue (see
3/3 0/13 Order at 8 n.6), ReDigi 's attempt to exclude these recordings from any damage award is
unfounded whether or not a distribution is found to exist.
ReDigi 's Jetter simply ignores the fact that for a recording to be offered for sale, it first
had to be reproduced by ReDigi and its users in order to be transferred to the ReDigi cloud.
Under the clear reasoning of the Court's summary judgment opinion, such reproduction
constitutes an independent violation of Capitol's copyright rights under 17 U.S.C. § I 06(1 ),
without regard to whether Capitol's distribution right has also been violated. As the Court's
opinion explained, in uploading Capitol's recordings to the ReDigi cloud, ReDigi and its users

See,~ Hotaling v. Church of Jesus Christ of Latter-Day Saints, 118 F.3d 199,201
(4th Cir. 1997); Motown Records Co., LP v. DePietro, 2007 WL 576284, at *3 (E.D. Pa. Feb. 16,
2007); Arista Records, LLC v. Greubel, 453 F. Supp.2d 961, 969-971 (N.D. Tex. 2006);
Universal City Studios Prods. LLLP v. Bigwood, 441 F. Supp.2d 185, 190-91 (D. Me. 2006).
1

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Cowan, Liebowitz & Latrnan, P.C.
Hon. Richard J. Sullivan, U.S.D.J.
August 7, 2013
Page 2
have necessarily fixed the recording in a new phonorecord, acts that violate Capitol's exclusive
right of reproduction under the Copyright Act absent some affirmative defense permitting the
reproduction. See 3/30/ 13 Order at 5-7.
With respect to the only affirmative defense proffered by ReDigi concerning violation of
the reproduction right, the fair use defense, the Court explained that it "has little difficulty
concluding" that ReDigi 's copying of Capitol's sound recordings "falls well outside the fair use
defense." Id. atl 0. The Court's fair use analysis- that ReDigi's purposes are commercial, that
its service "transforms" nothing about the digital file, and that the entire creative work is
appropriated in a fashion that devalues the market for legitimate digital distribution - applies
regardless of whether a track offered for sale is ultimately sold. Accordingly, Capitol is entitled
to an award of statutory damages for violation of the section 106(1) right of reproduction with
respect to every one of its recordings that was reproduced and then offered for sale, regardless of
whether or not a sale was ever consummated. See 17 U.S.C. §§ 501(a) (anyone who violates
"any ofthe exclusive rights of the copyright owner" is an infringer) (emphasis added); 504(c)
(any "infringer" liable for statutory damages in specified amount per work).
ReDigi also argues that the works downloaded by Capitol's investigator paralegal,
Colleen Hall, should be excluded from any statutory damage award. Such a contention fails for
the same reason addressed above with respect to the works offered for sale, but not sold. Any
recordings downloaded by Ms. Hall that are part of Capitol's complaint were first uploaded to
the ReDigi cloud, in violation of Capitol's reproduction right. In any event, as this Court held in
Arista Records LLC v. Lime Group LLC, 2011 WL 1226277 (S.D.N.Y. March 29, 2011),
" [c]ourts have consistently relied upon evidence of downloads by a plaintiffs investigator to
establish both unauthorized copying and distribution of a plaintiffs work." See also Olan Mills
Inc. v. Linn Photo Co., 23 F.3d 1345, 1348 (8th Cir. 1994) (defendant infringed by copying
works for plaintiffs agent); Warner Bros. Records Inc. v. Walker, 704 F. Supp.2d 460, 467
(W.O. Pa. 2010) (holding that downloads by investigator "establish[ed] unauthorized distribution
as to those nine recordings") ; Arista Records, LLC v. Usenet.com, Inc., 633 F. Supp.2d 124,
149-150 n. 16 (S.D .N.Y. 2009) ("Courts routinely base findings of infringement on the actions of
plaintiffs investigators") (collecting cases); Capitol Records, Inc. v. Thomas, 579 F. Supp.2d
1210, 1216 (D. Minn. 2008) (distribution to an investigator can form the basis for an
infringement claim); Atlantic Recording Corp. v. Howell, 554 F. Supp.2d 976, 985 (D. Ariz.
2008) (investigator downloads could form basis for infringement because "the recording
companies obviously did not intend to license [investigator] to authorize distribution or to
reproduce copies of their works;" " investigator's assignment was part of .. . attempt to stop
[Defendant's] infringement, and therefore the 12 copies obtained by [investigator] are
unauthorized"); U2 Home Entm't, Inc. v. Wang, 482 F. Supp.2d 314, 317-18 (E.D.N.Y. 2007)
(infringement liability based on rentals of copyrighted works to plaintiffs investigator). Thus,
any downloads by Ms. Hall are also sufficient to establish violations of Capitol's exclusive right
of distribution under 17 U.S.C. § 106(3).

29503/003/ 141 6854.1

Cowan, Liebowitz & Latrnan, P.C.
Hon. Richard J. Sullivan, U.S.D.J.
August 7, 20 13
Page 3
As RcDigi's contemplated motion is completely lacking in merit, the Court should deny
any such motion. We would be happy to address this issue in further detail at the August 9, 2013
conference to the extent the Court deems it necessary.
Respectfully,

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RichardS. Mandel
cc: Gary Adelman, Esq.

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