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Business News (more headlines) 04-13-2008

Courtroom Showdown For EBay Seller Over Promo CD Sales

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The Electronic Frontier Foundation (EFF) and San Francisco law firm Keker & Van Nest filed briefs in federal court Monday on behalf of eBay seller Troy Augusto, defending his right to resell promotional CDs ("promo" CDs) that he buys from secondhand stores in the Los Angeles area.

Augusto, who does business as "Roast Beast Music" on eBay, was sued in May 2007 by Universal Music Group (UMG), the largest record company in the world, for 26 eBay auction listings involving UMG promo CDs. At issue is whether the "promotional use only, not for resale" labels on these CDs can trump a consumer's right to resell copyrighted materials that they own, guaranteed by copyright law's "first sale" doctrine.

For decades, major labels have distributed promo CDs for free to tastemakers and music industry insiders in an effort to create buzz for upcoming releases. These promo CDs often make their way into secondhand stores, where Augusto purchases them for resale on eBay. UMG stamps its promo CDs with labels declaring that the CDs may not be resold and remain the property of UMG. The "first sale" doctrine in copyright law, however, makes it clear that once the copyright owner sells or gives away a CD, DVD, or book, the recipient is entitled to resell it without needing further permission. The summary judgment brief filed Monday argues that UMG gives up ownership of these promo CDs when it mails them unsolicited to thousands of people without any intention of their return. Accordingly, the first sale doctrine permits purchasers to resell these CDs.

"If UMG is able to stop resale of CDs just by putting 'not for resale' labels on them, then there is nothing to stop other restrictive labels from appearing on CDs, books, and DVDs," said EFF Senior Intellectual Property Attorney Fred von Lohmann. "Record companies are not entitled to strip consumers of their first sale rights simply by putting labels on their products."

A hearing on the motion for summary judgment is expected in early May 2008.

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