Capitol Records, LLC v. Redigi Inc.

Filing 286

DECLARATION OF GARY ADELMAN IN SUPPORT OF DEFENDANTS' MOTION FOR SUMMARY JUDGMENT. (This document was previously filed under seal in envelope #53 and unsealed on 12/20/2016.) (Attachments: # 1 Exhibit, # 2 Exhibit, # 3 Exhibit, # 4 Exhibit, # 5 Exhibit, # 6 Exhibit, # 7 Exhibit)(mro)

EXHIBIT 2

Case 1:12-cv-00095-RJS Document 6

Filed 01/19/12 Page 1 of 13

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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CAPITOL RECORDS, LLC,

No. 12-cv-0095 (RJS) (AJP)
Plaintiff,

-againstANSWER

REDIG! INC.,
Defendant.
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Defendant ReDigi Inc. ("ReDigi"), by its attorneys, Ray Beckennan, P.C.,
as and for its answer to the complaint (the "Complaint") of plaintiff Capitol Records,
LLC ("Plaintiff'), alleges as follows:
I.

Denies the allegations in paragraph I of the Complaint, except

admits that Plaintiff has brought the within action against ReDigi.
2.

Denies the allegations in paragraph 2 of the Complaint, except

admits that ReDigi owns and operates the "ReDigi" music service, which is a cloudbased music storage service as well as, upon infonnation and belief, the first online
marketplace for used or recycled music files.
3.

Denies the allegations in paragraph 3 of the Complaint, except

admits that 30 second clips of music tracks can be streamed through links which appear
on the ReDigi website, that the streaming of such clips is provided by, and licensed from,
an authorized provider thereof, that such clips are stored on the servers of said authorized
provider and not on the ReDigi service or on the hard drives of ReDigi users, and that the

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cover artwork displayed on the ReDigi website is likewise provided by, and licensed
from, the authorized provider.
4.

Denies the allegations in paragraph 4 of the Complaint.

5.

Denies knowledge or information sufficient to form a belief as to

the truth of the allegations in paragraph 5 of the Complaint.
6.

Admits the allegations in paragraph 6 of the Complaint.

7.

Denies the allegations in paragraph 7 of the Complaint, except

admits that Plaintiff has brought the within action against ReDigi.
8.

Admits the allegations in paragraph 8 of the Complaint.

9.

Denies the allegations in paragraphs 9 and 10 of the Complaint.

10.

Denies knowledge or information sufficient to form a belief as to

the truth of the allegations in paragraphs I I through IS of the Complaint.
II.

Denies knowledge or information sufficient to form a belief as to

the truth of the allegations in paragraphs 16 and 17 of the Complaint, except denies those
allegations to the extent that they allege that sound recordings and artwork have been
illegally reproduced, distributed and or performed or displayed.

12.

Denies the allegations in paragraph 18 of the Complaint, except

admits that ReDigi owns and operates the ReDigi website and service located at
www.redigi.com. that the website and service was launched in October 201 I and is in a
"Beta" testing and "inventory build" phase, that ReDigi has referred to its service as "the
world's first online marketplace for used digital music," and has stated that its service
allows users to "buy used digital music from others at a fraction of the price currently
available on iTunes."

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13.

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Denies the allegations in paragraph 19 of the Complaint, except

admits that the ReDigi site makes possible the sale of a digital music file from one user to
another without copying or file sharing.
14.

Denies the allegations in paragraph 20 of the Complaint, except

admits that ReDigi issued a press release before the launch of its service and respectfully
refers the Court to said document for its content.
15.

Denies the allegations in paragraph 21 of the Complaint, except

admits that the track stored in the user's personal storage locker is the file which had been
stored on the user's computer, and that ReDigi software automatically requires the user to
delete all instances of the file from the user's hard-drive and attached devices upon the
upload ofthe file to the user's personal storage locker.
16.

Denies the allegations in paragraph 22 of the Complaint, except

admits that ReDigi issued a press release before the launch of its service and respectfully
refers the Court to said document for its content.
17.

Denies the allegations in paragraphs 23 through 25 of the

Complaint, except admits that ReDigi has a tutorial video on its website and respectfully
refers the Court to said video for its content.
18.

Denies the allegations in paragraph 26 of the Complaint, except

admits that cover artwork from a third-party source is displayed on ReDigi's website
pursuant to license.
19.

Denies the allegations in paragraph 27 of the Complaint, except

admits that ReDigi users can earn "ReDigi coupons" and credits which can be applied to
the purchase of music files.

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20.

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Denies the allegations in paragraph 28 of the Complaint, except

admits that the ReDigi website offers contests.
21.

Denies the allegations in paragraph 29 of the Complaint, except

admits that ReDigi was mentioned in a New York Times article dated November 14,
2011.
22.

Denies the allegations in paragraph 30 of the Complaint, except

admits that the ReDigi earns a transaction fee from the sale of music by one user to
another through the ReDigi website.
23.

Denies the allegations in paragraph 31 of the Complaint, except

admits that ReDigi has made public statements and issued press releases.
24.

Denies the allegations in paragraph 32 of the Complaint, except

admits that the "Verification Engine" in ReDigi' s proprietary "Music Manager" software
("Music Manager") analyzes each file that a user seeks to upload to determine that it was
legally downloaded from iTunes by the user and eligible to be uploaded to the user's
personal storage locker.
25.

Denies the allegations in paragraph 33 of the Complaint, except

admits that Amazon.com, which is not the source of any ReDigi uploads, has terms and
conditions on its music store website.
26.

Denies the allegations in paragraph 34 of the Complaint, except

admits that Music Manager is resident on the user's computer, that Music Manager
verifies the eligibility of music files to be uploaded to the user's personal storage locker,
that after a file is so verified, Music Manager uploads the file and requires deletion of the
file and all copies thereof from the user's computer and from all synchronization and

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storage devices attached thereto, that if any storage or synchronization device is
connected to the computer subsequent to the upload, Music Manager automatically
searches such device or devices for instances of copies of the previously uploaded file,
that if a copy of such file is detected, the user is prompted to authorize the deletion of
such file from that device, and that if the user fails to provide such authorization, the
user's ReDigi account is suspended.
27.

Denies the allegations in paragraph 35 of the Complaint, except

admits that the First Sale Doctrine of 17 U.S.c. § 109 is one of many defenses to this
action.
28.
such, no response

Paragraph 36 of the Complaint calls for legal conclusions, and as
IS

necessary; to the extent that paragraph 36 contains factual

allegations, ReDigi denies same.
29.

Denies the allegations in paragraphs 37 and 38 of the Complaint.

30.

Denies the allegations in paragraph 39 of the Complaint, upon

information and belief denies that Plaintiff owns any of the songs, and denies knowledge
or information sufficient to form a belief as to the truth of the allegation that "many of
Billboard's 'top 100' [recordings] listed as available from ReDigi are owned by
Plaintiff."
31.

Denies the allegations in paragraph 40 of the Complaint, except

denies knowledge or information sufficient to form a belief as to the truth of the
allegation that Plaintiff owns or controls the sound recordings listed in Exhibits A and B
to the Complaint.

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32.

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Denies the allegations in paragraph 41 of the Complaint, except

admits that the RIAA sent ReDigi a "cease and desist" letter in November 2011, which
failed to comply with the Digital Millennium Copyright Act, 17 U.S.c. § 512
("DMCA").
33.

Denies the allegations in paragraphs 42, 43, 45 through 50, 52

through 60, 62 through 70, and 72 of the Complaint.
34.

Denies the allegations in paragraph 73 of the Complaint, except

admits that Music Manager determines whether files sought to be uploaded to the ReDigi
Cloud are eligible to be uploaded, that it is not necessary for the user to know the source
of the file sought to be uploaded since Music Manager will determine whether it is from
an eligible source, that ReDigi has adopted and reasonably implemented a policy that
provides for the suspension of users' accounts in the event of repeated infringement and
violation of ReDigi's terms of service, and that ReDigi has informed its users of this
policy and they have agreed to same.
35.

Denies the allegations in paragraph 74 of the Complaint.

36.

Denies the allegations in paragraph 75 of the Complaint, except

admits that ReDigi charges a transaction fee on the sale of a used music file.
37.

Denies the allegations in paragraphs 76 through 81 of the

38.

Denies knowledge or information sufficient to form a belief as to

Complaint.

the truth of the allegations in paragraph 83 of the Complaint.

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39.

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Denies the allegations in paragraph 84 of the Complaint, except

admits that Plaintiff has not granted ReDigi a license to copy, distribute or perform any
pre-1972 recordings.
40.

Denies the allegations m paragraphs 85 through 88 of the

Complaint.
AFFIRMATIVE DEFENSES

41.

After signing up for a ReDigi account, accepting ReDigi' s terms of

servICe, downloading and installing ReDigi's proprietary "Music Manager" software
("Music Manager"), and logging into the account using secure login information, a
ReDigi user may upload an eligible music file ("Eligible File") from the user's computer
to the user's personal storage locker ("Cloud Locker") in ReDigi's cloud-based storage
system (the "ReDigi Cloud").
42.

A user's Cloud Locker consists of file pointers that associate

particular Eligible Files with a particular user's account and indicate in which Cloud
Locker those files are located.
43.

Only the user associated with a particular Cloud Locker has access

44.

The only Eligible Files are those originally and legally downloaded

to its contents.

from iTunes, thereby excluding music tracks copied from CDs, or downloaded from other
online vendors or files sharers, or obtained from any other source.
45.

The terms and conditions used by iTunes do not in any way

prohibit any part of ReDigi' s business model. Plaintiff s citation of the terms and
conditions used by Amazon.com is inapposite.

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46.

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Music Manager analyzes each mUSIc file that a user seeks to

upload to determine that it was legally downloaded from iTunes by the user and eligible
to be uploaded. Before a file is accepted for upload, the file is subjected to an initial
validation process on the user's computer, which includes analyzing file ownership,
source, purchase dates, UITS code if it exists, metadata, and changes and modifications,
if any. If the file passes the initial validation stage, the file is uploaded to the user's
Cloud Locker where additional and more intensive analysis takes place to confirm
eligibility, including validating file source and ownership, and verifying that the file was
not modified or tampered with.
47.

Music Manager continuously runs in the background on a user's

computer. Upon the upload of an Eligible File to a user's Cloud Locker, such file and all
copies thereof residing on the user's computer, and on attached synchronization and
storage devises, are deleted therefrom.
48.

If any storage or synchronization device is connected to the user's

computer subsequent to the upload, Music Manager automatically searches such devices
for instances of copies of any Eligible File previously uploaded by the user to his or her
Cloud Locker.
49.

If a copy of such Eligible File is detected, the user is prompted to

authorize the deletion of such file from that device, and if the user fails to provide such
authorization, the user's ReDigi account is suspended.
50.

If a user downloads a file from his or her Cloud Locker, the file in

the Cloud Locker is deleted.

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51.

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After the upload of an Eligible File to a user's Cloud Locker, the

user can listen to the file by "streaming" it from the user's Cloud Locker to an intemetconnected device using the user's secure login to access his or her ReDigi account.
52.

No copy of a music file so "streamed" is stored; rather it is loaded

into RAM, and disappears when the song stops playing.
53.

A user can choose to offer an Eligible File stored in his or her

Cloud Locker for resale to other ReDigi users through the ReDigi used music
marketplace.
54.

No copy of the file in the ReDigi Cloud is made when the Eligible

File is sold by one ReDigi user to another ReDigi user.
55.

When such a file is purchased by another user, the file pointer

associating the Eligible File with the Cloud Locker of the selling user is modified to
associate the file with the Cloud Locker of the purchasing user.
56.

In such a transaction only the pointer is changed; the Eligible File

remains in the same location in the ReDigi Cloud and is not copied.
57.

After such a sale, the selling user no longer has any access to the

58.

After such a sale, the Eligible File remains in the purchasing user's

file so sold.

Cloud Locker where he or she can store it, listen to it, offer it for sale, or download it, in
which case the file is deleted from the purchasing user's Cloud Locker.
59.

ReDigi earns a transaction fee on the sales.

60.

ReDigi's website has links to 3D-second clips which are streamed

by a third-party source and to associated artwork maintained by that source, all pursuant

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to license. No copies of such clips are made or stored on ReDigi's website or in the
ReDigi Cloud, nor are any of the artwork files which are displayed on the website stored
on the website or in the ReDigi Cloud.
AS AND FOR A FIRST AFFIRMATIVE DEFENSE

61.

The Complaint fails to state a claim upon which relief can be

granted, and violates Fed. R. Civ. P. 8 by failing to allege (a) each specific original work
that is the subject of Plaintiffs claim, (b) Plaintiffs ownership of each such specific
work, (c) specifics of copyright registration of each such specific work, and (d) the acts
by which and the times during which ReDigi purportedly infringed each such copyright.
AS AND FOR A SECOND AFFIRMATIVE DEFENSE

62.

ReDigi's music storage service and used music marketplace are

protected by the safe harbor defense of the Digital Millennium Copyright Act, 17 U.S.c.
§ 512.

AS AND FOR A THIRD AFFIRMATIVE DEFENSE

63.

Plaintiff failed to comply with the notification requirements of the

Digital Millennium Copyright Act, 17 U.S.C. § 512.
AS AND FOR A FOURTH AFFIRMATIVE DEFENSE

64.

ReDigi's music storage service and used music marketplace do not

infringe on copyright based on the fair use doctrine.
AS AND FOR A FIFTH AFFIRMATIVE DEFENSE

65.

ReDigi' s music storage service and used music marketplace do not

infringe on copyright based on the essential step defense of II U.S.c. § 117.

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AS AND FOR A SIXTH AFFIRMATIVE DEFENSE

66.

ReDigi's music storage service and used music marketplace do not

infringe on copyright based on the copyright exhaustion doctrine.
AS AND FOR A SEVENTH AFFIRMATIVE DEFENSE

67.

The sale of Eligible Files from one ReDigi user to another ReDigi

user does not infringe on copyright based on the first sale doctrine.
AS AND FOR AN EIGHTH AFFIRMATIVE DEFENSE

68.

The transfer by a ReDigi user of Eligible Files to and/or from the

user's own Cloud Locker in the ReDigi Cloud is a non-infringing act protected by the fair
use doctrine.
AS AND FOR A NINTH AFFIRMATIVE DEFENSE

69.

The transfer by a ReDigi user of Eligible Files to and/or from the

user's own Cloud Locker in the ReDigi Cloud is a non-infringing act protected by the
essential step defense of II U.S.C. § 117.
AS AND FOR A TENTH AFFIRMATIVE DEFENSE

70.

The transfer by a ReDigi user of Eligible Files to and/or from the

user's own Cloud Locker in the ReDigi Cloud does not infringe on copyright based on
the copyright exhaustion doctrine.
AS AND FOR AN ELEVENTH AFFIRMATIVE DEFENSE

71.

The transfer by a ReDigi user of Eligible Files to and/or from the

user's own Cloud Locker in the ReDigi Cloud does not implicate the distribution right of
17 U.S.c. § 106(3).

II

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AS AND FOR A TWELFTH AFFIRMATIVE DEFENSE
72.

The streaming of 30-second clips of music files and associated

cover artwork through ReDigi's website is pursuant to licenses.
AS AND FOR A THIRTEENTH AFFIRMATIVE DEFENSE
73.

The distribution right of 17 U.S.c. § 106(3) is limited to the

dissemination of material objects.
74.

The digital files that are the subject of this action are not material

75.

The dissemination of digital files does not infringe the distribution

objects.

right of 17 U.S.c. § 106(3).
AS AND FOR A FOURTEENTH AFFIRMATIVE DEFENSE
76.

Alternatively, jf digital files are held by the Court to be material

objects subject to the distribution right of 17 u.s.c. § 106(3), then they are likewise
material objects subject to the first sale exception to 17 U.s.c. § 106(3) created by 17
U.s.C. § 109, and a ReDigi user's sale of a single file to another ReDigi user therefore
does not infringe the distribution right of 17 U.S.c. § 106(3), pursuant to 17 U.S.c. §
109.

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WHEREFORE ReDigi demands judgment dismissing the Complaint and
awarding attorneys' fees, costs, disbursements, and such other and further relief as to the
Court seems proper.
Dated: Forest Hills, New York
January 19, 2012
RAY BECKERMAN, P.c.
By:

slMorlan Ty Rogers
Morlan Ty Rogers
Attorneys for defendant ReDigi Inc.
108-18 Queens Blvd., 4th Floor
Forest Hills, NY 11375
[phone]

To:

Cowan, Liebowitz & Latman, P.C.
Attorneys for plaintiff Capitol Records, LLC
1133 Avenue of the Americas
New York, NY J0036-6799
[phone]

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