Court Rules That It's Legal To Sell Promotional CDs
from the first-sale-lives-on dept
Last year, we had noted that the 9th Circuit appeals court was set to hear three separate cases, all revolving around the first sale doctrine, which allows you to resell copyrighted works that you possess. The first ruling of the three, back in September, was bad news: overruling a good district court ruling, in Vernor v. Autodesk, saying that anyone could effectively wipe out your first sale rights by simply putting a “license” on it. The second ruling, in MDY vs. Blizzard, was more of a mixed bag. It accepted the basics of Vernor but said that just because you violate a “license,” it doesn’t automatically mean you violate the copyright.
Now, the ruling in the third case, UMG vs. Augusto, has come out and it looks pretty good. It upholds the first sale rights of people who get “promotional” CDs (pdf of the ruling, which is also embedded below). Basically, the court seems to agree with the lower court’s ruling, which suggested that being able to overrule first sale rights with a couple of sentences stamped on a CD, which the labels clearly never intended to get back, would undermine the entire principle of the first sale doctrine (though, it did so for different reasons).
So, how did the court square this ruling with its own decision in Vernor, which essentially said something different? It basically comes down to the fact that Universal Music gave out these CDs without expecting them back or without getting the original recipient to agree to anything specific. That is, the text stamped on the CD doesn’t count as a true license agreement. But all the crap included with Autodesk software does count as a license agreement (rather than a true transfer of ownership):
It is one thing to say, as the statement does, that “acceptance” of the CD constitutes an agreement to a license and its restrictions, but it is quite another to maintain that “acceptance” may be assumed when the recipient makes no response at all. This record reflects no responses. Even when the evidence is viewed in the light most favorable to UMG, it does not show that any recipients agreed to enter into a license agreement with UMG when they received the CDs.
Because the record here is devoid of any indication that the recipients agreed to a license, there is no evidence to support a conclusion that licenses were established under the terms of the promotional statement. Accordingly, we conclude that UMG’s transfer of possession to the recipients, without meaningful control or even knowledge of the status of the CDs after shipment, accomplished a transfer of title.
The main difference between the lower court ruling and this new ruling is that the appeals court focused on the lack of any actual “agreement” in the license, while the lower court focused on the lack of expected return of the promotional CD.
Not surprisingly, I think the court got this right but since I also believe that the earlier Vernor ruling was very, very wrong, it’s not surprising that I think this ruling does a nifty little tap dance to pretend that this ruling and the Vernor ruling are consistent. It basically says that it all depends on “the means of distribution,” in that recipients of promo CDs did not ask for them, while purchasers of software did. But that seems to be besides the point and somewhat unrelated. The same issue that seems to drive this ruling for Augusto should apply to Vernor as well. The court notes that there’s “no acceptance” of a license and you can’t assume acceptance via no response. And yet, that’s how most such software licenses work as well.
While I’m happy about this particular ruling, it still seems to conflict with itself and I would imagine we haven’t heard the last of these three first sale cases…