Summary
The Ninth Circuit held that UMG Recordings' unsolicited distribution of promotional CDs transferred ownership of the copies to the recipients, despite restrictive promotional language on the discs. Because the recipients owned the copies, the first sale doctrine permitted subsequent resale without UMG's authorization. The court affirmed the district court's summary judgment for Troy Augusto.
Questions Presented
- Whether UMG's unsolicited distribution of promotional CDs transferred ownership of the particular copies to the recipients for purposes of the first sale doctrine.
- Whether the restrictive statements on the promotional CDs created licenses rather than transfers of ownership.
- Whether the recipients' rights under the Unordered Merchandise Statute supported treating the CDs as gifts and disposing of them freely.
Holdings
- UMG's distribution of the unsolicited promotional CDs effected a transfer of title or ownership to the recipients, qualifying as a sale or gift under the first sale doctrine.
- The promotional statements did not create licenses restricting the recipients' ownership or resale of the CDs.
- The Unordered Merchandise Statute confers disposal rights on the original recipients, not directly on Augusto, but the recipients' statutory rights demonstrated that the CDs were transferred as gifts or owned copies rather than licensed property.
Factual background
UMG mailed unsolicited promotional CDs containing copyrighted sound recordings to selected music critics, radio programmers, and others without prior agreement or payment. The CDs bore restrictive statements asserting that they remained UMG property and were licensed for personal promotional use only, with resale or transfer prohibited. Augusto, who was not an intended recipient, acquired numerous promotional CDs from other sources and sold eight of them through online auctions. The material facts were undisputed.
Procedural history
UMG sued Augusto in the United States District Court for the Central District of California, alleging that his resale of promotional CDs infringed UMG's exclusive distribution right. The district court granted summary judgment in favor of Augusto. The Ninth Circuit had appellate jurisdiction under 28 U.S.C. § 1291 and affirmed.