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Federal judge OKs sale of promo CDs

promotional CDs legel to sell on eBay federal court rules Show of hands: how many of you have bought a used CD or DVD stamped "Not for Sale/Promotional Use Only"? Tuesday, a federal judge issued what appears to be the first ringing defense of the promo market, rejecting Universal Music Group's lawsuit against someone who sold promo CDs on eBay. UMG claimed that, as the CD cases clearly stated, the promotional discs were merely "licensed" to their recipients. The license agreement barred the discs from being sold, so when defendant Troy Augusto peddled the CDs, he violated UMG's copyrights (specifically, the company's exclusive right to distribute the works). But U.S. District Judge S. James Otero in Los Angeles held that UMG gave up ownership of the CDs when it mailed them to reviewers, publicists and other industry insiders with no expectation that they would be returned. As a consequence, Otero ruled, Augusto was the rightful owner of the discs, and under the "first sale" doctrine, he was entitled to sell them (provided that he didn't keep a copy). And no, Otero ruled, the fact that the CDs were sent out as gifts doesn't affect the recipients' right to sell them.

It's an important ruling, and not just for used CD buyers. It adds weight to the growing body of case law holding that companies can't stop buyers of copyrighted products from reselling them. Just last month, for example, a federal judge in Washington state rejected a lawsuit by Autodesk against someone selling used copies of AutoCAD software on eBay. And for Augusto, who was represented by lawyers from the EFF and Keker & Van Nest, it should mean a respite from record company litigation. Universal , in fact, was the second of the four major record companies to sue. He had agreed to a consent judgment with EMI in 2004, but when Universal sued last year, he figured it was time to put up a fight in court. Looks like he was right.

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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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