Troy Augusto, represented by the Electronic Frontier Foundation (EFF) and the law firm Durie Tangri LLP, was sued by UMG for offering promo CDs for auction on eBay. At issue was whether the labels on the CDs, some of which stated that they were "promotional use only, not for sale," trumped Augusto's right to resell the CDs that he bought. Copyright's "first sale" doctrine prevents a copyright owner from restricting further sales or uses of a work once title has passed.
In an opinion issued today, the appeals court held: "UMG transferred title to the particular copies of its promotional CDs and cannot maintain an infringement action against Augusto for his subsequent sale of those copies." The court noted that UMG did not maintain control of the CDs once it mailed them out, did not require the recipients to agree to the "conditions" it sought to impose with the not-for-sale label, and did not require return of the CDs if the recipient did not consent.
"This ruling frees promotional CDs from the shadow of copyright infringement claims, which is good news for music lovers," said EFF Intellectual Property Director Corynne McSherry. "But it also has broader ramifications. The court flatly rejected the argument that merely slapping a notice on a copyrighted work prevents the work from ever being sold. It eliminates the risk of copyright infringement claims against later recipients -- regardless of whether they paid for the work."
"The Ninth Circuit recognized an important principle: that you can't eliminate consumers' rights just by claiming there's a 'license agreement,'" said Joe Gratz of Durie Tangri, lead counsel for Mr. Augusto. "Once a copyrighted work is freely given, the copyright holder isn't in charge anymore. The copyright owner can't stop you from selling it or lending it to a friend."