Boston-based ReDigi, which bills itself as “the world’s first pre-owned digital marketplace,” was denied the right to resell digital music by Judge Richard J. Sullivan in U.S. District Court in the Southern District of New York. Capitol Records was granted its motion for summary judgment in a lawsuit that it filed against ReDigi in January 2012, in which it called the ReDigi digital music storefront “a clearinghouse for copyright infringement.”

Judge Sullivan wrote that ReDigi seeks “judicial amendment of the Copyright Act to reach its desired policy outcome,” to resell digital music. He rejected ReDigi’s claim that no copying occurs because the file is transferred from a user’s computer to its cloud server. “It is beside the point that the original phonorecord no longer exists. It matters only that a new phonorecord has been created,” he wrote. The judge also noted that ReDigi is not protected by the first sale doctrine, because it is an “unlawful” reproduction.

It is up to Congress to decide on digital resale, wrote Judge Sullivan. “However, [s]ound policy, as well as history, supports [the Court's] consistent deference to Congress when major technological innovations alter the market for copyrighted materials. Congress has the constitutional authority and the institutional ability to accommodate fully the varied permutations of competing interests that are inevitably implicated by such new technology.”

Judge Sullivan requested that both sides submit a letter by April 12 about the next step. Saying it is disappointed by the ruling, ReDigi said it will continue to operate the company's beta Web site while it appeals the decision. In its statement, ReDigi said "the case has wide ranging, disturbing implications that affect how we as a society will be able to use digital goods," noting that the recent decision, in the U. S. Supreme Court's decision in Kirtsaeng v. Wiley & Sons, "which reaffirmed the importance and applicability of the First Sale Doctrine in the United States of America."

The suit has been closely watched by the book industry since ReDigi had planned to move forward with selling used e-books once the lawsuit was behind it, and it is already in the midst of expanding into Europe which has ruled in favor of reselling digital software and games. In addition, Amazon has received a patent for a process to sell used digital items and Apple has applied for one.