In the case, Capitol Records, LLC vs ReDigi Inc, federal judge Richard Sullivan has ruled that individuals do not have the right to resell digital music files that they have legally purchased. In this particular case, ReDigi was attempting to set up a business where they bought mp3 files from those who had already purchased them online in a legal manner, then sell the files once more to new customers. That business has been ruled to break existing copyright law and ReDigi will probably face fines for secondary copyright infringement.
Here is a quote from the judge regarding the sale of digital files:
Courts have consistently held that the unauthorized duplication of digital music files over the Internet infringes a copyright owner’s exclusive right to reproduce. See, e.g., A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1014 (9th Cir. 2001). However, courts have not previously addressed whether the unauthorized transfer of a digital music file over the Internet—where only one file exists before and after the transfer—constitutes reproduction within the meaning of the Copyright Act. The Court holds that it does.
ReDigi argued that their business was protected by both fair use, and the doctrine of first sale, but the judge disagreed entirely:
...the first sale defense is limited to material items, like records, that the copyright owner put into the stream of commerce. Here, ReDigi is not distributing such material items; rather, it is distributing reproductions of the copyrighted code embedded in new material objects, namely, the ReDigi server in Arizona and its users’ hard drives. The first sale defense does not cover this any more than it covered the sale of cassette recordings of vinyl records in a bygone era.
You can read more about the case itself at Wikipedia, and you can find the summary judgement from the court here (note that the second link is to an 18 page pdf file, so anyone with a slow internet connection should consider themselves warned).
