Buy it once, shame on me — Sell it — you can’t get sell it again. It turns out I can’t get the saying right either. Three years ago, Troy Augusto, operating as roastbeastmusic, was sued by Universal Music Group (UMG) for selling used CDs on eBay. At issue were 26 CDs (Promo CDs) originally sent to music industry insiders and labeled “promotional use only, not for sale”. Augusto, not an industry insider, collects the Promo CDs secondhand and resells them via his eBay storefront.
UMG, the largest family of record labels in the recording industry, including Interscope-Geffen-A&M, Island Def Jam Music Group and Universal Motown Republic Group, claimed the sale of Promo CDs is a violation of their exclusive distribution right under 17 U.S.C. § 106(3). UMG argued that the ‘promotional use only’ creates a license between UMG and any recipient who accepts the CD and that under this license UMG retains title to it.
Augusto countered that the sale of the secondhand CDs is protected by the “first sale doctrine”. Codified in 17 U.S.C. § 109, the “first sale doctrine” permits the owner of a copy to resell it without the permission of the copyright holder:
the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.
The district court agreed and granted summary judgment. It noted that UMG’s only interest in maintaining a license on Promo CDs is to restrain transfer of its music. When UMG delivers Promo CDs to music industry insiders, the court said, it transfers title to those insiders and the CDs are subject to the first sale doctrine.
UMG appealed, bolstering its position with amicus participation by The Recording Industry Association of America (RIAA). The RIAA argues that Augusto’s sales directly compete with “authorized commercial copies”. It further argues that the promotional nature the CDs — often different composition of songs than the final release — increases the likelihood that downstream copying will occur.
Really? Like the first complaint, the arguments on appeal are perplexing. If the industry wants to restrict the entry of Promo CDs into the marketplace, it should make an effort — beyond a printed label — to regain control of the CDs. Walk by a college radio station and you will see that many (most) Promo CDs end up in “free” bins at the front door. Stations are inundated with Promo CDs that they can’t use and inevitably these copies end up at the Goodwill or garage sales.
Calling out roastbeastmusic as a competitive threat to the music industry is ridiculous. The CDs for sale in his storefront don’t supplant the market for “authorized commercial copies”. The argument that they increase the likelihood of downstream copying and distribution via peer-to-peer networks is equally misplaced. If and when they do reach the stream of commerce, Promo CDs are novelties — considered collectible by fans — not substitutes for an album.
The Electronic Frontier Foundation (EFF) is aiding in the effort to uphold the lower court’s decision and support first sale rights. Oral arguments were held this morning at the U.S. Court of Appeals for the 9th Circuit in Seattle.
More on this when the court issues an opinion. More from EFF. Read the original complaint here. Read the RIAA’s Amicus Brief.
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