Like other record labels, UMG distributes free CDs to radio stations and music reviewers in the hopes of drumming up publicity. The CDs come stamped with the label “promotional copy, not for sale.” Based on this notice and the fact that the copies were given away rather than sold, the labels argue that these “promo CDs” remain the property of the labels and are only leased to recipients for their personal use. California resident Troy Augustino makes a living selling various merchandise, including promo CDs, on eBay. UMG sued him in May for copyright infringement, claiming that it had merely licensed the CDs rather than transferring ownership and that Augustino was therefore committing copyright infringement by reselling them. The fundamental issue in the case is the First Sale Doctrine, which says that when a copyright holder sells a copy of a CD, the new owner of the CD is entitled to give or sell that copy to someone else without getting the copyright holder’s permission. This is the principle that makes libraries and used book stores possible. It was first articulated by the Supreme Court in 1908 and has since been codified into statute.
Fred describes the ruling:
In its ruling, the district court found that the initial recipients of “promo CDs” own them, notwithstanding “not for resale” labels. The court rejected the notion that these labels create a “license,” concluding that the CDs are gifts. According to the opinion, “UMG gives the Promo CDs to music industry insiders, never to be returned. … Nor does the licensing label require the recipient to provide UMG with any benefit to retain possession.” (The court also found that federal postal laws relating to “unordered merchandise” establish that promo CDs are gifts to their recipients.)
I’m nominally on vacation this week so I won’t have time to read the decision for a while, but it looks like a great ruling.
We did a podcast on the case and its implications, featuring Fred and Randy Picker of the University of Chicago law school, last summer.