BROOKE GLADSTONE: This is On the Media. I'm Brooke Gladstone. BOB GARFIELD: And I'm Bob Garfield. A few months ago, Universal Music Group, the biggest of the four record labels, filed suit in federal court against California resident Troy Augusto. Augusto makes a living buying collectable CDs, mostly rare promotional copies, and then reselling them on eBay. Universal, however, has argued that it still owns those CDs and Augusto isn't authorized to sell them.
Fred von Lohmann is a senior attorney with the Electronic Frontier Foundation and is defending Augusto. He says the lawsuit strikes at the very heart of what's called the First Sale Doctrine, which was established a century ago by the Supreme Court in Bobbs-Merrill Company versus Straus. FRED von LOHMANN: It involved a novel entitled The Castaways. This is back in 1908. In New York City, Macy's was selling the novel for 89 cents a copy. And this upset the publisher, who wanted a minimum price of one dollar a copy in all of their retail channels.
And there was a law suit, and Macy's said, hey, we bought the book from a wholesaler fair and square, and if we want to discount it, that's our business, and the copyright owner doesn't have control of that.
And the Supreme Court ultimately agreed, and said the copyright owner cannot control further sales or lending or other disposition of a novel, or, in today's parlance, a compact disc or any other copyrighted work, once ownership has passed out of the copyrighter owner's hands into the hands of someone who purchased or otherwise lawfully acquired it. BOB GARFIELD: Now, I gather that the name First Sale Doctrine can be itself misleading, because the law applies not only to copyright items that are sold but to those that are given away. FRED von LOHMANN: That's right. In 1984, there was a case involving a former Walt Disney employee who had worked for the company for many years and while working for the company was given a number of animation cels for famous Disney cartoons. And after he retired, and, I think, after he passed away, he ultimately decided to sell those cels. And Disney tried to stop him, claiming that hey, those were gifts. Disney continues to own them. The First Sale Doctrine does not apply. And the court rejected that and said, no, the First Sale Doctrine, despite its somewhat misleading name, applies whether the copyright owner sold it or whether they gave it away.
And, of course, in the case of promotional CDs that's exactly what the record labels, including Universal, are up to. They give away thousands of copies of these discs to tastemakers, magazines, radio stations and the like. BOB GARFIELD: And, in fact, I should, as a matter of full disclosure, point out that On the Media gets quite a number of these things which we, for the most part, take to a used-book store and sell so we can give going-away parties to departing [LAUGHING] staffers. FRED von LOHMANN: Don't tell Universal!
BOB GARFIELD: So who knows if we're next in the litigation machine? But tell me exactly what Troy Augusto was doing that so got under the skin of the Universal Music Group? FRED von LOHMANN: Troy Augusto makes his living basically doing the age-old thing. He buys low and he sells high. He goes to Los Angeles-area record stores, he finds CDs that he recognizes as being collectable, valuable to a certain set of fans, picks those up and resells them on eBay for, he hopes, a profit.
And it appears that major record labels, not just Universal — they object to certain promotional CDs being resold. For those auctions on eBay, the labels will send notices to eBay to try to stop those auctions. And Mr. Augusto has, to his credit, stood up for his rights and said, hey, I'm entitled to sell these. I own them. I bought them fair and square. You guys gave them away. The First Sale Doctrine ought to apply. BOB GARFIELD: If he were not to just resell the physical CD but to take it home to his computer, copy it and then sell the digital file electronically not just to one person but to tens of people or hundreds or thousands, would you be in this case in his support? FRED von LOHMANN: I don't think so. That would be a very different circumstance. And the First Sale Doctrine does not apply to additional copies that you make. Very simply put, if you buy a CD, you should be allowed to resell that CD or to give that CD away. Under both copyright law, and, I think, common sense, that's a very different proposition than making additional copies of your own, and the law does recognize that as an important difference.
BOB GARFIELD: Let's just say that Universal Music Group should prevail in this case and the First Sale precedent should be overturned. I'm assuming that the implications are far greater than Troy Augusto's ability to cobble out a living. FRED von LOHMANN: That's exactly right. If Universal here is able to trump the First Sale Doctrine by putting a little label on a product that says "For promotional use only, not for resale," then I think you're going to see a lot of copyright owners try to do the same kind of thing. You're going to see labels that say, "This book not for use in libraries, for personal reading only." You're going to see labels on DVDs that say, "This DVD not for video rental, for home use only."
The American Association of Publishers, I think, really puts the point on this. They represent book publishers in the United States and they have always had an uneasy relationship with libraries because they feel that librarians buy books and then they give them out, loan them for free.
That has led Pat Schroeder, the head of the association, to say that they have, quote, "serious issues with libraries," unquote. And one of their spokespeople, back in 2001, compared some in the library community to Ruby Ridge and Waco-style terrorists.
So First Sale is incredibly important if you believe in things like libraries and used-book stores. BOB GARFIELD: All right, Fred. Thank you so much for joining us. FRED von LOHMANN: My pleasure.
BOB GARFIELD: Fred von Lohmann is the senior intellectual property attorney with the Electronic Frontier Foundation.