Legal Updates - Reselling CD

Media and Entertainment Law - Sellers Be Wary:  Reselling CD may have a higher price than you expect! – Copyright Infringement – Grant of a License

Reselling merchandise online is a common tool for the internet savvy.  However, music labels are curbing the resale of promotional CDs.  In Universal Music Group (“Universal”) v. Troy Augusto (“Augusto”)  [2008], Augusto was sued by Universal in the US District Court for the Central District of California for selling promotional CDs on Ebay online auction website.  Universal argued that promotional discs are review copies sent to radio stations and journalists before the final edited versions of the discs go on sale.  Accordingly, the discs are labeled “For Promotional Use Only”.   This language indicates that the promotional CDs are not for resale.

Universal argues that the sale of promotional CDs by Augusto constitutes copyright infringement.  Universal claims promotional CDs remain the property of the recording company and are issued for advertising.  Arguably, when Universal sends a promotional CD it is granting the receiver a license to use the materials.  Thus, Augusto was selling promotional goods for profit and he never had valid ownership rights.   Augusto has seen this controversy in 2 separate lawsuits issued against him by Capitol Records and Virgin Records.   Augusto consented to a permanent injunction in both.

However, in this case, the Electronic Frontier Foundation has intervened on behalf of Augusto claiming Augusto has the right to resell CDs under the first sale doctrine.  The first sale doctrine of Copyright Act of 1976, 17 U.S.C. § 109 allows the purchaser to sell or give away a lawfully made copy of a copyrighted work without permission once it has been obtained.  Therefore, a copyright owner cannot control the change in ownership of a copyrighted work once it has been sold.   Electronic Frontier Foundation asserts Universal is attempting to restrain Augusto’s freedom to sell.  Augusto’s attorney’s further claims that limitations on the resale of promotional CDs would affect the business of used goods retailers including book stores and music stores.  They believe Universal’s attempt to stop the resale of promotional CDs has gone too far. This case is continuing and will be followed by RT Coopers LLP in the USA.

Note: Presently, it may be smart for sellers to suspend the resale of any goods marked “promotional use”.

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© RT COOPERS, 2008. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.