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UMG Recordings, Inc. v. Augusto - 628 F.3d 1175 (9th Cir. 2011)

Rule:

Notwithstanding its distinctive name, the first sale doctrine applies not only when a copy is first sold, but when a copy is given away or title is otherwise transferred without the accouterments of a sale. The "sale" embodied in the first sale concept is a term of art. Once a copyright owner places a copyrighted item in the stream of commerce, he has exhausted his exclusive statutory right to control its distribution.

Facts:

UMG Recordings produced compact discs (CDs) of copyrighted sound recordings and sent them unsolicited to music critics, radio disc jockeys, and other recipients for promotional purposes. Troy Augusto obtained some of the CDs from various sources and sold them at auction. UMG argued that Augusto infringed its exclusive right to distribute the discs. The district court granted summary judgment in favor of Augusto. UMG appealed.

Issue:

Can UMG still claim exclusive right to distribute the discs of copyrighted sound recordings it sent to music critics, radio disc jockeys, and other recipients for promotional purposes?

Answer:

No

Conclusion:

The court of appeals held that the mailing of the CDs to the recipients effected a sale for purposes of the first sale doctrine under 17 U.S.C.S. § 109(a). Although the owner placed written restrictions on the CD labels, the restrictions did not create a license agreement. Because the CDs were unordered merchandise, the recipients could dispose of them as they saw fit under the Unordered Merchandise Statute, 39 U.S.C.S. § 3009. The effect of § 3009 was to render the recipients owners, not licensees, for purposes of the first sale defense. Also, there was no showing that the recipients agreed to enter into a license agreement when they received the CDs. The owner's transfer of possession to the recipients without meaningful control or knowledge of the status of the CDs after shipment amounted to a transfer of title, and further sale was permissible without the owner's authorization.

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