Capitol Records, LLC v. Redigi Inc.

Filing 300

MEMORANDUM OF LAW IN OPPOSITION TO CAPITAL RECORD LLC'S MOTION FOR PARTIAL SUMMARY JUDGMENT. Document filed by Redigi Inc. EXHIBIT L TO THE DECLARATION OF RICHARD S. MANDEL, ESQ. (This document was previously filed under seal in envelope #85 and unsealed on 12/20/2016.)(mro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

--------x
CAPITOL RECORDS,LLC,

Plaintiff,
v.

Civil Action No.: 12CIV0095
ßJS)

REDIGI INC.,
Defendant.

------------x

MEMORANDUM OF LA\ry IN OPPOSITION TO CAPITOL RECORD LLC'S
MOTION FOR PARTIAL SUMMARY JUDGMENT

MEISTER SEELIG & FEIN LLP
Two Grand Central Tower
140 East 45th Street, 19tl'Floor
New York, New York 10017
Phone: [phone]S0
Attorneys for ReDigí Inc.

Gary Adelman, Esq.

TABLE OF CONTENTS
TABLE OF AUTHORITIES
PRELIMINARY

STATEMENT

..........

STANDARD............
4RGUMENT............
THE SUMMARY JUDGMENT

I.

ii

................

1

..,,........2
..........2

NONE OF CAPITOL'S EXCLUSIVE RIGHTS HAVE BEEN VIOLATED ...................

A.

NO REPRODUCTION TAKES PLACE IN A SALE TRANSACTION....................

B.

REPRODUCTION DOES NOT TAKE PLACE BY

DEFINITION

3

3

..,,.....7

C.

ARCHIVAL DUPLICATES THAT WERE MADE
ARE NOT TNFRINGEMENTS

.................... 13

D.

PERSONAL USE COPIES ARE NOT

E.

CAPITOL'S DISTRIBUTION RIGHT HAS NOT BEEN VIOLATED...................

INFRINGEMENTS....

............... I3
15

II.

REDiGI CANNOT BE LIABLE AS A DIRECT INFRINGER.................................... I8

III.

REDIGI CANNOT BE SECONDARILY

LIABLE

.............,....20

A.

REDIGI CANNOT BE LIABLE FOR CONTRIBUTORY INFRINGEMENT........ 20

B.

REDIGI CANNOT BE LIABLE FOR VICARIOUS INFRINGEMENT .................22

C.

REDIGI CANNOT BE LIABLE FOR INDUCEMENT OF INFRINGEMENT ..,...23

m.

REDIGI 2.0 CANNOT BE

CONCLUSION..........

ENJOINED

..................25
.......2s

TABLE OF AUTHORITIES
Cases

A&M Records, Inc. v. Napster, Inc.,
239 F.3d 1004 (9th Cir.

2001)

........

Arista Records LLC v. Usenet.com, Inc.,
633 F. Supp. 2d 124 (S.D.N.Y. 2009).,......

13

......20

Astroworlrs, Inc. v. Astroexhibít, Inc.,
257 F. Supp. 2d609 (S.D.N.Y.2003)........

District of Columbia,
29r U.S.4t1 (1934)

.........7

Best v.

........ 5

Butynski v. Sprínffield Terminal R.Co.,

s92F.3d272 (lst Cir.

2010)

.............5

C. M. Paula Co. v. Logan,

355 F. Supp. 189 (N.D. Tex. 1973)

..........

Campbell v. AcuffRose Music, Inc.,
510 U.S. 569,114 S. Ct. 1164,127 L. Ed. 2d 500

........

(1994)

11

74,15

Cartoon Nenuork LP, LLLP v. CSC Holdings, Inc.,
536 F.3d l2l (2d Cir. 2008).

73, 16, 79,20

Castle Rock Entm't, Inc. v. Carol Pub. Group, Inc.,
1s0 F.3d r32 (2d Cir.

........... ts

1998).

Util. Comm'n of PA,
CIVA 1:05-CV-2375,2008WL906491 (M.D. pa. Mar. 31, 2008)

Chase v. Pub.

Feist Publ'ns, Inc. v. Rural Tel. Sert,. Co.,
499 U.S. 340 (1991)..........

................2

Gershwin Pub. Corp. v. Columbia Artists Mgmt., Inc.,
443 F.2d 1ts9 (2d Cir. 1971).

Kregler v. City of New York,
821 F. Supp. 2d 651(S.D.N.Y.

....12

2011)........

London-Sire Records, Inc. v. Doe I,
542F. Supp.2d153 (D. Mass.2008)

.........21

......... 5

........passim

ll

MacDonald v. Gen. Motors Corp.,
1 10 F.3d 337 (6th Ck. 1997)

............ s

Matthew Bender & Co., Inc. v. W. pub. Co.,
1s8 F.3d 693 (2d Cir. 1998).

...........20

Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.,
545 U.S. 913,125 S. Ct. 2764,162L.8d.2d 781 (2005)

Natl Car Rental Sys., Inc., v. Computer Assocs Int,l, Inc.,
991F.2d426 (9thCir. t993)
Oscanyan v. Arms Co.,

r03 u.s.261,26 L. Ed. s39

(1880)..........

Playboy Enterprises, Inc. v. Russ Hardenburgh,Inc.,
982F. Supp.s03 (N.D. Ohio 1997)

Quality King Distríbs v. L'anza Research Int,l, Inc.,
523 U.S. 13s (1998)

passim

..........

ls

.......... s

..................20

...... t7

Ringgold v. Black Entm't Television, Inc.,

(2dCir.I997).

............,.14

Robinson v. McNeil Consumer Healthcare,
615 F.3d 861 (7thCir.20t0)..............

................ s

r26F.3d70

Ins. Co. of
391 F.3d 77

Sec.

Hartþrd v. Old Dominion Freight Line Inc.,

(2dCir.2004).

...............2

Sega Enterprises

Ltd. v. MAPHIA,
948 F. Supp. 923 (N.D. Cal. 1996)..........

Shapiro, Bernsteín & Co. v. H. L. Green Co.,
316F.2d304 (2d Cir. 1963).

.........12

...........22

Skidmore v. Swíft & Co.,
323 U.S. 134 (1994)

...... 16

Sony Corp. of Am. v. Universal City Studios, Inc.,
464U.5.417,104 S. Ct.774,78 L. Ed. 2d,574

(i984).......

passim

Stowe v. Nat'l R.R. Passenger Corp.,

793F. Supp.2d549 (E.D.N.Y.

z0t1)

................4

111

Twentieth Century Music Corp. v. Aiken,

422U.5.1s1

(197s)

...... 10

Twin Pealrs Productíons, Inc. v. Publications Int,l, Ltd.,
996F.2d 1366 (2d Cir.

1993).

Uníted States v. McKeon,
738F.2d26 (2d Cir.

1984).

Weissmann v. Freeman,
868 F.2d 1313 (2d Cir.

Winter v. United States,
196 F.3d 339 (zdCir.

........... 3

............... 5

1989).

......... t4

t999).

.............2

Statutes

202.........

.......... 9

17 U.S.C.

$101..........

........ 10

I7.U.S.C.

109(a)

17 U.S.C. ç

17 U.S.C. $

................. 9

107.........

........14

Rules
Fed. R. Civ.

P.56(c).........

....................2

8(dX2)-(3)

..................... ó

Fed. R. Civ. P.

Regulations
17 C.F.R. $

230.s02(b)(2)...........

........24

1V

PRELIMINARY STATEMENT
Defendant ReDigi Inc. ("Defendant" or "ReDigi") submits this memorandum,
the
declarations submitted in support of same together with the exhibits annexed thereto,l
and the Rule
56.1 Counter Statement of Disputed Facts ("RDF") in opposition to plaintiff Capitol
Records LLC,s

("Plaintiff'or "Capitol") motion for partial summary judgment.
Capitol has failed to demonstrate its entitlement to judgment as

a

demonstrated that any aspect of the ReDigi system infringes its exclusive

matter of law as it has not

rights. Capitol's motion

lacks any evidentiary support that infüngement takes place on the ReDigi system
and instead, rests

entirely on misinterpretations of the law and unsupported assumptions about ReDigi,s
technology.
There is no evidence that the ReDigi system is used to infringe nor is there evidence
that the ReDigi
system was created for the purpose of infringement, encouragingothers to infringe
or any other

activity that would support the imposition of direct or secondary liability. As set forth
below, none
of Capitol's exclusive rights are violated by consumers' use of the ReDigi system. Despite
Capitol's best efforts to confuse the issues and convince the Court that proof of infüngement
is
unnecessary, the undisputed facts of this case lead to only one conclusion

-that Capitol has failed to

satisfy its burden of proof and its motion must be denied.

I

The materials submitted in support of ReDigi's Opposition as referred to herein
include the
Declaration of Gary Adelman dated August 14,201t together with the exhibits annexed
thereto
("Adelman Decl."), the declaration of John Ossenmachei dated August 14,2012(.,Ossenmacher
Decl.") and the declaration of Lawrence S. Rudolpha/HaLany Rogel dated August14,2012
("Rogel Decl."). Many of the facts and arguments referred to herein are more
fully set forth in
ReDigi's Memorandum of Law In Support of its Motion for Summary Judgment dated
July 20,
2012, (Docket No. 55) ("Def. 8.."), ReDigi's Statement of Undisputed Fac-ts Pursuant
to Local
Civil Rule 56.1 (Docket No. 56) ("RSUF"), the Declaration of Gary Adelman dated July 20,2012
together with the exhibits annexed thereto (Docket No. 57) ("7120/12 Adelman Decl.',),
Declaration
of Lawrence S. Rudolph (Rogel) dated July 20,2012 (Docket No. 58) (*7/20/12 Rogei Decl.,'),
the
Declaration of colin worth dated July 20,2012 (Docket No. 59) (..worth Decl.,,),
und th.
Declaration of Jonathan Lin dated July 20, 2012 (Docket No. OO¡
i"t-in Decl.',), all of which are
fully incorporated herein by reference, but will not be repeated at iength.

THE SUMMARY JUDGMENT STANDARD
Summary judgment may be granted only

if there is no genuine issue

and the moving party is entitled to judgment as a matter of

law.

,S¿e

as

to any material fact

Fed. R. Civ. p. 56(c); Wnter v.

United States,l96 F.3d 339,346 (2d Cir. 1999). "If, as to the issue on which summary judgment
is
sought, there is any evidence in the record from which a reasonable inference could
be drawn in

favor of the opposing party, summary judgment is improper." See Sec. Ins. Co. of
Hartfurd v. OId
Dominion Freight Line 1nc.,391 F.3d 77,82-83 (2d Cir.2004). To defeat summary judgment,
nonmovant need offer only enough evidence for a reasonable jury to retum a verdict
in its favor. 1d

ARGUMENT
As evidenced herein, Capitol cannot prevail on its motion for summary judgment. It
undisputed that as plaintiff, Capitol bears the burden of proving the elements of its
copyright

infringement claims. See Feist Publ'ns, Inc. v. Rural Tel. Serv. Co.,499 U.S. 340, 361 (1991).(To
succeed on a claim of copyright infringement,
a

valid copyright,

and

plaintiff must prove two elements: ..(1) ownership of

(2) copying of constituent elements of the work that are original.',).

However, on its best day Capitol's motion leaves serious genuine issues of material fact
that would

allow

a

trier of fact to find in favor of ReDigi on all claims.2 While Capitol has tried to confuse
the

issues with unsupported assumptions as to how

it thinks ReDigi's technology works, its efforts are

futile. capitol has never examined ReDigi's system code and has no knowledge of how
its
technology works. As such Capitol has no evidence to prove that infringement has
occurred
through use of the ReDigi system, which is a necessary element to any finding of
infringement
under any theory of liability. Instead of supporting its motion with evidence, Capitol
has asked the

Court to base its ruling on its effoneous interpretation of certain statements and a definitional
theory
that is illogical and without merit.
2

Altematively,

as set

forth in the Def. Br., judgment in ReDigi's favor is appropriate.

All of the evidence in the record here supports the conclusion that Capitol's arguments are
without support and that its understanding of ReDigi's technology is wrong. As discussed herein,
Capitol has failed to satisfy its burden here and as such its motion must be denied.

I.

NONE OF CAPITOL'S EXCLUSIVE RIGHTS HAVE BEEN VIOLATED

Capitol cannot prevail on its claims of infringement, as it has failed to prove the second
element of a copyright infringement claim i.e. that ReDigi violated any of its exclusive rights.
See

Twin Peaks Productíons, Inc. v. Publications Int'\, Ltd.,996 F.2d 1366, 1372 (2d, Cir. lgg3)
(copyright infringement requires showing that defendant violated plaintifls exclusive
rights).3

A.

NO REPRODUCTION TAKES PLACE IN A SALE TRANSACTION

A "reproduction" does not take place during

a sale transaction on the ReDigi system. ,See

RSUF f118-23. Prior to any sales transaction, when a user chooses to upload an Eligible File
that is
on his or her hard drive, the Eligible File is migrated from the hard drive to the Cloud Locker.
Id. at
1[1112-23,3

1. The migration process does not involve reproduction or copying of the Eligible File to

the Cloud Locker because the actual Eligible File is what is migrated from the hard drive
to the

Cloud Locker. Id- Additionally through ReDigi 2.0, allnew tracks purchased through iTunes after
June 1 7,2072, are downloaded directly to the user's Cloud Locker. Id.
ffi40-45. Once in the Cloud

if

Locker

an owner sells the Eligible File, ownership is transferred by transferring the Key to
the

Eligible File from the seller to the buyer. The transfer of the Key is completed instantaneously
on
the database records, but rhe Eligible File itself is untouched,.Id.
nn4:,-52.
These facts, which demonstrate that ReDigi's software does not reproduce or duplicate

Eligible Files during the upload process, are undisputed. Despite the fact that it has been clear since
the preliminary injunction hearing that the workings of ReDigi's technology was a key issue
in this

3capitol

has only sought judgment as to the assertion that its exclusive rights to reproduction
and
distribution were violated. As such ReDigi will only address its arguments as to these issues.

case, Capitol chose not to pursue discovery on this issue and has continued to
assume

it knows how

the technology works. See Adelman Decl. Ex. 3, at 43:10-20. Capitol has never
looked at ReDigi,s

migration process or ReDigi's code. See 7120/12 Adelman Decl., Ex. T2,McMullan Dep.
125:13-

i5- Thus, Capitol cannot present any evidence to prove that use of the ReDigi system infringes.
Realizing its mistake, Capitol has tried to shift the focus away from its inability to present proof,
by
accusing ReDigi of changing its story, when ReDigi has done no such thing.

Capitol bears the burden of proof and has been on notice since ReDigi filed its Answer
that
ReDigi denies the accusation that its technology makes reproductions of Eligrble Files to
send to the
Cloud Locker. To the extent there were any statements made at the preliminary injunction
stage that
Capitol felt were inconsistent with ReDigi's denial of those allegations, Capitol had more
than
ample opportunity to explore those issues in discovery. But Capitol did not. Now
Capitol is asking
the Court to construe these very statements in a way that is inconsistent with the truth.
Capitol,s
t'equest that the challenged statements be

judicial admissions of infüngement against ReDigi is

tantamount to asking the Court to blindly accept an inaccurate interpretation of statements,
when all

of the evidence in factual record demonstrates that capitol is wrong.

"fA]ttorney's statements . . . may constitute admissions of his client; however, to bind the
client by such statements, they must constitute 'a clear and unambiguous admission of
fact.,,, Stowe
v.

Nat'l R.R' Passenger Corp.,793 F. Supp. 2d 549,554-55 (E.D.N.Y. 20ll) (quoting United
States

v.

McKeon,738F.2d26,30(zdcft.ßB$;oscanyanv.

Arms co.,l03 u.s.26l ,263 (lgg0));

Butynskiv. Spríngfìeld Termínal R.Co.,592F.3d272,217 (1st Cir.2010) (to qualiflzas
binding
admission, counsel's "statement, when viewed in context, must be clear and unambiguous,,);
Robinson v. McNeil Consumer Healthcare, 615 F.3d 861,872 (Zth Cir.2010) (quoting
MacDonald

v' Gen. Motors Corp., I 10 F.3d

337

,340 (6th Cir. IggT) ("to qualify

as

judicial admissions, an

attorney's statements must be deliberate, clear and unambiguous.")); Kregler v. City of
New york,

821

F

- Supp.

2d 651, 656 (s.D.N.y. 201 1) (same). Ail inferences must be made in favor of the party

against whose interests the admission was allegedly made. see Best

v.

District of Columbia, 291

u.s. 41t,4ts (1934).
The statement in ReDigi's opposition to Capitol's motion for a preliminary injunction that

"[t]he only copying which takes place in ReDigi service occurs when a user uploads music files to
the ReDigi cloud," cannot be interpreted as a judicial admission that ReDigi's upload process

involvestransferofaduplicationofmusicfilesasthatis
means. As explained at length in the deposition of John Ossenmacher, this statement referenced
the
fact that ReDigi's system used to be programmed, in some circumstances, to make a duplicate

archival copy of an Eligible File on the user's hard drive for recovery purposes.

,S¿e

RSUF flfl25-33;

RDF $ lIl?6.4 However, no duplicate archival copies, if made, were ever actually used for
recovery or uploaded to the Cloud Locker. See RSUF
fl32. The migration of the Eligible File itself
never involved sending a duplicate to the Cloud Locker because the Eligible File itself is transferred

to the Cloud Locker and is no longer on the user's hard drive, it is not deleted. Id. g-23,31

llï.t

Capitol has also challenged the part of the statement in ReDigi's brief that ,.copies" are
stored in the Cloud Locker, and has asked the Court to accept this statement as

a

judicial admission

that a "reproduction" of an Eligible File is stored in the Cloud Locker. However, this is not
what

the statement means. Throughout this litigation Capitol has equivocated between the meaning

of

a

As explained in Section I of the Def. Br., archival copies could have been made for recovery
purposes. Although Capitol has not proved that its works were duplicated, if they had
been, it
would not be an infringement as the copy was only in existence foi seconds before being deleted
and as such does not satisfu the fixation requirement. see Def. Br., p. 9-10.
5

To the extent that the patent uses the word "copied", ReDigi's patent was not filed to cover the
specific method of uploading files to the cloud, it was filed for ReDigi business process. Moreover
at the time the patent was filed, the data migration program was not finished. ,See RDF
ç I,n42.

"copy" or "copies" and reproduction which confuses the technical issues with legal terminology.6
However, the meaning of the two uses is not synonymous. The word "copies"
materials are not always used to describe ReDigi's technology.
goes to the record store to get a

"copy" of

a

song.

^See

as used

in ReDigi,s

RDF $ f ï37-3g. Just as one

'copy' of a new or used album, one can go to ReDigi to get a

Id. However in this

instance the word copy is not used to describe the

technology or indicate that areproduction was made or sold, rather it is just a colloquial
usage

of

the word "copy'', which is commonplace.Id.
The evidence demonstrates that Capitol's interpretation of the challenged statements
is

wrong. ReDigi unequivocally denied Capitol's accusation that "the user's original file is duplicated
and then stored by the ReDigi service," in its Answ er. Compare 7/20/12 Adelman
Decl., Ex. 1,

Complaint lQ1 with Ex. 2, Answer fl15. Capitol's claim that ReDigi never suggested that
its
technology avoided sending a copy to the cloud is highly disingenuous, given ReDigi's
denial

of

that exact allegation. Id. Simllarly, Capitol's assertion that ReDigi's fair use and essential
step
defenses could be interpreted to support an admission of infringement is ridiculous.
That argument

flies in the face of black letter law allowing pleading of altemative inconsistent theories
of relief.
SeeFed' R. Civ' P. 8(dX2)-(3); Astroworks, Inc. v. Astroexhibit, Inc.,Z57 F. Supp. 2d
609,616

(s.D.N.Y. 2003) (legal allegations are properly plead in the alternative).
As to Paragr aph 47 of ReDigi's Answer and Paragr aph 6 of the Declaration of Larry
Rudolph dated January

27

,2072 ("1127 /12 Rudolph Decl."), Capitol has taken these statements out

of context and again tries to attribute a meaning that does not exist. The phrase ..such file,, refers
to
the archival copy that could have previously been created for recovery pu{poses, it does
not refer to
the Eligible File.
6

,See

RDF $I f1[39-40 This is further clarified by the next sentence in the

One such example was in Capitol's motion for a preliminary injunction where it used
the phrase a
"copy" to describe what, admittedly more accurately, should have been referred to as a
"phonorecord." See 7/20112 Adelman Decl. Ex. 13, at 5 n.2. Given that Capitol uses the
word
interchangeably to mean different things, it is hypocritical to attack ReDigi,s use here.

declaration, which explains that

"[i]f

the user were to attempt to upload the file without first

accepting the prompt to delete the other copy or copies detected by Music Manager,
the upload

would be blocked." (Emphasis Added.) See id.
When viewed in context with the other evidence it is clear that the challenged
statements do
not prove that ReDigi's system makes a duplicate copy and sends that copy to the
Cloud Locker and
cannot be construed as judicial admissions against ReDigi to that effect. When
asked about these
statements at deposition, ReDigi's witnesses clearly explained their meaning.
See RDF $I,
$

\[]þ7-a0;

II l[26. ReDigi's position has never changed. To the extent these statements were at all

ambiguous at the preliminary injunction stage, that was not ReDigi's intent.

,Se¿

RDF $I, l1ll41.

ReDigi's system is highly technical and complicated and in opposing the motion for

a

preliminary

injunction, ReDigi sought to explain to the Court in the best way possible how its system
worked.

Id. Howevet without
as

a

protective order in place, ReDigi was also concerned about going into detail

to the details and workings of its technology, as it is highly sensitive, proprietary information.
1d
When read in context with ReDigi's Answer, which expressly denied the allegation
that

duplications of Eligible Files were sent to the Cloud Locker, Capitol should have known
that
ReDigi's upload process did not involve duplicating files. Capitol's choice not to investigate
fuither is not a reason to construe these statements as a judicial admission of infüngement
against

ReDigi. Capitol's request that the Court ignore the unrdisputed evidence in the record

as to how the

technology works and instead grant summary judgment in their favor would be prejudicial,
unjust
and should not be countenanced by this Court.

B. REPRODUCTION DOES NOT TAKE PLACE BY DEFINITION
Capitol's argument that infringement is a definitional issue also fails. Capitol has taken
the
position that the exclusive right to reproduction is the exclusive right to prevent
others from making
new phonorecords, which it claims, albeit incorrectly, is tantamount to the right to move
a digital

file from one place on a hard drive to another. Capitol relies on London-Sire Records, Inc. v.
Doe

I,

to mean that when an electronic music file is written to a hard disk the fixation
of the file on the
disk is a "phonorecord." London-Sire Records, Inc. v. Doe I 542 F. Supp. 2d, 153,171 (D.
,
Mass.

2008).

Based on this, Capitol has taken the position that by migrating an Eligible
File to the Cloud

Locker a new phonorecord is created in violation of the copyright act, as a matter
of definition. At

first blush, if considered in

a vacuum, the theory may seem attractive, but

in reality Capitol,s

position makes no sense.
In the London-Sire case the court noted that the "electronic file (or, perhaps more
accurately,
the appropriate segment of the hard disk) is . .

. a 'phonoreco rd."' Id.

Therefore, assuming

arguendo that Capitol's position is correct, each time a computer,by anyprocess,
moved an
electronic music file to a different section of the hard disk, a new phonorecord
would be created and
the copyright holder's rights would have been infünged. Applied to how computers
function, this

position is irrational. ln executing many different user commands, computers
move the location

of

files all the time. For example, computers move the location of electronic files when
they go
through defragmenting processes or when a person moves their music files from
one directory to
another because they want to use a new media player.

,S¿e

RDF $I, 1[43. If Capitol were right, by

moving a file from one segment of someone's hard drive to another segment of the
same hard drive
a new phonorecord

would be made in violation of Capitol's reproduction right. It would be illogical

and inefficient to propose that the intent of the Copyright Act was to prevent this.
The power

of

authors to exercise their exclusive rights cannot interfere with the progress and
development

of

technology. see sony corp. of Am. v. (Jníversat city studios, Inc.,

464

u.s.

41

7, 442 (1gg4).

In addition, adoption of this view would change the application of the limitations
on
exclusive rights, such as the first sale doctrine.

If by moving an electronic fìle an infringement had

occurred, digital files would be excluded from the limitations provided by the first
sale doctrine,

unless a user sold his or her whole hard drive, which would be cumbersome and would
still make

it

impossible to sell different tracks to different people. See 17 U.S.C. 109(a). As addressed
in
Section IV of the Def. Br., precluding digital files from the first sale doctrine is inconsistent
with
both the policy considerations behind the first sale doctrine and principles governing statutory
interpretation. See Def. Br., p. 19-24. It is clear that Capitol's argument is advanced for
the sole
purpose of preventing a secondary market for digital goods. Such purpose is
squarely at odds

with

the Copyright Acts provision of a limited monopolv. 1d

Additionally, when read in context with the rest of London-Sire,Capitol's conclusion is at
odds with the purpose of the

law.

Congress did not distinguish between the copyrightable work,

which consists of aggregation of sounds and phonorecords (i.e. material objects in which sounds
are
fixed), so that infüngement would be a matter of defìnition. As noted in London-^Szre, Congress
"distinguished between the abstract, original work on the one hand, which is the source of the
copyrights, and its material incamation on the other which is protected by the copyrights,,to
abolish
the common law presumption that if a material object containing the copyrighted work
was sold the
sale included the copyright unless the agreement excepted

Supp. 2d at

them. London-Sire Records, Inc., 542F.

171(citing H.R. Rep. 94-14767 at 52-53 (1976)). It was because Congress made this

distinction that "the two are different, [and] the author can freely sell a copy without disturbing
the
copynghts."

Id.

"[I]n the sense of the Copyright Act, 'material obiects, should not be
ies. Rather.

rmance o
at 173. Furthermore, while distribution of phonorecord must be of

it separates

a copv

work." (Emphasis Ãdded.) Id.
a

material object, ,.there is no

reason to

limit'distribution'to

processes in which amatenalobject exists throughout the entire

transaction," as opposed to where a material object is elsewhere at the finish. Id.1
The Court should not, as Capitol urges, consider the meaning of language in the Copyright

Act in

a

vacuum. The Supreme Court has mandated that "[w]hen technological change has

rendered its literal terms ambiguous, the Copyright Act must be construed in light
of this basic

purpose."s See Sony Corp. of Am.,464 U.S. at 432, citíng Twentieth Century Music
Corp. v. Aiken,

422U.5- 151, 156 (1975). The progressive language contained in the definition of "phonorecord,,,e
makes clear Congress' intent that the definition be broad enough so that its application (in

protections and limitations) could be applied to changing technology. In this instance,
as in all
cases where a Court is asked to apply existing law to a new technology,

it is imperative that the

meaning of the law be applied to technology with consideration as to how the technology
functions.
Here it is illogical to believe that Congress intended to prevent movement of a singularly
purchased copyrighted good whether tangible or in-tangible, i.e. the Eligible
File, so long as it is not

reproduced or duplicated. In fact the congressional reports cited by Capitol are indicative
of this
7

In London-Sire Records, the Court referenced that distribution took place on peer-to-peer
file
sharing networks and specifically noted that there was no requiremeni thut u *ãt.riul
object exist

throughout a transaction. The Court further noted that this included situations where,.,Jn
original
copy' is read at point A and duplicated elsewhere at point 8." Id. at 174. By .,original copy'ihe
court necessarily mgant the file residing on the user's hard drive. In ReDigi;s system
to th; extent
these original copy files were purchased from iTunes they are Eligible FilJs. On reply
Capitol will
likely argue that this statement supports their theory that infringement is a definitionui irru",
but this
argument fails on its face. The duplication referenced by the Court in London-Sire, isspecific
to the
facts of the electronic transactions that were at issue in that case, which were peer to peer
file
sharing networks where a duplication from an original file was made --i.e. thá originál
copy and a
new copy both existed after the transaction was complete. These facts are wholly inappo.ii"
to the
facts here' ReDigr does not duplicate Eligible Files, rather Eligible Files are migrated
io the Cloud
Locker' In the ReDigi system only the Eligible File ever exists. S¿e RSUF
flng-24,36.
8

Refeoing to the cause of promoting broad public availability of literature, music and other
arts for
the general public good. See Sony Corp. of Am., 464 tJ.5. at 432.
e

Phono.e"ords are "material objects in which sounds . . . are fTxed by anymethod now
known or

later developed. . ." (Emphasis Added). l7 U.S.C. 9101.
10

conclusion. Although conveniently omitted in Capitol's brief the legislative history indicates
that
the reproductive right to produce a material object is concerned with preventing unauthorized

duplication and reproduction. ,se¿ S. Rep. No. 94-473,58 (1975) ("As under the present law,
a
copyrighted work would be infringed by reproducing it in whole or in any substantial part,
and by

duplicating it exactly or by imitation or simulation." (Emphasis Added.)). Congress clearly
intended to limit the reproduction of a work, but there is no indication that it meant to limit
the

ability to transfer

a purchased

work to a new location, as ReDigi does.

In fact other courts that have addressed the question of whether it is an infringement to
remove a copyrighted work from a medium on which it was fixed and apply it to a different

medium have held that this is not an infringement because the work itself was moved, not
reproduced. see c. M. Paula co. v. Logan,355 F. Supp. lg9, 191 (N.D. Tex. I 973). rn
c.M.
Paula, the defendant utilized

a process

of transferring printed designs from legally purchased

greeting cards to other mediums. Essentially the defendant coated greeting cards
that plaintiffs

copyrighted designs were affixed to with resins and then through the use of chemicals lifted
the
original image from the greeting card and reapplied that same lifted image elsewhere . Id. at
190.
The Court held that such a process was not a reproduction. Id. af

lgL

Each plaque sold by

defendant required the purchase and use an individual piece of artwork sold by plaintiff.

If

defendant wanted to make 100 plaques using the identical print, defendant would be required
to
purchase 100 separate prints, and that process did not "constitute copying."

Id. Thecourt rejected

the notion that merely because the design was affixed to different mediums at different
times, that

was "reproduced" or "copied" in violation of the Copyright

it

Act. The design was transferred, but

transfer of the work from one physical medium to another does not constitute a reproduction
where
no reproduction of the work was made.

il

The technology here, albeit more advanced, presents the same issue that was decided
in
C-M- Paula Co. By a user instructing ReDigi to upload an Eligible File, ReDigi
migrates, or

transfers, the Eligible File from a user's computer to the Cloud Locker. But the Eligible
Files are

not duplicated, as there is never an instance where the Eligible File is in more than
one place at a

time. The Eligible File is lifted from the users' hard drive
transferring the file itself is not reproduced or duplicated.
as

and moved elsewhere, but the process

,see

of

RSUF fl1'i.2,20-23. Additionally, here

in C.M. Paula, each Eligible File sold on the ReDigi system was legally purchased through

iTunes' In order for one hundred individual digital files of a song to be available for purchase
on
ReDigi, one hundred individual digital files of that song had to have been previously purchased
from iTunes and offered for sale on ReDigi. See RSUF
!f80. The essence of a violation of the right
to reproduction is that that there could have been an Eligible File on the user's hard
drive and a
duplicate in the Cloud Locker in existence at the same time. ReDigi does not allow
that to happen

during the migration and sale process, thus there is no reproduction. It does not matter
that for mere
seconds the Eligible File was not ernbodied in a material object as the Copyright
Act does not

require that"a material object existf] throughout the entire transaction

." London-Sire Records, Inc.,

542F. Supp.2dat173.
The other authority cited by Capitol to support their argument does not further their
cause,
as the facts are distinguishable from the facts

here. The

cases relied upon

by Capitol involve

instances where a copy was made i.e. where an original existed and that original
was duplicated or

reproduced. see chase v. Pub. util. comm'n of PA, No. 05cv2375,200gwL906491 (M.D. pa.

Mar. 31, 2008) (involving reproduction of transcripts by photocopl ng); Sega Enterpríses
Ltd.

v.

MAPHIA,948 F. Supp. 923,932 (N.D. CaL.1996) (involving the reproduction of video games
by
making and downloading a copy of a game maintained on a central storage database). These
cases
are more closely analogous to

file sharing

cases, where an electronic

l2

file that was permanently

stored on one hard drive, was then copied and transferred to thousands of other users.
See e.g.

Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 921-22 (2005) (a requesting
user can download a copy of a file stored on another user's computer);

A&M Records, Inc.

v.

Napster, [nc.,239 F.3d 1004, 1012 (gthCir. 2001) (a copyof the contents of an Mp3
file are
downloaded from one computer to the other).

ReDigi's marketplace is wholly unlike these cases. ReDigi does not sell duplications of
Eligible Files to multiple users. A user can only sell the exact Eligible File that that user purchased
from iTunes

-

and they can only sell

it once.

,Se¿

RSUF fl80. ReDigi's system does not send a

reproduction or duplication of the Eligible File to the Cloud Locker, but rather transfers the
particular Eligible File to the Cloud Locker, which can later be sold. ,See RSUF
1ll2-23. Thus no
reproduction or infüngement has occurred.

C. ARCHIVAL DUPLICATES THAT WERE MADE ARE NOT INFRINGEMENTS
Capitol has not produced any evidence that archival copies of its copyrighted works were

made' However, even in the event that one was, as explained at length in Section I of the Def.
Br.,
since

it could only have existed for mere seconds, it could not have been sufficiently fixed to

qualify as a reproduction of a phonorecord under the Copyright Act and cannot be an infüngement.
See Cartoon Network LP,

LLLP v. CSC Hotdings, 1nc.,536 F.3d

l2l,

l2g-130 (ZdCir. 200g)

(where "[n]o bit of data remains in any buffer for more than a fleeting 1.2 seconds,,,
the work is

only embodied for a "transitory" period and "thus fails the duration requirement."); Def Br., p.
9-10.

D. PERSONAL

USE COPIES ARE NOT INFRINGEMENTS

Similarly, as also explained at length in Section III of the Def. Br., when

a user downloads a

Personal Use Copy of a purchased Eligible File from ReDigi for his or her own personal
use, these

downloads are not an infüngement as they are protected by fair use and/or the license that
comes

with the purchase of

a track

from iTunes. See Def. Br., p. 14-19.

l3

Capitol's argument that fair use does not apply has completely missed the point. Capitol,s
motion focused on the applicability of fair use to the upload transaction but failed to analyze the
applicability of fair use to Personal Use Copies downloaded after purchase. While Capitol,s
seems
to presume that fair use does not apply, it has failed to present any evidence that demonstrates
that

fair use should not apply to a personal use copy downloaded after purchase.
The fair use doctrine allows a holder of the privilege to use copyrighted material in
a
reasonable manner without the consent of the copyright

owner. Vleissmann

v.

Freeman g6g F.2d

7373, 7323 (2d Cir. 1989). The fair use doctrine is grounded in the well founded notion that

copyright protection is only a limited monopoly and the protection has never accorded copynght
owners complete control over all possible uses of his or her work. Sony Corp. of Am.,464IJ.S.
at

432. Section

107 identifies factors that enable a court to apply "an 'equitable rule of reason'

analysis to particular claims of infringement" to determine whether the use in question qualifies.
1d
at 448. Contrary to Capitol's assertion the examples of types of fair use activities listed in
the
preamble are only common and are not exclusive of other protected uses.

,See

Sony Corp. of Am.,

464U.5.at448 citingH'R. Rep. No.94-1476,at65-66 (Section l0Twasnotintended..to freezethe
doctrine in the statute, especially during a period of rapid technological change. Beyond
a very
broad statutory explanation . . . and some of the criteria . .

.

the courts must be free to adapt the

doctrine to particular situations on a case-by-case basis."). C.f,, Rínggold v. Black Entm,t
Television

lnc.,126 F.3d 70, 78 (2d Cir. 1997)(citing Campbell v. AcuffRose Music, Inc.,5l0 U.S. 569,
57g79 (1994) ("[t]he enquiry mav be guided by examples in the preamble) (Emphasis Added.)).

As explained at length in Section III of the Def. Br., all four of the factors listed in Section
107, weigh in favor of a f,rnding that fair use protects the download of a Personal Use
Copy of a

legally purchased music track.

,See

RSUF fl1[52-65. Furthermore, Capitol's argument that ReDigi

earns a fee on a sales transaction has no bearing on the analysis, given that the personal
Use Copy is

l4

made after purchase and confers no benefit to ReDigi of any

klnd. Id.

at fT53. Fair use in this

situation is applied to personal storage of a user's purchased files, which only benefits the user,
who
because of the Personal Use Copy can enjoy the track at their convenienc e.

Id. atfl1[52-65

The fair use doctrine "permits and requires courts to avoid rigid application of the copyright
statute, when, on occasion,

it would stifle the very creativity which that law is designed to foster.,,

Castle Rock Entm't, fnc. v. Carol Pub. Group,

Inc.,

150

F.3d 132,

141

(2d Cir.199g) (quoting

Campbell,5l0 U.S. at 577). Courts must adapt the doctrine to situations on a case-by-case basis and
in light of technological changes. Sony Corp. of Am.,464 U.S. at 451. As set forth in ReDigi,s
motion, the statutory factors and equitable considerations present here, support the conclusion
that
Personal Use Copies are protected by fair use.
^|ee Def. Br.,
evidence to the contrary,

p. 14-19. As Capitol

has presented no

it is clear Personal use copies are protected.

E. CAPITOL'S DISTRIBUTION RIGHT HAS NOT BEEN VIOLATED
Similarly to the above no violation of Capitol's distribution right has occurred within the
ReDigi system. As explained at length in Section IV of the Def. Br., any distributions of Eligible
Files by userst0 which occur on the ReDigi marketplace are protected by the first sale doctrin

e.

See

Def. Br., p' 19-24. ReDigi users do not sell "reproductions" of Eligible Files on the ReDigi
marketplace. Any Eligible Files on

a

user's computer that auser chooses to sell are migrated,

without reproduction to the Cloud Locker.

^See

RSUF 1[1114-24. Any new music purchased through

iTunes using ReDigi 2.0 is downloaded directly to the Cloud Locker.

t0

Id. atl[]40-45. Thereafter the

Additio.tally, Capitol's assertion that a distribution takes place when an Eligible File is offered
for sale, contradicts the express language of the distribution-nght. See 17 U.S.C. 106(3). There
can
be no distribution where no sale occurred. See London-Sire Records, nnc.,542F. S"pp. 2d
at 169
(defendants cannot be liable for violating the plaintiffs' distribution right unless
a,.distribution,'
actually occurred); Natl Car Rental Sys., Inc., v. Computer Assocs Int;¡, Inc., gg1 F.Zd 426, 434 (gth
Cir. 1993) (stating that infüngement of the distribution right requires the actual dissemination ol
copies or phonorecords). If an offer for sale were a distribution, then those offers are protected
by
the first sale doctrine as well. SeeDef. Br., p. 19-24.

l5

ownership of an Eligible File is transferred by transfer of ownership of a Key to the
space on the

Cloud Locker where the Eligible File is resident - no copying or duplication occur s. Id.
l[\47

-51.11

Moreover ReDigi's users are disposing of the particular phonorecord that they legally
purchased from iTunes i.e. the Eligible File that is in the Cloud Locker. There
is no requirement in

the Copyright Act that a material object exist throughout a sale transaction

.

See

London-Sire

Records, Inc., 542 F. Supp. 2d at I73 ("while the statute requires that distribution
be of .material

objects,' there is no reason to limit 'distribution' to processes in which a material object
exists
throughout the entire transaction"). Through ReDigi a particular Eligible File purchased
by a

ReDigi user is migrated to the Cloud Locker and then that particular Eligible File, now
in the Cloud
Locker (a material object), is sold to a new user. It is beyond dispute that the particular
phonorecord purchased has been sold. There is no requirement that it be resident
in the exact same
material object for the entire transaction.

capitol's reliance on the report from copþght office from August 2001 ..DMCA section
104 Report," is misplaced.l2 The report's conclusions are inapposite, as

it was premised on the

question of whether the first sale doctrine applies to instances where "reproduction
of the works
[are] involved." DMCA Section 104 Report at 70-80. Since reproduction is not involved in

ReDigi's sale process the report has no bearing on the issues in this

case.

rl

As mentioned above, even when the ReDigi system could have been making an archival
duplicate
for recovery pu{poses during the migration process, ReDigi never actually haJto use
an archival
duplicate that could have been made as there was never an instance in which there
was a disruption
or in which the transfer failed. S¿¿ RSUF lT1l25-33. Since these duplicates were never
used in the
migration process they do not change the analysis here.

't As an initial matter the DMCA Section 104 Report is not binding. See Cartoon Network,536 F.
3d at 129 (citing Skidmore v. Swift & Co.,323 U.S. 134, 140 (1gg4)) (the Second Circuit
held that

the DMCA Section 104 Report "deserves only Skidmore deferen.",'d"f"r"nce based
on its ,power
to persuade"' and further declined to follow the Report's interpretation regarding the
duratioìal
requirements).
16

However even if the Court agreed with Capitol's argument that a reproduction had
taken
place as a matter of definition, the DMCA Section 104 Report actually provides
support for a

finding that the first sale doctrine should still apply to digital goods. Assuming arguendo
Capitol,s
definitional structure were adopted, ReDigi's technology transfers Eligible Files while
ensuring that
the Eligible File itself is no longer on the transferring user's hard drive after the transfer
is

complete. In addition to this ReDigi's Media Manager software continually scans connected
devices and databases to ensure that a transferring user cannot retain a separate copy
ofthe
transferred eligible filre. See RSUF !110; DMCA Section 104 Report at 8l-84 (unless
a.forward and

delete' technology is employed an additional affirmative act by sender would be required
which
would make it difficult to prove or disprove whether the act of transfer had taken place
and
increases the risk of infringement). Although ReDigi is not a "forward and delete,"
technology, the
end result is the same. That a user can transfer ownership of an electronic file,
and the technology
ensures the transferor does not retain a separate copy

ofthat electronic file.

Additionally assuming arguendo that the Court were to adopt Capitol's argument that
transferring a file is necessarily a reproduction because it is moved to a different place,
the Court
should still apply the first sale doctrine in order to give full effect its purpose, which
is to limit a

copyright o',¡r'ner's control over a copyrighted item after it is placed in the stream of commerce
by
the copyright owner. See Quality King Distríbutors, Inc. v. L'anza Research Int,l, 1nc.,523
U.S.
135, 1 52 (1998) ("The whole point of the first sale doctrine is that once the copyright
owner places
a

copyrighted item in the stream of commerce by selling it, he has exhausted his exclusive
statutory

right to control its distribution."); Bobbs-Merrill co. v. straus,210

u.s. 33g,351(1g0g)

(the

copyright owner sold copies . . . in quantities and at a price "satisfactory to it" and when
it did so it
exercised its right to vend. To add "the authority to control all future retail sales
. . . would give a

t7

right not included in the terms of the statute . . .[and] extend its operation, by construction,
beyond
its meaning, when interpreted with a view to ascertaining the legislative intent in its
enactment.,,).
To hold that infüngement takes place by definition as a result of any change in the physical

location of storage of an electronic file while refusing to apply the first sale doctrin e, or
arule

of

law equivalent to it, would have the net effect of improperly extending Capitol,s right to
distribution to include control over all future dispositions of digital property. This effect
is
inconsistent with the policy behind the first sale doctrine and inconsistent with the policy
behind the

Copyright Act as a whole. Although the immediate effect of copyright law is to secure
a fair return

for creative labor, the "ultimate aim, is by this incentive, to stimulate artistic creativity for
the
general public good," the latter of which is the primary object of the

limited monopoly .

See Sony

Corp. ofAm.,464U.S. at432. See also Def. Br., p.19-24. Forthe Courtto accept Capitol,s
argument and preclude legally purchased digital goods from being re-sold would give
Capitol an

unlimited monopoly and an ability to forever control the further sales of copies of works
it already
secured a fair return on. Capitol placed the Eligible Files into the stream of commerce
through

iTunes and received the benefit of the sale it was entitle d, to. See RSUF
fln6g-72. As a result Capitol
has exhausted its exclusive statutory right to control distribution

.

Quatity King Distributors, Inc.,

523 U.S. at 152. Capitol should not be allowed to extend its exclusive rights beyond
the scope

what the Copyright Act intended. Bobbs-Merrill Co.,210 U.S.

of

at35L If rhis Court finds that a

reproduction must occur when a singular electronic file is transferred
-not copied-- because of the

Copynght Act's literal terms, the transaction must be construed in light of the basic purposes
of the
act. Sony Corp. of Am-, 464 U.S. at 432. In that case, reproduction would be an essential
step to a

lawful transaction and the first sale doctrine should still apply to protect future sales of lawfully
obtained phonorecords.

il.

REDIGI CANNOT BE LIABLE AS A DIRECT INFRINGER

18

Even if the Court were to agree with Capitol's argument that by definition
reproduction
occurred during the upload process, ReDigi cannot be liable as a direct infringer
as it has not
engaged in "volitional conduct." See Cartoon Network LP, LLLP,536 F.3d
at 131(..volitional

conduct is an important element of direct

liability"). Where a defendant merely

houses and

maintains a system where "copies" can be made some other conduct must be shown
to demonstrate
that the defendant operates the copying device.

Id. In Cartoon

Network,the Second Circuit held

that by selling access to a system that automatically produces copies on command,
Cablevision
resembled a store proprietor who charges customers to use a photocopier on the premises
and

without more cannot be said that Cablevision "makes" any copies when its machines
are operated
by customers. Id- at 131-132. This is especially true where the defendant "automatically
obeys
commands and engages in no volitional conduct.,, Id.

If the Court accepts Capitol's definitional argument, ReDigi

cannot be liable directly as its

only act was making a service available. This does not constitute volitional conduct
analogous to
operating a "copy device." ReDigi provides a cloud storage space and a marketplace
for the sale

of

legally purchased music. Just as the owner of a used CD store, ReDigi has not engaged
in any
conduct that would rise to the level of volitional conduct. Merely allowing a user
to command the
system to upload files is not conduct that is operational in a way that is more
than Cablevision,s

conduct, which the Second Circuit found did not confer direct liability on Cablevision.
1d

Capitol's argument that since "ReDigi is intimately involved in selecting and screening,,
each fìle through ReDigi's verification software, imposing direct
also without merit and was rejected by the Second Circuit

liability would be appropriate is

in Cartoon Network. Id. at 132

(unfettered discretion in selecting programming that it would make available
for recording was not

sufficient to displace consumer as person who "makes copies" when determining

liability).

As in

Cablevision, where the decision focused on the defendant's lack of control over which
programs

t9

were made available or when they will air, ReDigi has no control over which songs content
owners
sell through iTunes or for that matter which Eligible Files users will choose to upload.

,See

RDF gI,

J[44. ReDigi's system is limited to the content that is made available through iTunes and is further

limited by which Eligible Files users choose to upload. Id.t3 Like in Cablevision, ReDig;has
not
engaged in volitional conduct, which is an essential element of direct

liability. As such

even

if this

Court found that acts of infringement occurred through its system, ReDigr cannot be directly
liable.

ilI.

REDIGI CANNOT BE SECONDARILY LIABLE

ReDigi also cannot be held liable under the theories of vicarious infringement, contributory
infringement or inducement of copyright infringement. As discussed at length in Section
I supra,
no act of infringement occurs on the ReDigi system, either by the processes of the system
or by

ReDigi's users, thus ReDigi cannot be secondarily liable.

See Matthew Bender

&

Co., Inc. v.

W.

Pub. Co.,l58 F.3d 693,706 (2d Cir.199S) (for all three theories of secondary copyright

infringement, there must be the direct infringement of a third party). Additionally, Capitol's
suggestion that random independent acts of infringement which predate and/or are committed

outside the system is not enough to hold ReDigi liable under any theory of secondary liability.

A.

REDIGI CANNOT BE LIABLE FOR CONTRIBUTORY INFRINGEMENT

t3 (Jsenet
and,Røss Hardenburgh, are inapplicable to the facts here. Even to the extent
those
holdings are persuasive, there are very important differences between their holdings and

the facts
here. Most importantly, in both cases the defendants had their employees .rrgug"d in review
activities. See Arista Records LLC v. (Jsenet.com, fnc.,633 F. Supp. 2d n4:ru8 (S.D.N.y .2009)
(defendants took active steps including "human review"); Ptayboy'Enterpriies,
Inc. v. Russ
Hardenburgh, Inc., 982 F . Supp. 503, 513 (N.D. Ohio 1 997) (defendant irad a policy that allowed
employees to view files before they were uploaded and to move them to a genårallyavailable
file).
ReDigi's system does not have a process of human review prior to upload. Media Manag"r r"un,
potential tracks for eligibility based upon a defined set of criteri a. Sie RSUF
I8-9, 66. ReOigi's
employees have no direct oversight over which files are uploaded to ReDigi's marketplace
b-y users.
Se¿ RDF $l' 1T44. The distinction between automated processes and indiviãual
supervision, which is
the difference here, goes to the heart of the Cartoon Networkdecision which found that
a
"significant difference exists between making a request to a human employee, who then volitionally
operates . . . and issuing a command directly to a system, which automàtically obeys
commands and
engages in no volitional conduct." cartoon Network,536 F.3d at l3l-132.
20

ReDigi's active steps to discourage piracy and prevent infüngement precludes liability based
on a theory of contributory infüngement. Contributory infringement liability arises by conduct
where one "intentionally induc[es] or encouragfes] direct infüngement." Grokster 545 U.S. at
930

citing Gershwin Pub. Corp. v. Columbia Artists Mgmt., hnc.,443 F.2d 1159, I 162 (2d Cir.l97l).
Furthermore providing technology capable of substantial non-infringrng uses does not constitute

contributory infüngement. See Sony Corp. of Am.,464 U.S. at 456.

It is undisputed that ReDigi went to great lengths to build
copyrght law in every respect.

Se¿

a system that was

complaint with

RDF $I, ff5-36. ReDigi's founders researched copyright law,

consulted with attorneys and determined that under the first sale doctrine they could provide a legal
market place for digital music if they had technology that could effectuate uploads and sales within
the confines of copyright law. Id. at15,7. ReDigi's founders also explored existing technologies,
and when they determined that the technology that could work within the confines of the law
was

not readily available

- they built technology

that would. Id. at16.

ReDigi's entire business model was designed is to provide incentives for legally purchasing
music' Id-

atl9'

To fuither ReDigi's goals of discouraging piracy and preventing infüngement

ReDigi's has implemented many controls. Id. atl[10-17. By way of example ReDigi was designed
as closed system meaning users cannot get cash out of the system, they can only use credits
to

purchase more music.

Id. at1[18-22. ReDigi

also sought to discourage independent acts

of

infringement by educating consumers about their responsibilities under the law and by developing
Media Manager, which actually makes it more difficult for

a user

to commit an independent act of

infringement than any enforcement technique utilized for physical distributio n. Id. atIe3-25, 29-33.
In addition, ReDigi created tools that users could use to get rid of music they may have previously
pirated and gave users the option to easily purchase legal tracks . Id. atll34-35

2t

ReDigi has gone to extreme lengths to build a system compliant with the law and
to
implement measures that are meant to deter and prevent independent acts of infringement.
These
efforts are fundamentally incongruent with a finding of inducement or encouragement
of direct

infringement. As such, ReDigi cannot be held liable for contributory infringement.

B. REDIGI

CANNOT BE LIABLE FOR VICARIOUS INFRINGEMENT

Similarly to the above ReDigi cannot be held liable under a theory of vicarious

infringement. One infringes vicariously "by profiting from direct infringement while
declining to
exercise anght to stop or limit it." Grokster,545 U.S. at 930, citing Shapiro, Bernsteín
& Co. v. H.

L' Green Co.,316 F -2d 304,307 (2d Cir. 1963). To the extent it is possible for

a user

to commit an

independent act of infringement outside of the ReDigi system, ReDigi does not
have the right or

ability to stop or limit those acts. ReDigi has done everything that is technologically possible
to
prevent and discourage users from committing independent acts of infüngement.
ReDigi,s Media

Manger continuously scan a user's hard drive, connected devices, such as portable
media players,
flash drives, backup drives, as well as any the database for iTunes which tracks files
on wirelessly
connectable devices that sync with iTunes, Google Cloud and any other cloud
storage services for

which local folders are maintained on a user's hard drive, such as Drop Box.

If Media Manager finds a copy of an uploaded Eligible File

,See

RDF $I, Ill30-33.

on any of these devices it requests

deletion of that file, and if user's fail to comply, their account on ReDigi is suspen
ded. Id. at flfl33.

A user would have to go to extreme measures to get around ReDigi's Media Manager
software. Despite the fact that capitol has repeatedly tried to imply that this is a likely
occufïence,
there is no evidence that its implication is true. To the contrary, the ways in which
consumers use
products that are capable of storing and playing media, which depend on connectivity
for
convenience of use, suggest that this is highly unlikely.

Id. at\[]þl -33. Even if

a user wanted to

make a copy of an Eligible File before upload with the intent to keep it after it was
sold, whatever

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object that user made the copy on could never be connected to the computer or the iTunes database
ever again to avoid detection. Moreover

it is not

as

if

a user

could sell all of his or her Eligible Files,

retain copies, get cash out of the system and uninstall ReDigi, because ReDigi does not allow

individuals to get cash out of the system. Id.

atll|8-19.

In order for

of use of any credit received they have to keep using ReDigi

-

a

person to obtain the benefit

and in order to keep using ReDigi

the user must remain legally compliant.

There is virtually no chance of this type of infringement occurring in anything more
than
isolated instances, and there can be no dispute that ReDigi has done everything possible to
discourage and prevent even the few instances where an individual could try to commit such
acts.

Frankly speaking, instead of investing lots of time into figuring out how to get around ReDigi's
software' if an individual is committed to stealing music it would be much easier and more likely
for that person to go to a fìle sharing service, where in

a

matter of seconds that person can steal

whatever music they want. However, to the extent that a person could go to these extreme
measures'

it would be preposterous to say that ReDigi declined

a

right or ability to stop or limit this

behavior when ReDigi has done the exact opposite. As a result, ReDigi cannot be held vicariously

liable for any such acts of infringement.

C. REDIGI CANNOT BE LIABLE FOR INDUCEMENT OF INFRINGEMENT
Lastly, ReDigi cannot be liable for inducement of copyright infringement. To be liable for
inducement of copyright infringement one must distribute a device with the object of promoting
its
use to infringe copyright, as shown by clear expression or affirmative steps taken to foster

infringement. See Grokster,545 U.S. at919. There is no evidence that ReDigi has distributed its
service with the object of promoting its use for third parties to infringe copyright. To the contrary,
as discussed above

ReDigi has made extraordinary efforts to build a service that is compliant with

copyright law, discourages piracy and prevents infringement.

23

Even if this Court were to agree with Capitol and decide that violation of the exclusive
reproduction right is a definitional issue, ReDigi should not be held liable under any
of these
theories of secondary liability. It cannot be disputed that ReDigi has endeavored
to build a lawful
business. ReDigi undertook great efforts to understand copyright law and build a
system that was

compliant with it and then built a system meant to operate within its confines.

,S¿e

RDF

$1,

llTl -17.

ReDigi's belief that its actions are lawful is objectively reasonable given that there is no
clear
authority to the contrary. Id. atlB6. To this day, there is no clear authority that would
have led
ReDigi to know that their actions are unlawful, because they are not. ReDigi,s service
is nothing

like the type of file sharing services that case law has focused on. File sharing services,
which are
clearly illegal, distribute duplicated copies of one source file to millions of users.
Unlike these
services ReDigi's users migrate the actual Eligible File and then are able to sell that
Eligible File

without duplicating

it. Cf id. at18.

Further unlike these services, here there is no evidence of bad

faith, willful infringement or nefarious purpose. Capitol's attempt to imply that the
disclosures
contained in ReDigi's subscription agreements constitute an acknowledgement that
ReDigi knew its
service was unlawful is preposterous. As Capitol should know, securities laws require
full
disclosure of all potential risks to investors

.

see 77 c.F.R. ç 240.10b-5. Given the litigious history

of the music industry when faced with any new technology, it was not imprudent for
ReDigi to
warn its investors that, despite its well-founded belief that its service was legal,
the record labels

might nevertheless sue ReDi g. See RDF

$1, 1Tf36.

A truthful disclosure abour the state of the law to

potential investors cannot be construed negatively against ReDigi.
There is no question that ReDigi's system is the first of its kind. There is no question
that

ReDigi built the system to comply with the law. ReDigi did not induce, know about, decline
to stop
or promote infringement in any way. Here, there is no evidence of bad faith or improper
motive.

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C'f' Grokter,
accept

545 U.S. at

938. For this reason even if the Court decides on a prospective basis to

capitol's definitional argument ReDigi should not be held liable.

III.

REDIGI2.O CANNOT BE ENJOINED

Additionally, and in the event that the Court agrees with Capitol's definitional
argument,
ReDigi cannot be enjoined from operation of ReDigi 2.0. If the Court accepts
Capitol's argument it
necessarily follows that ReDigi 2.0 is legal. In ReDigi 2.0 anew file purchased
from iTunes is
downloaded directly to the ReDigi Cloud Locker. According to Capitol, the ,,phonorecord,,is
created in the Cloud Locker. Thereafter, ownership of the file is transferred
by transferring the Key,

which is registered to the buyer on the records of the database-the file is never
moved. Under
Capitol's theory, this process does not violate its exclusive rights and as such it
cannot be enjoined.

CONCLUSION
Capitol's theories of liability in this case are based upon nothing but speculation
and

assumption-it has no proof. As

set forth above

it is undisputed that none of Capitol's exciusive

rights are infünged by any use of the ReDigi system. For this reason Capitol's
motion for judgment
as a matter of law must be denied and judgment

in favor of ReDigi should be granted. Additionally,

although Capitol has prevented no proof of its occuffence, even in the event that
this Court believes
that some type of infringement could potentially occur outside of the ReDigi
system, Capitol,s

motion must still be denied as ReDigi cannot be held liable under any theory of
secondary liability
for independent acts that it has never encouraged, induced, known about or declined
to limit or stop.
For all of these reasons ReDigi respectfully requests that Capitol's motion
be denied in its entirety.

Dated: New York, New York
August 14,2072
Meister Seelig & Fein, LLp
140 East 45th Street, 19th Floor
New York, New York 10017
Phone (212) 6s5-3580
Email [e-mail]
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