Interesting case filed by Universal Against eBay Seller

[tabberone]

http://arstechnica.com/news.ars/post/20080409-universal-tossing-that-promo-cd-violates-our-rights.html


Is throwing a record label's promo CD in the trash an "unauthorized distribution" of the music? According to Universal, the answer is yes. The claim surfaced as part of a legal case against an eBay reseller who offered Universal promo discs for sale in violation of the "not for resale" label printed on each disc. While the case sounds almost farcical, it raises an important question: can Universal and other labels in fact control the distribution of a product once they have sent it to others, or does the US "first sale" doctrine give people the right to do as they like with the promo discs?

Record labels aren't thrilled about people who sell the promo discs that are sent out to music magazines and radio stations, though even a casual visit to a used music store will show that the restrictions printed on the discs aren't followed with any sort of rigor. Normally, this is no big deal, but when it escalates into an eBay business model, the labels get a bit jumpy.

Universal is currently suing one Troy Augusto, who runs Roastbeast Music Collectibles and offers items for sale on eBay. Augusto makes three-quarters of his income from reselling promo CDs as "collectible" items on eBay. He's been sued before for such behavior, and has in the past agreed to a consent judgment that admitted the sales violated record labels' exclusive rights to distribute the music. After Universal used eBay's "Verified Rights Owner" program to request that Augusto's sales of its promo CDs be halted, Augusto sent counter-notices to eBay that said Universal's notices were "mistaken." That got Augusto's items listed once more, but it drew a lawsuit from Universal (read the complaint [PDF]).

Do not throw Barry away
without express written permission

At issue here is who owns the promo CDs. Universal argues strenuously that it never transferred ownership when it sent them out and that the discs are merely "licensed" to those who receive them. Each disc includes text that makes clear that "this CD is the property of the record company and is licensed to the intended recipient for personal use only." According to Universal, the label could recall the discs at any time (though it has never done so). In fact, even giving the discs away or tossing them in the trash constitute "unauthorized distributions."
License or gift?

The EFF, which has taken up Augusto's case, says that the case is far more serious than a dispute over whether someone can sell (or trash) a promo CD; the issue is whether companies can do an end run around the "first sale" doctrine that gives a purchaser the right to resell and otherwise control an object he or she has purchased. If slapping a sticker on a CD can override the first sale doctrine, then could book publishers limit used book sales with a sticker of their own?

The EFF's Fred von Lohmann, writing about the issue when the EFF first took the case last year, described the stakes this way: "If UMG is right, then copyright owners of all kinds can strip away our first sale rights by putting these kinds of 'label licenses' on their wares. Next thing you know, CDs, books, DVDs, and video games could be festooned with 'notices' that erode a customer's first sale, fair use, and other rights."

Universal says that the first sale doctrine doesn't apply in this case "because there was no first sale of the UMG Promo CDs (but only a limited license to specific recipients)." It points to US law that codifies the first sale doctrine and notes a key exception. According to the law, the first sale privilege "does not, unless authorized by the copyright owner, extend to any person who has acquired possession of the copy or phonorecord from the copyright owner by rental, lease, loan or otherwise, without acquiring ownership of it." Universal says that this is exactly how people acquired ownership of the discs.

But the EFF's filing (PDF), made on Monday, argues that gifts have long been seen by courts to fall under the "first sale" rule. When a product is sent (unrequested) through the US Postal Service, case law says that it must be seen as a gift. In other words, the EFF claims that Universal can't simply send people an item and impose its idea of license conditions on it. (Believe it or not, there is actually a long case long history behind the idea of "unordered merchandise" that comes through the mail.) The filing is worth reading, if only for the fact that it opens with a lengthy quote from Harry Potter.

Augusto has filed a counterclaim against Universal for interfering with his business and for filing knowingly false DMCA takedown notices with eBay.

Should be interesting to watch.

[crymeariver]

I hope Universal looses because DMCA is a bad seed.
I think some of those sued by RIAA turn back and sue RIAA for their tactics. THey are extortion of users and sometimes use methods th at are borderline illegal.

[tabberone]

The DMCA had good intentions to prevent copyright infringement.

However I don't believe Congress factored in the abuse of this law.

If there were civil penalties for false DMCA takedowns that would help.

As it stands now it's very hard to get any type of damages, and they have to be applied at the federal level.

[tabberone]

As I'm sure you saw when Ina reported it, Universal lost. The judge ruled the seller had a right to sell the promo cds.