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ReDigi founders will remain as defendants on Capitol’s infringement litigation

By Chris Cooke | Published on Thursday 4 September 2014

The record industry’s legal squabbles with MP3 resale platform ReDigi rumble on, with the labels scoring another win this week in getting the digital start-up’s founders listed as co-defendants on the litigation.

As much previously reported, the US record industry has objected to the idea of an MP3 resale service since the off, not convinced by ReDigi’s claims that the seller’s copy of a digital track is definitely deleted after a sale, and anyway adamant that the terms and conditions on iTunes et al do not allow downloads to be sold on. ReDigi does not concur, insisting that the First Sale Doctrine in US copyright law which allows the resale of CDs should apply to the digital domain too.

But Universal division Capitol, which is leading on the legal fight, scored a victory last year when a judge ruled in its favour on the dispute. ReDigi, however, vowed to appeal, while also arguing that since Capitol had gone legal it had overhauled its technology, so that the judge’s ruling didn’t apply to the firm’s current website, which is still operational.

Whatever you make of that argument, there was a side issue at play here too as Capitol tried to have ReDigi founders and, respectively, CEO and CTO, John Ossenmacher and Larry Rudolph, added to the lawsuit as defendants. The record company argued that the two men came up with the idea of ReDigi, and totally controlled the business, and therefore should be personally liable for any copyright infringement.

It’s an important move for Capitol, in that when you go after digital start-ups with copyright litigation, however confident you are of a win in court, there’s always the risk you’ll run up mega legal bills and then the company you’re pursuing will go under with no assets. It’s useful, therefore, to have the option of going after the individuals behind the company. For the entrepreneurs targeted it can be costly, just ask MP3tunes founderMichael Robertson who was ordered to pay $41 million in damages to EMI even after his copyright infringing start-up had folded.

So, needless to say, Ossenmacher and Rudolph objected to being added to Capitol’s lawsuit in a personal capacity, and asked to have their names removed. But earlier this week a US judge ruled that they could be held liable for any infringement their company is deemed to have undertaken or contributed to.

The judge said in his ruling: “Although [Capitol’s lawsuit] could certainly have provided more detail with respect to the individual actions of each defendant, the court finds that it is nevertheless sufficient, if barely so, [for Ossenmacher and Rudolph to be included], since the three defendants are a small start-up and the two corporate officers who directed and controlled essentially all of its activities”.