Capitol Records accused of sabotage

A start-up which has been selling pre-owned digital music files is claiming Capitol Records is trying to sabotage its business.

ReDigi has been running for a few months and claims to be a modern-day used record store – providing the public with a platform to buy and sell used MP3s.

According to Wired, Capitol Records tried to get the outfit shut down for copyright infringement but suffered a set back when a New York federal court judge declined to issue an injunction that would have effectively shut the site. The case will now go ahead in August.

ReDigi claims that Capitol leaned on another startup, Rdio, to pull the plug on providing album art and 30-second playable songs for ReDigi’s site. Rdio licences content from record labels including Capitol Records, and charges users $10 a month to stream unlimited music to smartphones and computers.

Now, ReDigi can’t display album art and has begun pulling in sound snippets from YouTube instead of Rdio.

Ray Beckerman, ReDigi’s attorney, said that as Capitol had been denied an injunction, it sought to use extrajudicial tactics to accomplish what they were unable to obtain in court.

ReDigi said it had licensing agreements with Rdio for such services, which Rdio abruptly halted Friday without notice.

Capitol will have its work cut out. ReDigi exists because of the first-sale doctrine which says that people in lawful possession of copyrighted material have the right to sell it.

But that right has been questioned in regards to MP3s. In 2008 a federal judge threw out UMG Recordings’ claim that it retained perpetual ownership of promotional CDs.

In the ReDigi case, Capitol Records claims ReDigi was liable for contributing to copyright infringement and was demanding judge Sullivan immediately order ReDigi to remove Capitol-owned material. It also wanted damages of up to $150,000 per track against the startup.

This would have killed the business if Sullivan agreed.

ReDigi says its account holders have a right to upload their purchased iTunes files into ReDigi’s cloud. When a file is sold to another ReDigi account holder, no copy is made.

ReDigi’s technology does not allow the original uploaded file sold to be accessed by the seller any more.