Ever wonder about this new thing — where someone sells you some stuff, typically something that has some sort of copyright on it, only when you take a close look it turns out they tell you, no, they didn’t really sell it to you — they only licensed it to you? Sounds pretty ridiculous, and sooner or later someone had to test it. Someone has. Jorge Espinosa reports, and I excerpt a tad too much here, but where to cut when it’s all this good?:
In an important opinion regarding the first sale doctrine, Judge James S. Otero of the United States District Court for the Central District of California has ruled in UMG Recordings v. Augusto, No. CV 07-03106 (C.D.Cal. June 10, 2008), that the first sale doctrine protects the sale of promotional music CDs originally distributed with alleged restrictive licenses.
UMG Recordings, Inc. (“UMG”) owns the copyright to numerous songs and produces CDs containing those songs. As a pre-release promotional item, UMG often creates and distributes by unsolicited mail promotional CDs which may contain different art work or songs. These promotional CDs are labeled with the following language:
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.
Augusto purchased a large collection of promotional CDs. He then sold them on the online auction site eBay as rare collectibles not available in stores. . . .
The court rejected the existence of a license and held that the sales were protected by the first sale doctrine . . . First the court analyzed the nature of the alleged license. One hallmark of a license is the owner’s intent to regain possession. In this case UMG did not intend to regain possession of the promotional disks. Another hallmark of a license is a recurring benefit to UMG from the CDs. The absence of a recurring benefit suggested a gift rather than a license. Finally, the only apparent benefit to UMG from the alleged license is to restrain trade, a purpose contrary to law and public policy. Although the promotional CDs were distributed for free, the court noted that the first sale doctrine applies after the “first authorized disposition by which title passes.” Based on these grounds, the language on the CDs did not constitute a restrictive license and its conveyance to the initial recipient exhausted UMG’s rights to the CDs.
There’s a lot more at Jorge’s blog post. The decision itself is here.
But don’t run off so fast. Sit down and enjoy this. Slow down. Smell the flowers. Now… that’s right: The “license” to the CD dumped on the recipient in the mail (and hence “accepted” by opening the mailbox!) actually said,
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.”
I’m sorry, please — one more time: Resale or transfer of possession is not allowed and may be punishable under federal and state laws.” TRANSFER OF POSSESSION IS NOT ALLOWED! Oh, brave new world, that has such blather in it!
Limitless hyperlink love and an autographed picture of LIKELIHOOD OF CONFUSION® plus a glatt kosher lunch to anyone who finds out for me the name of the law firm that charged UMG to draft that brilliant bit of overdone boilerplate.
UPDATE: More on this topic from Pamela Chestek. Unfortunately not every court is “getting” it.