Monday 30 April 2012, 11:47 | By

Is ReDigi running out of money as it awaits EMI court battle?

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ReDigi

Speculation that controversial MP3 resale service ReDigi wouldn’t be able to afford to fight its legal battle with EMI is starting to ring true, after lawyers working for the digital start-up filed a motion to withdraw from the case last week.

As previously reported, ReDigi is a website that enables music fans to sell unwanted MP3s on to third parties. The founders of the company say reselling MP3s is no different than reselling CDs, a practice protected under American copyright law by the so called ‘first sale doctrine’. The tech firm adds that its technology verifies the source of the digital file being sold and ensures the original is deleted from the seller’s computer after sale.

But even if you buy the idea that the ReDigi system is really capable of ensuring an MP3 put up for sale came from a legitimate source, and that the seller deletes their copy after sale (which seems unlikely, but whatever), the American record industry argues that the ‘first sale doctrine’ does not apply, because when a CD is exchanged no actual copying takes place, whereas a digital exchange requires new mechanical copies to be made without a licence.

While both sides think their arguments are strong, when EMI – the record company actually suing over this – pushed for a summary judgement in February, the judge hearing the case ruled that the debate was too complicated for a judgement to be made without a full trial. He added that the dispute at the heart of this case was a “fascinating issue” that “raises a lot of technological and statutory” points.

So, well done ReDigi for proving the law wasn’t as clear on this issue as EMI originally claimed, though, as we noted in February, a court hearing that will cover “lots of issues”, as Judge Richard Sullivan predicts it will, sounds expensive for a start-up that has only raised, to our knowledge, half a million in capital, and which will struggle to find new investment while this lawsuit hangs over it.

According to Digital Music News, last week ReDigi attorney Ray Beckerman filed a motion to exit the case and hand things over to another firm. There are, of course, various reasons why the lawyer might choose to do that, but most commentators noted that Beckerman’s filings stated that the lawyer had a ‘retaining lien’ with his former client, which basically means he is owed money and can exercise the right to keep hold of paperwork relating to the case until bills are settled.

That, in turn, has led to speculation that ReDigi is running out of money, which is no fun at all when you have a big complicated court case upcoming, and a fledgling business to develop at the same time. Although neither Beckerman nor ReDigi have commented, some now wonder if this case will ever go to court.

If it doesn’t, that will piss off some in the tech community – partly because no one likes it when big companies put start-ups out of business simply by landing them with a bit of litigation they can’t afford to defend, and partly because, while the MP3 resale thing may be a non-starter, it’s thought the ReDigi case, if it gets to court, might also test some copyright principles relating to the wider cloud-storage and file-transfer marketplace.

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