Why Your Right To Sell Promo CDs Matters
This guest post is by Fred von Lohmann, the Senior Staff Attorney of the Electronic Frontier Foundation. 
On Monday, a federal court of appeals in Seattle will consider whether it is legal to resell "promo CDs." You've seen them, the CDs mailed out for free by record labels to industry insiders, reviewers, and radio stations, each bearing the label "promotional use only, not for resale." Do those labels stand up in court? And why should you care?
The case pits the largest record label in the world, Universal Music Group, against an eBay seller called "Roast Beast Music". Roast Beast Music buys promo CDs at used record stores around Los Angeles and resells them on eBay. In 2007, the Electronic Frontier Foundation (EFF) took up the case, and in 2008, Roast Beat Music prevailed. UMG has now appealed the decision.
A Green Light To Erode Consumer Rights
Why should you care? Because if UMG wins, then copyright owners will have the green light to put "label licenses" that erode a consumer's rights on not only CDs, but also books, DVDs, and video games.
At the heart of the case is the "first sale" doctrine. The idea, set out in Section 109 of the Copyright Act, is simple: once you've acquired a lawfully-made CD or book or DVD, you can lend, sell, or give it away without having to get permission from the copyright owner. In simpler terms, "you bought it, you own it" (and because first sale also applies to gifts, "they gave it to you, you own it" is also true).
But the copyright industries have never liked first sale, since it creates competition for their titles (you could borrow it from a friend, pick it up at a library, or buy it used from a seller on Amazon or eBay).
More importantly, however, the first sale doctrine also reduces a copyright owner's ability to impose restrictions on how you use the work after it is sold. For example, at the turn of the 20th century, book publishers tried to impose a minimum resale price on books by putting a notice in every copy. In the 1930s, record labels put "private use only, not for broadcast" notices on records in an attempt to block radio stations from playing their records without additional payment. In the 1980s, movie studios tried the same thing with video cassettes, trying to control the video rental business.
Fortunately, Congress, the courts, and free markets have consistently rejected these efforts to undermine the first sale principle. Now another court will have the opportunity to remind record labels that there are limits to their power over those shiny silver discs. – Fred von Lohmann, EFF
More on the case here.
Perhaps a dumb question, but if they’re free promotional goods and not *sold*, how would the First *Sale* Doctrine apply?
IANAL. Off the top of my head: “first sale” doctrine applies to any legitimate transfer of ownership. In the original case, Universal argued that they retained title to the promotional CDs. However, following that logic, it would be illegal for any CD reviewer to do anything with a promo CD other than ship it back to the record company. Even throwing it out would be unauthorized transfer of Universal’s property.
The court found that, with respect to promo CDs, Universal did none of the things which would indicate that they maintained title to the CDs. There was no contract with the recipients. There was no attempt to go to the recipients and retrieve the CDs. The court concluded that the promo CDs were gifts. As gifts, they satisfied the transfer of ownership needed to invoke the First Sale doctrine.
Again, IANAL, and this was tossed together with about five minutes of Googlesearching and some dim and distant memory.
Thanks, wallow-T. That makes sense.
I have an incredibly strong position about this despite being someone who owns recording copyrights – but my opinion is based on having moved a few times and the environment. But I have a solution for the labels that want to stop resale of promos.
Basically when I recieve a promo in the mail, 90% come in unsolicited and 99% of thm want something from me – to write a review, to become their agent, to send it to someone who is a contact, etc. They aren’t sending them to me as a gift, etc.
So what am I supposed to do. Well according to them I either have to ruin the environment by throwing it away or becoming a depository / archive for their CDs. Have you ever moved and had to drag thousands of CDs with you, a good portion you didn’t ever ask for or want. Now, the vast majority of the CDs and LPs I have received that I didn’t want, I actually either gave to a friend or student of mine or donate them to a local music archive.
But my solution, if the labels don’t want me to sell them or pass it along is this – mail me a self addressed stamped envelope a la Netflix and I will happily return the unwanted sound recording. Do you think the postage they would spend on this program would make up for the lost sales if they remained in circulation? But, this will only work, if they don’t throw them away, as that would be more environmentally damaging (waste of paper on envelopes, gas that the postal carrier used, etc).
Oh yeah, isn’t possession 9/10ths of something?
Promo-CDs are currently in the process of becoming a non-issue with promo downloads taking over. The latter don’t cause any disposable waste that the label would need to have sent back to them. So this lawsuit is indeed very suspicious to be about something else instead.
As most best selling CDs from a few years ago are available on the used market for about $1 because of their widespread availability at internet resellers (from which I buy frequently), it is no surprise that the labels miss the revenue they got in the old days when they could sell these popular products at their original retail prices even 5 or more years after their release.
Yet, the prices for that kind of product are down now and there is no way they can go up again unless people are willing to pay more for used CDs. And they only do that when they are scarce. Maybe the labels should go online and buy up large quantities of used CDs of their artists for $1 each that they want to sell new by themselves at $15 just to reduce deflation of the market?
The preservation of libraries and their rights is paramount.
Nice little one-sided piece of non-journalism. Anyone can buy a CD, but what’s purchased is a set of rights, not the music itself; there is an implied license and certain rights are reserved in the transaction, such as the right to make unlimited copies for free distribution. Of course, it’s ridiculous to expect that record labels will police reviewers and music bloggers, but in principle, UMG is correct; if a reviewer has no desire to haul the thing around, the only ethical course of action is to destroy it, the same way book/CD returns are destroyed. Just because it’s common practice for music reviewers to cart loads of failed releases to resale shops to trade them for music they’re actually interested in doesn’t make it right; reselling a promo copy is in fact illegal, just like it says on the label.The implication that this somehow infringes the rights conferred to an actual purchaser of the product I find suspect.
Actually, in addition to the rights you’ve purchased, you’ve also purchased the physical media. Therefore, you have every right to resell that physical media provided you have not copied it.