Capitol Records, LLC v. Redigi Inc.

Filing 224

LETTER addressed to Judge Richard J. Sullivan from Gary Adelman and Michael De Vincenzo dated June 16, 2016 re: Response to Plaintiffs' Pre Motion Conference Letter. Document filed by Redigi Inc..(Adelman, Gary)

June 16, 2016
VIA ELECTRONIC MAIL AND ECF
Hon. Richard J. Sullivan
[e-mail]
Re:

Capitol Records LLC v. ReDigi Inc., et al. (12 Civ. 00095) (RJS)

Hon. Judge Sullivan:
This letter constitutes Defendants’ response to Plaintiffs’ June 13, 2016 pre-motion
conference request.1 Defendants oppose Plaintiffs’ claim of entitlement to an award of attorneys’
fees. Such an award on the unique facts of this case would contravene the purposes of the
Copyright Act.
Today, the U.S. Supreme Court unanimously approved the Second Circuit’s approach to
determining whether to award attorneys’ fees in copyright cases holding that federal courts are
required to give “substantial weight to the objective (un)reasonableness of a losing party’s
litigating position.” Kirtsaeng v. John Wiley & Sons, Inc., No. 15-375, Slip Opinion at p. 2. As
Justice Kagan explained in her unanimous opinion for the Court, “placing substantial weight on
objective reasonableness also treats plaintiffs and defendants even-handedly [because] [n]o
matter which side wins a case, the court must assess whether the other side’s position was
(un)reasonable.” The Supreme Court made clear that the question whether the losing party’s
position was objectively reasonable cannot be answered by whether or not the party has been
found to infringe copyright.2
This lawsuit was never a run-of-the-mill copyright infringement case. ReDigi developed
new, patented technology intended to enable consumers of lawfully purchased copyrighted
digital music files to lawfully buy, sell or otherwise transfer these pre-owned music files—just as
consumers are free to sell their legitimately purchased cd's. ReDigi believed, and argued to the
Court, that its technology successfully accomplished this worthwhile purpose. As this Court
recognized “[t]he 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” . .
. . “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.” See 3/30/13 Order p. 4-5 [DE 109]. See
also TR: 2/6/12 p. 3:4-6 [DE 26] (“I find this to be a fascinating issue. We raised a lot of

1 As

an initial matter the Court’s April 28, 2016 Order, directed the parties to submit “any contemplated motions
regarding costs and fees by June 3, 2016”.
2 “Courts

every day see reasonable defenses that ultimately fail (just as they see reasonable claims that come to
nothing); in this context, as in any other, they are capable of distinguishing between those defenses (or claims) and
the objectively unreasonable variety. And if some court confuses the issue of liability with that of reasonableness,
its fee award should be reversed for abuse of discretion.” Id. at p. 10.

June 16, 2016
Page 2 of 3

technical and statutory issues that make this kind of a niche case”); TR: 10/5/12 p. 3 [DE 107]
(“there are honest disagreements as to what the law says and how it ought to be applied”).
The fact that the Court found that ReDigi’s technology did not fully accomplish its
copyright-conforming objective does not retroactively make Defendants’ arguments and
defenses objectively unreasonable.3 To the contrary, the just-announced Kirtsaeng decision
makes clear that this is precisely the kind of case where the objectively reasonable arguments
that ReDigi advanced militate strongly against an award of attorneys’ fees. As Kirstaeng
declares, attorneys’ fees awards “are a double-edged sword.” Penalizing losing parties who
advance objectively reasonable albeit unsuccessful positions in hard and novel cases is contrary
to the Copyright Act’s goal of “enriching the general public through access to creative works.”
Id. at p. 6. The prevailing party (Kirtsaeng) argued that attorneys’ fees should be awarded in
hard and novel cases because it resulted in some clarification of the law. The Supreme Court
reached the opposite conclusion, holding that an award of attorneys’ fees in hard and novel cases
“could just as easily discourage as encourage parties to pursue the kinds of suits that
‘meaningfully clarif[y]’ copyright law.” Id. at p. 8.
ReDigi’s fair use defense was also not objectively unreasonable. Indeed, while the
parties disputed the application of fair use to works uploaded to ReDigi and later offered for sale
or sold, Plaintiffs did not contest that works uploaded to ReDigi for storage was fair use. See
3/30/13 Order at p. 10. Nor was ReDigi’s position that fair use applied objectively unreasonable
given, inter alia, the factually sensitive, and evolving, nature of the fair use defense, and that the
iTunes Store Terms and Conditions (as cited in ReDigi’s briefs) authorized the practice of using
and transferring purchased music to other devices. See ReDigi 7/20/12 Br. at 16-17.
Further, the resolution of ReDigi’s defenses on summary judgment is not tantamount to a
determination that these defenses were objectively unreasonable or devoid of legal or factual
support. Courts in this Circuit have previously held that a summary judgment decision against a
party, i.e. a “finding that no reasonable juror could find in favor of one party is not the same as a
finding that the losing party’s claim was objectively unreasonable-something more is required.”
Belair v MGA Entertainment, Inc., 2012 Copr. L Dec P 30253 (S.D.N.Y. May 10, 2012) (citing
Fogerty, 510 U.S. at 527) (emphasis added). Here, although the Court found the facts not
disputed, the application of the law to the facts was, and remains, disputed.
Plaintiffs are unable to demonstrate anything more than that Defendants’ arguments did
not prevail. Defendants have not litigated this case in an objectively unreasonable manner.
Contrary to Capitol’s assertions, ReDigi did not backpedal on key factual admissions. Moreover,
for Capitol to characterize ReDigi’s explanation as a “semantic play” or imply surprise is without

3

Courts have routinely held that “only those claims that are clearly without merit or otherwise patently devoid of
legal or factual basis ought to be deemed objectively unreasonable.” Jovani Fashion, Ltd. v Cinderella Divine, Inc.,
820 F Supp. 2d 569, 573 (S.D.N.Y. 2011) (rejecting the argument that because plaintiff’s theory of copyright ability
shifted over the course of litigation, plaintiff never had a reasonable claim in the first place and holding that without
more, the claim was not “clearly without merit”).; Penguin Books U.S.A., Inc. v. New Christian Church of Full
Endeavor Ltd., No. 96 Civ. 4126, 2004 WL 728878, at *3 (S.D.N.Y. Apr. 6, 2004) (“[O]nly those claims that are
clearly without merit or otherwise patently devoid of legal or factual basis ought to be deemed objectively
unreasonable”). Defendants’ honestly held legal position that ReDigi 1.0 does not violate the Copyright Act,
supported by Defendants’ technical understanding of how the system works, was not “patently devoid of legal or
factual basis,” even though, in the end, the Court reached a different conclusion.