Ninth Circuit Hears Critical First Sale Doctrine Case

By Christopher Harbin

Once again the record industry is attempting to prop up their failing business model by redefining consumer rights in heinous fashion. This week, the Ninth Circuit heard arguments in a crucial case that may substantially alter first sale rights.  For those that aren’t up on their copyright law, the “first sale” doctrine dictates that once a copyright owner sells or gives away a work, the owner of the work may dispose of it as she sees fit.   When you buy a book at a store, you may resell the book to another without restriction.  If you buy it, you own it.

In this case, Universal Music Group is suing Roast Beef Music for copyright infringement for auctioning  on Ebay promotional CDs that it bought at a used record store.  UMG sends these CDs out to radio stations and music retailers.  Each promo CD bears a marking that prohibits their resale. Courts have generally held that where physical possession of a copyrighted work is transferred to another without an expectation of return, the transfer is a “sale” and first sale rights attach.  UMG’s argument, made time and time again by copyright owners to no avail, is that these CDs are merely licensed and thereforeno first-sale rights attach. Should UMG win, copyright holders would be able to restrict secondary sales and uses completely.   Bottom line:  no more Netflix, no more selling used books on Amazon, no more used-record stores.

Let’s be clear here.  UMG is not concerned about promo copies of The Killers “Sam’s Town” being sold on Ebay.  Their actual plan is to use a favorable decision in this case as a forward position to erode consumer rights and use copyright infringement lawsuits, or threat of suit, to prop up a dying business.  Let’s hope Koz and his cohorts on the Ninth put the final nail in the music business’s coffin.

3 Responses to Ninth Circuit Hears Critical First Sale Doctrine Case

  1. Jeff Gordon says:

    I agree that the slippery slope conclusion of an unfavorable decision would lead to exactly the points made in your second paragraph.

    But as any lawyer knows, courts rarely decide such sweeping change – rather, they rule on the specifics of the case at hand… and in this particular situation, Universal is talking about LABELED promo CD’s. Oh, and they lost at the District Court level… which means that the appeal is going to be even more narrowly constrained.

    UMG is going to lose this case… slippery slope averted. Save Chicken Little scenarios for things that are actually happening to erode our current rights. :)

  2. Dan says:

    I used to work in the record industry (yes I’m that old). Record industry reps used to hand out dozens of promo CDs that were clearly LABELED to stores and encouraged us to sell them to anyone who liked what they heard when we played them. This predates CDs back to records as well. In fact, when an artist failed to take off, within a year full boxes of promos ended up at record stores right from the record company or distributor sure must be a fact that UMG would not want discussed.

  3. thefncrow says:

    There was a used CD store I used to frequent a few years back that would often sell promo CDs like this. The big deal with that was the fact that the promo CDs they would have would often turn out to be for releases which weren’t yet available at retail.

    I assume someone who was on a list to receive promo CDs either decided to just rip and/or burn a copy of the CD and go and make a few bucks at the CD shop by selling their promo discs. Which, hey, was fine by me, because it wasn’t often that you got to pay $9 to buy a CD that wasn’t going to hit retail for another 3 weeks.

    Now, that activity, which I personally loved as the consumer, does seem a little abusive, and if the music companies wanted to take some action to prevent that from happening, I’d understand. However, the position they’re taking is definitely far too broad. Once the CD is available at retail, promo copies should absolutely be fair game for resale.

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