Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

تمرين 8

UMG Recordings, Inc. v. Augusto
United States Court of Appeals, Ninth Circuit, 628 F.3d 1175 (2011).
FACTS Universal Music Group (UMG) is the world's largest music company. It is made up of two core businesses-music recording and music publishing. UMG regularly ships specially produced promotional CDs to individuals such as music critics and radio programmers. The recipients have neither requested nor agreed to receive the CDs, and UMG does not receive payment for them. The CD labels state that the CDs are "the property of the record company," "licensed to the intended recipient," and for "Promotional Use Only-Not for Sale." Troy Augusto managed to obtain some of these promotional CDs from various sources and later sold them through online auction sites, such as eBay. After making several unsuccessful attempts to halt the auctions through eBay's dispute-resolution program, UMG filed a complaint in a federal district court alleging that Augusto had infringed UMG's copyrights. Augusto asserted that UMG's initial distribution of the CDs effectively transferred ownership of the CDs to the recipients. Thus, his resales were permitted under the first sale doctrine. UMG argued that the statements on the CD's labels and the circumstances of their distribution granted only a license to each recipient, not a transfer of ownership. The district court granted summary judgment in favor of Augusto, and UMG appealed.
ISSUE Did UMG, by sending promotional CDs to individuals in the music industry, lose its right to control further distribution of the CDs under the first sale doctrine?
DECISION Yes. The federal appellate court held that UMG had conveyed title of the copyrighted promotional CDs to the recipients rather than simply creating licenses.
REASON The court examined the nature and circumstances of UMG's distribution in determining that the recipients had acquired ownership of the CDs. "The promotional CDs are dispatched to the recipients without any prior arrangement as to those particular copies. The CDs are not numbered, and no attempt is made to keep track of where particular copies are or what use is made of them." Under the first sale doctrine, a copyright owner who transfers title in a particular copy to another cannot prevent resale of that copy. In addition, "although UMG places written restrictions in the labels of the CDs, it has not established that the restrictions on the CDs create a license agreement." Because there was no indication that the recipients had agreed to a license, no license was created. The court, therefore, affirmed the district court's order dismissing the copyright infringement action against Augusto.
FOR CRITICAL ANALYSIS-Social Consideration What would be the implications for society if the first sale doctrine did not exist?