Music Critics Rejoice! Appeals Court Ruling Says Promotional CDs Can Be Resold

A key ruling finds in favor of music journalist Troy Augusto who was sued by Universal Music Group for selling promos on eBay.

Promotional CD owners are free to thin out their collections without fear of reprisal. On Tuesday the U.S. Court of Appeals for the 9th Circuit court held up a lower court's ruling that confirmed the right to sell promotional CDs. The case pitted the world's largest record label against a guy selling CDs on eBay.

The Electronic Frontier Foundation, which along with Durie Tangri LLP represented the defendant, posted the decision on its website.
The case of UMG Recordings v. Troy Augusto centered on Augusto's sale of eight promotional CDs on eBay. UMG argued that the sale of its promotional CDs were prohibited. It pointed to a promotional statement affixed to the promotional CDs that inform the recipient that the CD is the property of UMG and has been licensed to the recipient for personal use. Augusto argued that UMG had transferred ownership of the CDs and under the first-sale doctrine he was free to resell the CDs.
The appeals court ruled that UMG transferred ownership of its promotional CDs and noted that UMG did not maintain control of CDs after they were mailed out and did not require recipients to agree to the terms of conditions given on the promotional statement. And that's the gist of promotional CD mailings. While some copies are specifically requested, most arrive in the mail unsolicited and with no request to acknowledge the conditions outlined on the packaging.
The timing of this ruling is notable because promotional CDs are disappearing. One reason is smaller mailing lists. Retailers and music critics exist in smaller numbers today than in the past. Another reason is the record industry's adoption of digital technology to send promotional music. Labels often use professional services like My Play MPE to securely send advance music. Many publicists use free file-hosting sites and simply send out links in emails. Digital distribution eliminates postage expense and reduces waste from disposed mailing materials.