Circuit recently applied the first sale doctrine in a case involving free and unsolicited
promotional compact discs (CDs). The court held that because of the
distribution method, title to the promotional CDs was transferred to the
recipients, and an infringement action could not be based upon the CDs' sale
In the Ninth Circuit case, UMG Recordings had shipped
specially-produced promotional CDs to a large group of individuals, such as
music critics and radio programmers. Most of the promotional CDs bore the
This CD is the property of the
record company and is licensed to 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.
Some of the CDs also bore a more succinct statement, such as
"Promotional Use Only-Not for Sale."
Troy Augusto, who was not among the individuals receiving
the CDs, acquired numerous such CDs. He then sold the CDs through online
auctions despite the promotional statement. UMG filed a complaint against
Augusto, alleging that Augusto had infringed UMG's copyrights in CDs for which
it retained the "exclusive right to distribute."
In UMG Recordings,
Inc. v. Augusto, 2011 U.S. App. LEXIS 52 (9th Cir. Cal. Jan. 4, 2011) [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law], the Ninth Circuit applied
USCS § 109's first sale doctrine, holding that
under the circumstances, the recipients had acquired ownership and were
entitled to use or dispose of the CDs in any manner they saw fit. The
conclusion was based largely on the nature of the distribution, with the
Ninth Circuit noting that: (1) the CDs were dispatched without any prior
arrangement as to those particular copies; (2) the CDs were not numbered, and
no attempt was made to track their location and use; and (3) no license
The Ninth Circuit also refused to find a "bullying
for payment" requirement in the Unordered Merchandise Statute, 39
USCS § 3009, and rejected UMG's contention that the promotional
statements had given rise to a license.