June 11, 2008 | By Fred von Lohmann

Liberation Day for Promo CDs: Victory in UMG v. Augusto

In an important victory for the first sale doctrine, a federal district court today ruled that selling "promo CDs" on eBay does not infringe copyright. The court threw out a lawsuit by Universal Music Group (UMG), which had argued that the "promotional use only" labels affixed to these CDs somehow conveyed eternal ownership on UMG, making it illegal to resell the CDs (or even throw them away).

For decades, record labels have mailed out millions of promotional records and CDs to radio stations, music reviewers, DJs, and music industry insiders. Troy Augusto, an eBay seller, finds these "promos" at used record stores, where he buys those that have value as collectibles and resells them on eBay. After an abortive attempt to use DMCA takedowns to block Augusto's eBay auctions, UMG ultimately sued him in federal court, claiming that the "promotional use only" labels on the CDs mean that UMG owns them forever and that any resale infringes copyright.

EFF and the San Francisco law firm of Keker & Van Nest took Augusto's case to fight for the proposition that a copyright owner can't take away a consumer's first sale rights just by putting a "promotional use only, not for resale, remains the property of UMG" label on a CD. After all, the first sale doctrine had its origin in a Supreme Court case involving book publisher's effort to enforce a "may not be sold for less than one dollar" label on a book.

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.)

With software vendors, laser printer manufacturers, and patent owners trying to strip consumers of their first sale rights with unilateral labels, licenses, and notices, today's ruling sets an important precedent holding the line against these efforts (and comes one day after the Supreme Court reaffirmed the same principle in the patent context in Quanta v. LG). Here's hoping this ruling is another nail in the coffin of "label licenses" that try to strip consumers of their privileges under copyright law.


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