The recent UMG v. Augusto decision by the Ninth Circuit Court of Appeals provided consumer copyright advocates with plenty of reasons to celebrate. But before popping the last bottle of champagne, it would be prudent to wait and see the extent to which, if at all, the court uses UMG to limit Vernor v. Autodesk’s effect.
In UMG, the court held record companies that mail promotional CDs to radio stations, even if labeled “Promotional Use Only—Not for Sale,” may not retain ownership or licensing rights to those CDs without first requiring the recipient to agree to any use conditions. Consequently, the recipient of the CDs retains unfettered ownership, and thus may successfully invoke the “First Sale” doctrine in response to a copyright infringement claim, should the recipient later decide to sell the goods.
This decision is receiving praise by music lovers because it is said to free promotional CDs from the shadow of copyright infringement claims. Sounds great for consumers.
Unfortunately, lost in the celebration is the Ninth Circuit’s prior decision in Vernor v. Autodesk, which has the potential to limit UMG’s effect.
Vernor held, inter alia, that the recipient of the copyrighted material, in this case software, obtains a mere license if the the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use restrictions.” Vernor found that the defendant received only a license, thus he never obtained ownership, precluding him from invoking the “First Sale” doctrine. Consequently, upon selling the CDs, the defendant committed copyright infringement.
UMG didn’t overrule Vernor; rather it distinguished the two cases based on UMG’s method of distribution conveyed ownership to its recipients. UMG gave the material away unconditionally, in such a way that constituted a gift, whereas Vernor transferred the property subject to specific conditions, specifically that the user not resell the software. As a result, in UMG, the owner received ownership of the goods while in Vernor the recipient received only a license to use the goods.
Accordingly, we should wait and see how the Ninth Circuit interprets the two holdings, focusing primarily on the relative scope of each decision. For copyright consumers, while UMG is a step in the right direction, a broad interpretation of Vernor could undermine the momentum UMG generated.