Re: UMG vs. Augusto: first sale wins

[Alexander Terekhov]

http://www.iplitigationupdate.com/blog.aspx?entry=1173

"Sending Promotional Music CDs Constitutes “First Sale” for Copyright
Protection Purposes

Januar 28, 2011 | Posted by Karin Scherner Aldama | Print this page 

The Ninth Circuit recently held that a copyright owner’s unsolicited
mailing of promotional music CDs to, for 
example, music critics and radio disc jockeys constituted a sale of the
discs to their recipients for purposes of the Copyright Act’s first sale
doctrine, 17 U.S.C. § 109(a). UMG Recordings, Inc. v. Augusto, __ F.3d
__, No. 08-55998, 2011 WL 9399 (9th Cir. Jan. 4, 2011).

UMG brought copyright infringement claims against Augusto, who had
obtained from third parties promotional CDs distributed by UMG and then
offered those CDs for auction on the Internet. UMG argued that the
original recipients of its CDs only obtained a license because the CDs
generally contained promotional statements indicating that they were
“licensed to the intended recipient for personal use only,” and that
their acceptance “constitute[s] an agreement to comply with the terms of
the license.” Id. at *1. The promotional statements also prohibited the
transfer or resale of the CDs. Augusto argued against the claims on the
basis of the first sale doctrine. That doctrine provides that the lawful
owner of a lawful copy of a CD can sell or otherwise dispose of that
copy as he pleases, without the consent of the copyright owner. 17
U.S.C. § 109(a). The district court granted summary judgment for
Augusto, and UMG appealed.

In upholding the district court’s grant of summary judgment for Augusto,
the Ninth Circuit concluded that the original recipients obtained
ownership of and title to the CDs, and thus the first sale doctrine
applied. The Ninth Circuit based its conclusion on an evaluation of “all
the circumstances of the CDs’ distribution.” UMG, 2011 WL 9399, at *4.
Of particular importance were the following factors: (1) The CDs were
unsolicited and dispatched without any prior arrangement with their
intended recipients in regard to what would happen to the individual
CDs; (2) “The CDs [were] not numbered, and no attempt [was] made to keep
track of where particular copies [were] or what use [was] made of them,”
so that UMG retained no control over the copyrighted material; and (3)
The promotional statements on the CDs did not create a license because
there was no evidence that any of the original recipients ever agreed to
enter into a license agreement, and acceptance of a license cannot be
assumed “when the recipient makes no response at all.” Id. at *4, *6.
Based on these factors, the court concluded that “UMG dispatched the CDs
in a manner that permitted their receipt and retention by the recipients
without the recipients accepting the terms of the promotional
statements. UMG’s transfer of unlimited possession in the circumstances
present here effected a gift or sale within the meaning of the first
sale doctrine.” Id. at 7.

In reaching its conclusion, the court emphasized the differences between
the circumstances in this case and those at issue in cases involving
software licenses. Specifically, the court focused on the fact that
software users order and pay for copies of software and implied that it
was also relevant that software vendors typically control how the
copyrighted software can be used. Id. at *6-7. Effective software
licenses are thus distinguishable from the ineffective licenses that UMG
tried to create.

Augusto had also argued against UMG’s claims based on the Unordered
Merchandise Statute, 39 U.S.C. § 3009, which allows recipients of
unordered merchandise to dispose of that merchandise as they see fit.
The court found that Augusto could not invoke that statute directly
because, by its terms, it applied only to the CDs’ original recipients.
Nonetheless, the court concluded that the Unordered Merchandise Statute
supported its conclusion that the mailing of the CDs effected a sale and
not a license because the statute renders recipients of unordered
merchandise, such as the CDs at issue, owners of that merchandise. UMG,
2011 WL 9399, at *5.

Lesson Learned: The unsolicited mailing of copyrighted material without
any control over what subsequently happens to that material constitutes
a first sale. Unless the recipients agree to enter into a license, a
first sale occurs even if the material is accompanied by a promotional
statement seeking to create a license, because acceptance of such a
license cannot be assumed without the recipient’s confirmation of
acceptance. Consequently, after receipt of unsolicited copyrighted
materials, recipients can dispose of that material as they see fit, and
the copyright holder cannot control or prevent that disposition."

<chuckles>

regards,
alexander.

-- 
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