Copywrite

UMG v. Augusto, Case No. 2:07-cv-3106 SJO (AJWx) in the U.S. District Court for the Central District of California, Western Division. Pending.

• UMG complaint for copyright infringement [PDF, 4.3MB] May 10, 2007
• Augusto answer and counterclaim [PDF, 54K] Aug 6, 2007

Some background – Augusto collects up all those promo only CDs that record labels send out, which are typically stamped “Promotional Only – Not For Sale” or similar language, and sells them on eBay. These have been a traditional tool for labels to promote their artists since they started sending out 45s stamped in this way in the 1950s. Univeral doesn’t like the fact Augusto is doing this and sue claiming that the first sale doctrine (see 17 U.S.C. § 109(a)) does not apply to these products because they have that special stamp on them. UMG’s Promo CD language states:

This CD is the property of the record company and is licensed for the intended recipient for personal use only. Acceptance of this CD shall constitute an agreement to comply with the terms of the license. Resale or transfer of possession is not allowed and may be punishable under federal and state laws.

UMG attaches this language to the CD when they, literally, send one to every record store, distributor, radio station, reviewer, and promoter in the nation. I still have cases full of Promo CDs from my days in the music industry (note: I have a record label, 2 studios, and music publishing house lined up as legal clients starting soon, so the onslaught of really awful free CDs may commence again soon). UMG claims the that they never give up ownership of the CD, but merely license it to the intended recipient for use. As such, no first sale and the first sale doctrine does not supply a defense. It is not a new argument, but one rarely tested – Does the marking of the CDs as Promo Only create an agreement supplanting § 109(a)? In essence, UMG seeks a way to control content after they ship it out.

This is nothing new, Universal Republic is trying to do the same thing with import CDs at the moment, under copyright law’s right of distribution.

I think that if there was an return address imprinted on each CD, there would be an argument that UMG was only only giving a provisional license to the use of the CD. Taken as a whole, the transaction currently looks like what it is – a giveaway with the person in possession having ownership of the media. UMG is likely to lose this one, so long as the EFF can keep their political views out of the litigation (I feel that they are good at grassroots organizing, but tend to be ultimately harmful to online rights by being extreme in their views and, thereby, losing suits they should have handily won. See here and here.)

On the issue of first sale, Tamera H. Bennett asks Who Pays the Songwriter Under First Sale Defense?

Here is my question for the day that has yet to be addressed: Who pays the artist, producer, music publisher/songwriter and yes even the record label when “promo only” copies are sold? [when the artist contract contains language like:] . . . no such royalty shall be payable with respect to promotional Phonorecords . . .

Answer: Ummm, no one pays the songwriter. The “first sale” was a giveaway, so everyone loses out. The songwriter, artist, producer, and label all trade these free copies in exchange for building interest in a product and therefore, hopefully, sell more of the product. That is the trade. And, because the number of promo copies sent out is a relatively stable number, if the product sucks then the Promo Only CDs may end up being a large percentage of existing pressings. But if the product is a winner, the Promo Only CDs will represent a miniscule amount of total pressings. The fact that having these promo copies on the resale market is not already baked into their calculations is the real disturbing part in all of this. However, I have a belief that promo copies are accounted for these in their financial projections but the labels are looking for a way to alter the underlying assumptions to help shore up declining margins from CD sales.