“In a major lawsuit testing the legitimacy of music downloads, Capitol Records LLC has won a court ruling that the start-up ReDigi Inc has infringed its music copyrights,” Jonathan Stempel and Alistair Barr report for Reuters. “U.S. District Judge Richard Sullivan in Manhattan said ReDigi was not authorized to allow listeners to use its platform to buy and sell “used” digital music tracks originally bought from Apple Inc’s iTunes website.”

“The decision made public on Monday is a blow to early efforts to create online marketplaces for used digital goods, akin to how used books, for example, might be sold in stores,” Stempel and Barr report. “‘This will profoundly affect the economics of any digital re-sale marketplace,’ by limiting what can be sold as ‘used’ or forcing sellers to obtain copyright holders’ approval before transacting business, said Bill Rosenblatt, president of consulting firm GiantSteps Media Technology Strategies.”

Stempel and Barr report, “Sullivan said ReDigi’s service ‘infringes Capitol’s reproduction rights under any description of the technology,’ and does not deserve protection under the theory of fair use. ‘ReDigi facilitates and profits from the sale of copyrighted commercial recordings, transferred in their entirety, with a likely detrimental impact on the primary market for these goods,’ Sullivan wrote. ‘It is beside the point that the original phonorecord no longer exists. It matters only that a new phonorecord has been created.’ …To sell music bought from iTunes on ReDigi, a user ‘must produce a new phonorecord on the ReDigi server,’ Sullivan wrote. ‘Because it is therefore impossible for the user to sell her ‘particular’ phonorecord on ReDigi, the first sale statute cannot provide a defence.’”

“E-books, MP3 songs and digital videos bought from iTunes or Amazon.com Inc are effectively rentals, which means they cannot be re-sold once used. Earlier this year, Amazon was awarded a patent for an online mechanism to allow customers to sell or transfer digital goods. Apple has applied for a patent covering a similar system,” Stempel and Barr report. “Joe Wikert, general manager and publisher at O’Reilly Media, Inc. [said], ‘Both Amazon and Apple have been working on patents, which are insurance policies for both of them in my view. They have been sitting on the sidelines watching the ReDigi case.’”

Read more in the full article here.

MacDailyNews Take: ReDigi really picked a bad name for their company.

[Thanks to MacDailyNews Readers "Fred Mertz" and "Lynn Weiler" for the heads up.]