EFF Wins Promo CD Resale Case

DJMajah writes "Universal Music Group's case against Troy Augusto, fought by the Electronic Frontier Foundation, has been dismissed by a federal judge. UMG sued Augusto, the owner of Roast Beast Music, over 26 eBay listings of promotional CDs. UMG argued that promo CDs distributed for free to radio stations, DJs and other industry insiders could not be resold; the discs usually carry a label reading 'For promotional use only, not for resale.' UMG asserted the doctrine of first sale does not apply, as the discs were not actually sold and therefore remained UMG's property. The judge ruled that the doctrine does apply because the discs were gifts. The labels indicate no expectation of their return."

The EFF sure taught the industry a lesson!

I'm sure in the future they will modify their labels to require the return of promo materials.

Go go EFF!

Re:The EFF sure taught the industry a lesson!

Let them try. If they write that on that label, they will no doubt have to prove they actually recover the CDs they send, and it's not just there to get around the other judgement. And if the CD is sent unsolicited, then they will have to pay for the return fee or expose themselves to extortion lawsuits or something. Let them try to deal with that logistic nightmare.

Re:The EFF sure taught the industry a lesson!

If the CD is sent unsolicited (through USPS at least) and they try to get it back, they get slammed for mail fraud.

That'll be a trick even for their kettle of lawyers to get out of.

Re:The EFF sure taught the industry a lesson!

And if the CD is sent unsolicited, then they will have to pay for the return fee or expose themselves to extortion lawsuits or something.

As I understand it: If it's unsolicited (and not the result of a shipping error or a fraudulent order by some third party) there is no obligation to return it, no matter what is printed on it.

Re:The EFF sure taught the industry a lesson!

Maybe.

Here's the thing:

If [insert RIAA member here] notices that I am a program director at a radio station and sends me a promo CD in the mail with my name on it, then it's mine. I can listen to it, sell it, throw it out, give it away, copy it to my iPod, dupe it for the car stereo, and set it on fire. About the only thing I can't legally do is give a copy to a third party (in violation of copyright law).

Merely receiving something in the mail does not obligate me to do anything that the sender asks. If the sender wants it returned, that's fine; they can want it all week and it'll still never happen.

I mean, imagine it if you will, AC: Suppose I sent you a CD with a label on it which said "Please return to avoid a $250,000 fine, 5 years in jail, or both." Worse, suppose such a CD gets lost in the mail.

Either way, you don't have to do a thing. Were things any other way, we'd see huge numbers of positively ugly scams circulating the USPS, where by inaction alone, simple homeowners would be victimized by their own fucking mail.

(I'm sure that one of Slashdot's resident lawyers can come up with some fancy polysyllabic Latin verbiage to exactly describe this non-problem, but for now you'll all have to grasp this concept without it having any specific title.)

Re:The EFF sure taught the industry a lesson!

postman hoc, propter hoc?

Re:The EFF sure taught the industry a lesson!

I like it!

But actually, it doesn't have a fancy latin name: it's just called "mailing of unordered merchandise". The federal statute is 39 U.S.C. 3009 [cornell.edu], and it was cited and analyzed at length in the judge's opinion (linked to from the EFF press release). The statute is designed to combat exactly this sort of scam: a company sends you something you didn't ask for, then imposes conditions on your ownership of it (like saying you can't sell it, or saying you have to pay for it).

Joe Gratz
(attorney for the defendant in UMG v. Augusto, but speaking here only for himself)

If I were to donate to any tech foundation

it would DEFINITELY be to the EFF. What heroes they are, in today's world!

Re:If I were to donate to any tech foundation

"If" ??

Why don't you donate?

Seriously, if you live in the US and you care at all about electronic freedom, then you should really do your part by helping the EFF fight the good fight. Discussing/complaining on Slashdot is great and all, but if we ever want things to change, we have to actually do something... or at least fund people who are doing something.

I donate to the EFF yearly. You should consider doing the same [eff.org].

Re:If I were to donate to any tech foundation

Even if you don't live in the US donating is a good idea. Before I joined the Canadian Forces, I made several donations to the EFF. American law, as the recently proposed copyright law here shows, tends to lead to extreme pressure on Canada to "conform to international (read American) standards". If the nastiness can be confined at the source, it has less chance of making it North. Pull the teeth on the American laws before they spread.

Re:If I were to donate to any tech foundation

We operate internationally, including in Canada -- see http://www.eff.org/issues/international [eff.org] . A large number of EFF members live outside the US and our work reflects that (there are three of us who work on these topics full time, plus three interns currently:I'm British, our international legal director is Australian; we work at groups like WIPO and arenas like the European Parliament).

As an aside, if there are any digital rights issues in your country that you think should get wider coverage, or need advice on how to tackle, or technical and logistical support, get in touch with me, [e-mail] or mail [e-mail]. It really helps us to get feedback and news from our supporters.

Re:If I were to donate to any tech foundation

(Cut and pasted from the last annual report -- mail [e-mail] if you'd like a copy, or have any questions. Guidestar is a good place to start to make comparisons with other groups)

Profit and Loss Standard - January through December, 2006

Ordinary Income/Expense

Income
Corporation Contributions $215,229.72
Event Income 57,630.10
Foundation Grants 466,858.36
Individual Major Contributions 1,423,444.26
Interest Income 18,161.86
Litigation 430,545.00
Matching Gifts 35,426.34
Membership Income 882,710.89
Combined Federal Campaign (CFC) 10,354.40
Minor Donations 9,739.50
Honorarium/Awards 1,300.00
Fiscal Sponsorship 156,225.89
Miscellaneous Income 19.50
Total Income 3,707,645.82

Expense
Salaries & Benefits 1,865,393.06
Building Expenses 192,684.57
Corporate Insurance 35,645.71
Office Expenses 153,142.46
Membership Expenses 48,258.50
Court Filing and Fees 20,557.99
Bank & Merchant Fees 31,236.87
Consultants 82,622.52
Staff & Board Enrichment 24,150.06
Travel & Entertainment 66,092.38
EFF Events 23,216.94
Grassroots Campaigning 41,868.30
Taxes 410.00
Fiscal Sponsorship Expense 189,899.23
Total Expense 2,775,178.59

Net Ordinary Income $932,467.23

Other Income/Expense

Other Income
Unrealized Gain or Loss 108,618.85
Total Other Income 108,618.85
Net Other Income 108,618.85
Net Income $1,041,086.08

2006 was a particularly good fundraising year for us. In early 2007, we
transferred $1 million of our 2006 net income into EFF's Endowment Fund
for Digital Civil Liberties, to ensure the long term sustainability of
the organization. We do not anticipate having a similar surplus of
operating funds in 2007.

And books?

Will this then apply to books who have had their cover torn off and returned to the publisher? Most of those books carry a "if the cover is missing this book cannot be resold" blurb. Booksellers who can't sell a quantity of trade paperbacks return the front cover in lieu of the entire book for a refund. It saves on shipping and the publisher doesn't want the unsold books back anyway. So would these be considered 'gifts' to the bookseller, and presumably under this ruling also viable for resale?

Re:And books?

Nope. The paperbacks didn't afterall, turn up unsolicited in the mail of the bookstore. (if they did, they WOULD be gifts)

What allows the booksellers to rip and return the cover, destruct the rest of the book and get a refund is a CONTRACT they entered into with the publisher, in this contract they promised to destruct books whose cover they return. Thus if they return covers yet fail to destruct the books they're in violation of contracts, and will be held responsible for any damages arising from that.

Re:And books?

There are two distinct situations here:

  - A bookseller signs a sales contract with terms before books are sent to said bookseller. These terms prohibit sale of books who's covers have been removed for refund. If the contract actually says "made not suitable for resale", the publisher would (successfully) argue that if any customer found the refunded book to have any value, the bookseller didn't sufficiently render it unsuitable for sale.

  - A radio station receives an unsolicited CD in the mail from a record label; the label hopes the radio station will play said CD on the air. The front of the CD says "Not for resale"

In the first case, there is a legally binding contract that the bookseller entered into requiring them to destroy the coverless book or pay the wholesale price of the book to the publisher.

In the second case, under US law the record label has used the US mail to give the CD to the radio station as a gift. The radio station is free to do whatever they want with it, as they are not bound by any contract, no matter what is printed on the outside of the disc.

Re:And books?

Will this then apply to books who have had their cover torn off and returned to the publisher? Most of those books carry a "if the cover is missing this book cannot be resold" blurb. Booksellers who can't sell a quantity of trade paperbacks return the front cover in lieu of the entire book for a refund. It saves on shipping and the publisher doesn't want the unsold books back anyway. So would these be considered 'gifts' to the bookseller, and presumably under this ruling also viable for resale?

Yes and No. Mostly No.

Think about how that process works. You buy up a bunch of inventory. You then don't sell it and want to return it to get your money back. The publisher could just say screw you, you bought it, its your problem to sell. (And that's the case with a lot of books... and why there are those bins with hard covers for $1.00 in them.)

But some publishers with some titles for a number of reasons, give you the option to return the book for full or partial credit if it doesn't sell within a time frame. Of course, they don't really want the book back and it costs a bundle to ship heavy books around so instead they simply require you to destroy the book and they compensate you. The whole 'tear off and send in the covers' is just part of the 'auditing and accounting processes' to ensure disreputable dealers don't just claim they destroyed them and ask for piles of money back while selling the books. Plus by tearing the covers off and having the disclaimer in the book it renders the books nearly worthless even if they aren't destroyed, because a) the cover is missing, and b) consumers know that someone got paid to destroy these books and now is trying to sell them.

The book seller was essentially paid to destroy and discard them, if they didn't destroy them then they are in violation of their contract and liable to be sued etc. Its no different than you contract a company to come to your office to shred your documents, and then instead they take your documents and sell them on ebay, they are in serious violation of the contract. Same deal here.

So in most cases if you came into possession of such a book it would mean that the contract was not fulfilled and the publisher could seek damages from the book seller that was supposed to have destroyed it. If you worked at a book store and just kept copies for yourself, it gets messy, those copies could legally amount to stolen, and reselling them would amount to selling stolen property. If your being paid to destroy or discard something and you keep it, the question of whether its theft or not is complicated. Normally it would be ok... like if your boss said throw that printer away and you took it home instead. But if your boss said destroy this book of customer contact and account information and you took it home instead... that would be theft.

But here the illegality has really nothing to do with the cover being missing, or the disclaimer on the book, and everything to do with the fact that the publisher paid for these books to be destroyed and they weren't.

HOWEVER. ALL THAT SAID.

If you somehow legally came into possession of a book with its cover ripped off, you can sell it. You are not bound by any contract. Nor are you bound by the disclaimer on the first page about the missing cover.

If you bought a book and then tore its cover off for example you'd still be able to sell it without question. Or if you found it on the street that would be fine.

If you pulled it out of a dumpster that would really depend on the circumstances. It would probably be legal in most cases of simple dumpster diving... but illegal theft if it were a more systematic enterprise, especially if you were involved or related to the bookstore putting them there.

Aww the EFF Won?

I'm actually a bit sad that the EFF won on this case. Because if it hadn't of been overturned, you could label "anything" as no-resale and send it to someone. Like, you know, that giant pile of bricks or the entire output of a nuclear reactor and mail it to the RIAA.

Because, with the policy they were trying to establish precedent for, you could do so, mark it as no-sale and no-disposal, and force them to build warehouses to store the random crap you send them.

Re:Aww the EFF Won?

As fun as that would be, I could see a few problems with it:

1) I'd lose my job - The warehouse would start to question why I always had my Jeep full of boxes and barrels to ship out to CA, and would complain about the shipping charges.

2) I'd be arrested - After plundering every Goodwill dropoff area (a.k.a. 'Round back') for weeks on end for used underwear and rugs that have seen more cat urine than most litter boxes.

3) The ASPCA would track me down - After stealing several monkeys, which I would train to fill buckets full of monkey semen to send to the offices of the lawyers for the RIAA. Imagine hundreds of barrels of monkey semen, all no-resale and no-disposal. Think about it.

I am.

And I need a bucket.

Finally!

Now I know what to do with all my dead monkeys! [redhat.com]

Good news

I used to work at a music store in my youth and selling promo CDs is what got me through college.

What?

The RIAA didn't walk away from the case and then try to re-sue using a different judge this time?

Re:What?

The RIAA didn't walk away from the case and then try to re-sue using a different judge this time?

They would have, but the defense slapped a sticker on the paperwork stating "not for re-trial".

Re:Sheesh.

Maybe I'm just overly hopeful, but it certainly seems to me that people in the legal system are begining to see just how ridiculous many of these 'flimsy' shrinkwrap/EULA/itsnotyoursitsreallyalicense type arguements are.

Wish in one hand...and you'll soon be washing them both

Re:Sheesh.

Not really. The music industry has pretty much tested, since its very inception, the outer bounds of what the legal system would allow.

The whole idea of "licensing" or "leasing" music rather than selling it isn't a new one. The Victrola Company attempted all sorts of shenanigans with its records, including invalidating your right to play the record if you bought it for less than $1 [natch.net] (that's from 1906!). They attempted to back this up not only with contract law, but with patents as well. Their attempts at price-fixing via this method, both on records but even more significantly on machines, went all the way to the Supreme Court [findlaw.com] ("STRAUS v. VICTOR TALKING MACH. CO. , 243 U.S. 490").

So this is really nothing new at all. It's just the music industry playing screw-the-consumer in the same manner they have always done.

Re:Please return this post ... or I'll sue you!

Often, these promotional copies aren't sent out until AFTER release. When I was a lowly music store manager, labels fell all over themselves to shower me and my staff with promotional copies of just about anything that came out. This accomplished 3 things from the labels perspective:

1. We'd use the CDs for in-store play, thus generating customer interest.
2. Word of mouth advertising from our employees.
3. Often, in exchange for free copies of the CDs, we'd let a label representative make a small in-store display of that or other recent/new/upcoming releases from that label.

I left that job with thousands of discs, which I sold at used stores for $1-$4 a piece -- nice severance package, if you can get it.

It's always struck me as funny that record companies get pissed about free music being available online, when they happily send music stores multiple free copies of nearly every new CD that comes out. I've often wondered how many tens of thousands of free copies of each major release get sent out. (I understand the logic -- quid pro quo and all that -- but it's still a strange practice.)