## Facts

- UMG, a copyright owner of numerous sound recordings, mailed specially-produced “promotional” CDs to music-industry recipients for marketing.
- The CDs bore legends such as “Promotional Use Only—Not for Sale,” and asserted the discs remained UMG’s property and were “licensed” for personal use with resale forbidden.
- UMG sent the CDs unsolicited, without negotiated agreements, without requiring return, and without tracking recipients’ use or transfers.
- Troy Augusto, not an original recipient, acquired multiple promotional CDs through secondary channels (including used stores and online purchases) and resold them on eBay.
- UMG sued for copyright infringement, alleging Augusto’s sales violated UMG’s exclusive distribution right under 17 U.S.C. § 106(3).
- Augusto asserted the first sale doctrine under 17 U.S.C. § 109(a), contending the initial distribution transferred ownership of the physical copies.

## Issues

1. Whether UMG’s distribution of unsolicited promotional CDs transferred ownership of those copies to recipients, permitting downstream resale under 17 U.S.C. § 109(a) without infringing 17 U.S.C. § 106(3).
2. Whether the “licensed/not for sale” legends and surrounding circumstances created a binding license that preserved UMG’s ownership and barred resale.
3. What effect 39 U.S.C. § 3009 (unordered merchandise) has on recipients’ right to treat unsolicited mailed CDs as gifts and dispose of them.

## Decision

- The Ninth Circuit affirmed summary judgment for Augusto.
- The court held UMG’s unsolicited distribution of the promotional CDs transferred title to recipients; the recipients were “owners” of their particular copies for § 109(a) purposes.
- The legends on the discs did not create a license because they were unilateral assertions without recipient assent and without meaningful continuing control by UMG.
- Because recipients could treat the unsolicited CDs as gifts under 39 U.S.C. § 3009, they could retain and dispose of the discs, supporting ownership rather than licensing.
- Augusto’s resale of lawfully made copies was protected by the first sale doctrine, defeating UMG’s infringement claim as a matter of law.

## Legal Principles

- 17 U.S.C. § 109(a) limits the copyright owner’s § 106(3) distribution right by allowing the owner of a lawfully made copy to sell or otherwise dispose of that copy without authorization.
- Labels stating “not for sale” or “licensed” do not, by themselves, establish a binding license; mutual assent and continuing restrictions consistent with a true licensing arrangement matter.
- A transfer of ownership for first-sale purposes can occur without payment; a gift may transfer title sufficient to trigger § 109(a).
- Under 39 U.S.C. § 3009, recipients of unsolicited mailed merchandise may treat it as a gift and dispose of it, which is inconsistent with the sender’s claim of retained ownership in the mailed item.

## Conclusion

The court held that unsolicited promotional CDs mailed without assent-based license terms or ongoing control are owned by recipients, making downstream resale lawful under the first sale doctrine despite “not for sale” legends.


UMG Recordings, Inc. v. Augusto, 628 F.3d 1175 (9th Cir. 2011)