Source: https://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2
Timestamp: 2017-11-22 11:11:25
Document Index: 542503815

Matched Legal Cases: ['§ 101', '§ 106', '§ 109', '§ 117', '§ 410', '§ 501', '§ 202', '§ 202', '§ 101', '§ 106', '§ 106', '§ 13', '§ 410', '§ 106', '§ 202', '§ 13', '§ 106', '§ 202', '§ 109', '§ 109', '§ 109', '§ 109', '§ 109', '§ 109', '§ 13', '§ 13', '§ 3', '§ 195', '§ 3', '§ 195', '§ 117', '§ 117']

Plaintiff UMG Recordings, Inc.'s Notice of Motion & Motion for Partial Summary Judgment on Liability on Complaint | UMG v Augusto | Electronic Frontier Foundation - JDSupra
This is UMG's Notice of Motion & Motion for Partial Summary Judgment as to the issue of Copyright Liability.
Mitchell Silberberg & Knupp LLP 1 2 3 4 5 6789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 1798090.1 RUSSELL J. FRACKMAN (SBN 49087) rjf@msk.com KARIN G. PAGNANELLI (SBN 174763) kgp@msk.com AARON M. WAIS (SBN 250671) amw@msk.com MITCHELL SILBERBERG & KNUPP LLP 11377 West Olympic Boulevard Los Angeles, California 90064-1683 Telephone: (310) 312-2000 Facsimile: (310) 312-3100 Attorneys for Plaintiff UMG RECORDINGS, INC. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA UMG RECORDINGS, INC., a Delaware corporation, Plaintiff, v. TROY AUGUSTO d/b/a ROAST BEAST MUSIC COLLECTABLES AND ROASTBEASTMUSIC, an individual; and DOES 1 through 10, inclusive, Defendants. AND RELATED COUNTERCLAIM. CASE NO. 2:07 CV 3106 SJO (AJWx) The Honorable S. James Otero PLAINTIFF UMG RECORDINGS, INC.’S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT ON LIABILITY ON COMPLAINT DATE: May 5, 2008 TIME: 10:00 a.m. CTRM.: 880 (Declarations of Kathleen Strouse, David Benjamin, Mark McDevitt, Tegan Kossowicz and Russell J. Frackman, and related documents, filed concurrently herewith) Ca$ssee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 11 ooff 2255 J. FRACKMAN (SBN 49087) r f@com V RIN G. PAGNANELLI (SBN 174763) com M. WAIS (SBN 250671) amw aimsk.SILBERBERG & KNUPP LLP Boulevard C liornia 90064-1683 31a0) 2000 3100 for Plaintiff RECORDINGS, INC. STATES DISTRICT COURT DISTRICT OF CALIFORNIA RECORDINGS, INC., a Delaware NO. 3106 SJO (AJWx) S. James Otero UMG RECORDINGS, v. INC.'S NOTICE OF MOTION AND FOR PARTIAL AUGUSTO d/b/a ROAST JUDGMENT ON MUSIC COLLECTABLES ON COMPLAINT ROASTBEASTMUSIC, an and DOES 1 through 10, May 5, 2008 of Kathleen Strouse, David Mark McDevitt, Tegan RELATED COUNTERCLAIM. and Russell J. Frackman, and filed concurrently SMilbitceherlbl erg &Kn 2up p8 LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 1 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 1798090.1 TO: DEFENDANT AND HIS COUNSEL OF RECORD: PLEASE TAKE NOTICE that on May 5, 2008, at 10:00 a.m., or as soon thereafter as the matter may be heard, in Courtroom 880 located at 255 East Temple Street, Los Angeles, California 90012, Plaintiff UMG Recordings, Inc., will and hereby does move, pursuant to Rule 56 of the Federal Rules of Civil Procedure, for partial summary judgment on liability determining that defendant Troy Augusto is liable for copyright infringement. This motion is based upon the grounds that there is no triable issue of fact on defendant’s liability for copyright infringement, and is based upon this Notice, the Memorandum of Points and Authorities in Support of this Motion, the Declarations of Kathleen Strouse, David Benjamin, Mark McDevitt, Tegan Kossowicz, and Russell J. Frackman, and the Request for Judicial Notice, all filed concurrently herewith, all pleadings and papers on file in this matter, and oral argument. Plaintiff has complied with Local Rule 7-3. See Declaration of Russell J. Frackman at ¶ 2. DATED: April 7, 2008 RUSSELL J. FRACKMAN KARIN G. PAGNANELLI AARON M. WAIS MITCHELL SILBERBERG & KNUPP LLP By: /s/Russell J. Frackman Russell J. Frackman Attorneys for Plaintiff UMG RECORDINGS, INC. Cassee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 22 ooff 2255 DEFENDANT AND HIS COUNSEL OF RECORD: TAKE NOTICE that on May 5, 2008, at 10:00 a.m., or as soon may be heard, in Courtroom 880 located at 255 East Temple California 90012, Plaintiff UMG Recordings, Inc., will and pursuant to Rule 56 of the Federal Rules of Civil Procedure, for summary judgment on liability determining that defendant Troy Augusto is for copyright infringement. is based upon the grounds that there is no triable issue of fact on defendant's liability for copyright infringement, and is based upon this Notice, the of Points and Authorities in Support of this Motion, the Declarations Strouse, David Benjamin, Mark McDevitt, Tegan Kossowicz, and and the Request for Judicial Notice, all fled concurrently all pleadings and papers on fle in this matter, and oral argument. has complied with Local Rule 7-3. See Declaration of Russell J. at ¶ 2. April 7, 2008 J. FRACKMAN G. PAGNANELLI M. WAIS SILBERBERG & KNUPP LLP J. Frackman for Plaintiff RECORDINGS, INC. & LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP i 1 2 34 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 TABLE OF CONTENTS PAGE INTRODUCTION..................................................................................................1 I. SUMMARY OF RELEVANT FACTS.........................................................1 II. AUGUSTO HAS INFRINGED UMG’S EXCLUSIVE DISTRIBUTION RIGHTS IN ITS COPYRIGHTED SOUND RECORDINGS. ...........................................................................................5 III. THE FIRST SALE AFFIRMATIVE DEFENSE CANNOT SHIELD AUGUSTO’S SALES OF THE UMG PROMO CDs. ...................8 A. The First Sale Defense is a Limited Affirmative Defense On Which Augusto Bears The Burden of Proof..................................8 B. In Any Event, The First Sale Defense Cannot Apply To The Licensed UMG Promo CDs....................................................... 13 CONCLUSION .................................................................................................... 19 Cassee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 33 ooff 2255 OF CONTENTS INTRODUCTION ... 1. OF RELEVANT FACTS ... HAS INFRINGED UMG'S EXCLUSIVE RIGHTS IN ITS COPYRIGHTED SOUND RECORDINGS ... FIRST SALE AFFIRMATIVE DEFENSE CANNOT AUGUSTO'S SALES OF THE UMG PROMO CDs ... Sale Defense is a Limited Affrmative Defense Augusto Bears The Burden of Proof ... Event, The First Sale Defense Cannot Apply To UMG Promo CDs ... ... SMilbitceherlbl erg &Kn 2up p8 LLP 1 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP ii 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 TABLE OF AUTHORITIES CASES PAGE A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001) ......................................................................5 Adobe Sys, Inc. v. One Stop Micro, Inc., 84 F. Supp. 2d 1086 (N.D. Cal. 2000) ............................................ 14, 16, 17 Adobe Systems Inc. v. Stargate Software, Inc., 216 F. Supp. 2d 1051 (N.D. Cal. 2002) ................................................ 17, 18 American Int’l Pictures v. Foreman, 576 F.2d 661 (5th Cir. 1978) .................................................................. 9, 18 Arizona Cartridge Remanufacturers Assn. v. Lexmark Int’l, Inc., 421 F.3d 981 (9th Cir. 2005) ...................................................................... 15 Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994) ................................................................................... 10 DSC Comm’n Corp. v. Pulse Comm’n, Inc., 170 F.3d 1354 (Fed. Cir. 1999)................................................................... 16 Hotaling v. Church of Jesus Christ of Latter-Day Saints, 118 F.3d 199 (4th Cir. 1997) .................................................................... 5, 7 ISC-Bunker Ramo Corp. v. Altech, Inc., 765 F. Supp. 1310 (N.D. Ill. 1990) ....................................................... 18, 19 Los Angeles News Serv. v. Conus Commc’n Co., 969 F. Supp. 579 (C.D. Cal. 1997)................................................................5 MAI Sys Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993) ...................................................................... 16 Major League Baseball Promotion v. Colour-Tex, 729 F. Supp. 1035 (D. N.J. 1990) ............................................................... 18 Marisa Christina, Inc. v. Bernard Chaus, Inc., 808 F. Supp. 356 (S.D.N.Y. 1992)................................................................5 Matlow v. Solomon, No. Civ. 04-6109-HO, 2005 WL 309976 (D. Or. Feb . 7, 2005)...................6 Cassee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 44 ooff 2255 OF AUTHORITIES MRecords, Inc. v. Napster, Inc., 1004 (9th Cir. 2001) ... v. One Stop Micro, Inc., 1086 (N.D. Cal. 2000) ... v. Stargate Sofware, Inc., 2d 1051 (N.D. Cal. 2002) ... Int'l Pictures v. Foreman, (5th Cir. 1978) ... Cartridge Remanufacturers Assn. v. Lexmark Int'l, Inc., 981 (9th Cir. 2005) ... v. Acuf-Rose Music, Inc., 569 (1994) ... Comm 'n Corp. v. Pulse Comm 'n, Inc., (Fed. Cir. 1999) ... v. Church of Jesus Christ of Latter-Day Saints, 4th Cir. ... 5,7 ]SC-Ramo Corp. v. Altech, Inc., 1310 (N.D. 111. ... News Serv. v. Conus Commc'n Co., 579 (C.D. Cal. 1997) ... Sys Corp. v. Peak Computer, Inc., (9th Cir. 1993) ... League Baseball Promotion v. Colour-Tex, 1035 (D. N.J. 1990) ... Christina, Inc. v. Bernard Chaus, Inc., 356 (S.D.N.Y. 1992) ... v. Solomon, & Civ. 04-6109-HO, 2005 WL 309976 (D. Or. Feb. 7, 2005) ... LLP 11 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP iii 1 23 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Meridian Project Systems, Inc. v. Hardin Construction Co., LLC, 426 F. Supp. 2d 1101 (E.D. Cal. 2006) ................................................. 16, 18 Microsoft Corp. v. Software Wholesale Club, Inc., 129 F. Supp. 2d 995 (S.D. Tex. 2000) .................................................. 13, 18 Microsoft v. Harmony Computers & Electronics, 846 F. Supp. 208 (E.D.N.Y. 1994).................................................. 10, 13, 18 NCR Corp. v. A T M Exchange, Inc., 2006 U.S.Dist. LEXIS 30296, 81 U.S.P.Q.2d 1216 (S.D.Ohio May 17, 2006) ............................................................................................ 13 Novell, Inc. v. Unicom Sales, Inc., 2004 Copr. L. Dec. ¶ 28,900, No. C-03-2785 MMC, 2004 WL 1839117 (N.D. Cal. August 17, 2004) .................................................. 10, 17 Parfums Givenchy, Inc. v. C&C Beauty Sales, Inc., 832 F. Supp. 1378 (C.D. Cal. 1993), aff’d, 38 F.3d 477 (9th Cir. 1994) .................................................................................................... 14, 19 Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007) .................................................................. 5, 6 ProCD, Inc., v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996) ...................................................................... 15 Register.com, Inc. v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004) ....................................................................... 15 S.O.S. v. Payday, Inc., 886 F.2d 1081 (9th Cir. 1989) .................................................................... 17 SoftMan Products Co. v. Adobe Systems, Inc., 171 F. Supp. 2d 1075 (C.D. Cal. 2001)....................................................... 18 Storm Impact, Inc. v. Software of Month Club, 13 F. Supp. 2d 782 (N.D. Ill. 1998) ............................................................ 15 Universal City Studios Prods. LLLP v. Bigwood, 441 F. Supp. 2d 185 (D. Me. 2006) ..............................................................6 Wall Data v. Los Angeles County Sheriff’s Department, 447 F.3d 769 (9th Cir. 2006) ................................................................ 16, 17 Cassee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 55 ooff 2255 Project Systems, Inc. v. Hardin Construction Co., LLC, 2d 1101 (E.D. Cal. 2006) ... Corp. v. Sofware Wholesale Club, Inc., 995 (S.D. Tex. 2000) ... v. Harmony Computers & Electronics 208 (E.D.N.Y. 1994) ... v. A TM Exchange, Inc., S.Dist. LEXIS 30296, 81 U.S.P.Q.2d 1216 (S.D.Ohio 17, 2006) ... Inc. v. Unicor Sales, Inc., L. Dec. ¶ 28,900, No. C-03-2785 MMC, 2004 WL D. Cal. August 17, 2004) ... Givenchy, Inc. v. C&C Beauty Sales, Inc., 1378 (C.D. Cal. 1993), aff d, 38 F.3d 477 (9th Cir. ... 10, Inc. v. Amazon.com, Inc., (9th Cir. 2007) ... Inc., v. Zeidenberg, (7th Cir. 1996) ... com, Inc. v. Verio, Inc., 393 (2d Cir. 2004) ... S v. Payday, Inc., (9th Cir. 1989) ... Products Co. v. Adobe Systems, Inc., 1075 (C.D. Cal. 2001) ... Inc. v. Sofware of Month Club, (N.D. Ill. 1998) ... City Studios Prods. LLLP v. Bigwood, 2d 185 (D. Me. 2006) ... v. Los Angeles County Sherif's Department, 769 (9th Cir. 2006) ... Silberberg & 2 8 LLP 111 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP iv 1 23 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Wildlife Internationale, Inc. v. Clements, 591 F. Supp. 1542 (S.D. Ohio 1984).............................................................6 STATUTES 17 U.S.C. § 101 ......................................................................................................1 17 U.S.C. § 106(3)..................................................................................................5 17 U.S.C. § 109 .................................................................................................. 8, 9 17 U.S.C. § 117 .................................................................................................... 16 17 U.S.C. § 410 ......................................................................................................5 17 U.S.C. § 501 ......................................................................................................5 37 C.F.R. § 202.3(h)(3)(A) .....................................................................................5 OTHER AUTHORITIES Corbin On Contracts (1993) ................................................................................. 15 M. & D. Nimmer, Nimmer On Copyright (2006) ...................................................5 Witkin, Summary of California Law (10th ed. 2005)............................................ 15 W.F. Patry, Patry On Copyright (2008) ................................................................ 13 Cassee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 66 ooff 2255 Internationale, Inc. v. Clements, 1542 (S.D. Ohio 1984) ... 101 ... 106(3) ... 109 ... 117 ... 410 ... 501 ... § 202.3(h)(3)(A) ... AUTHORITIES On Contracts (1993) ... & D. Nimmer, Nimmer On Copyright (2006) ... Summary of California Law (10th ed. 2005) ... Patry, Patry On Copyright (2008) ... SMilbitceherlbl erg &Kn 2up p8 LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 1 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 1798090.1 INTRODUCTION This copyright infringement action was commenced by UMG Recordings, Inc. (“UMG”) against defendant Troy Augusto d/b/a Roastbeast Music Collectibles (“Augusto”) because Augusto was offering for sale, selling, and distributing over eBay, UMG’s copyrighted sound recordings without consent or authorization. Augusto counterclaimed, claiming that UMG’s notices of infringement to eBay materially misrepresented that his conduct was infringing. This motion seeks partial summary judgment on the issue of Augusto’s liability on UMG’s complaint for copyright infringement. Because Augusto infringed UMG’s copyrights and because UMG’s notices of infringement were accurate and sent in good faith, UMG concurrently moves for summary judgment on Augusto’s counterclaim. (The only remaining issue is UMG’s remedies on its complaint.)1 I. SUMMARY OF RELEVANT FACTS UMG is a record company that, under various labels including Interscope, Island Def Jam, Geffen, and Universal, creates, manufactures, and sells phonorecords embodying its copyrighted sound recordings.2 SUF 1. In addition to the commercial recordings UMG sells to the public, UMG (like other record companies) licenses a small number of “promotional” CDs to select individuals, often before a commercial release to the public of a full album, for purposes of promoting and advertising that commercial release. SUF 2. These individuals are in or associated with the music business, such as reviewers, disc jockeys, and radio stations, and are in a position to generate interest in UMG’s commercial recordings among the consuming public. SUF 3. Promotional CDs differ from the commercial 1 Although the legal issues and arguments in the two motions are discrete, for convenience the “Summary of Relevant Facts” is included in both motions. Phonorecords are “material objects in which sounds … are fixed.” 17 U.S.C. § 101. CDs are phonorecords. Sound recordings are “works that result from the fixation of a series of musical … sounds.” Id. The recorded performances embodied on phonorecords are sound recordings. Cassee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 77 ooff 2255 infringement action was commenced by UMG Recordings, ("UMG") against defendant Troy Augusto d/b/a Roastbeast Music Collectibles ("Augusto") because Augusto was offering for sale, selling, and distributing over UMG's copyrighted sound recordings without consent or authorization. counterclaimed, claiming that UMG's notices of infringement to eBay misrepresented that his conduct was infringing. This motion seeks partial judgment on the issue of Augusto's liability on UMG's complaint for infringement. Because Augusto infringed UMG's copyrights and because UMG's notices of infringement were accurate and sent in good faith, UMG moves for summary judgment on Augusto's counterclaim. issue is UMG's remedies on its complaint.)' 1. OF RELEVANT FACTS is a record company that, under various labels including Interscope, Def Jam, Geffen, and Universal, creates, manufactures, and sells embodying its copyrighted sound recordings.2 In addition to recordings UMG sells to the public, UMG (like other record licenses a small number of "promotional" CDs to select individuals, a commercial release to the public of a full album, for purposes of and advertising that commercial release. SUF 2. These individuals are associated with the music business, such as reviewers, disc jockeys, and radio a position to generate interest in UMG's commercial recordings public. SUF 3. Promotional CDs differ from the commercial ' the legal issues and arguments in the two motions are discrete, for the "Summary of Relevant Facts" is included in both motions. 2 "material objects in which sounds ... are fxed." CDs are phonorecords. Sound recordings are "works that result from the of a series of musical ... sounds." Id. The recorded performances & phonorecords are sound recorTngs. LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 2 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 CDs sold by UMG to the public (e.g., they may have only one or two selections and they may not include artwork). SUF 4. Unlike commercial CDs, UMG does not sell promotional CDs, UMG receives no payment for them, UMG expressly retains ownership of them, and UMG does not permit them to be sold or transferred by their recipients. SUF 5. Each of UMG’s promotional CDs contains the name of one of UMG’s labels and language indicating it is the property of UMG and its sale or transfer is expressly prohibited under the terms by which it is provided and accepted. SUF 6. This license is printed on the CD itself and/or on its packaging and has included the following language: “This CD is the property of the record company and is licensed to the intended recipient for personal use only. Acceptance of this CD shall constitute an agreement to comply with the terms of the license. Resale or transfer of possession is not allowed and may be punishable under federal and state laws.” SUF 7. Although this language has varied over the years, its intent and purpose has always clearly been that promotional CDs are provided only for limited purposes, are licensed to the recipients, and their sale or distribution by the recipients is not permitted. SUF 8. UMG selects the recipients of each of its promotional CDs from proprietary lists maintained and updated by various departments within UMG. Each promotional CD is sent with a return address. SUF 9. Those promotional CDs which are not accepted by the recipients or are not deliverable are returned to UMG and destroyed. SUF 10. While UMG does not otherwise request the return of promotional CDs from legitimate recipients (among other reasons, because to do so would be logistically difficult, expensive, time consuming, and unnecessary), UMG polices the unauthorized sales of its promotional CDs over eBay by locating Cassee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 88 ooff 2255 by UMG to the public e( ., have only one or two selections and not include artwork). SUF 4. Unlike commercial CDs, UMG does not CDs, UMG receives no payment for them, UMG expressly retains of them, and UMG does not permit them to be sold or transferred by their SUF 5. UMG's promotional CDs contains the name of one of UMG's labels it is the property of UMG and its sale or transfer is under the terms by which it is provided and accepted. SUF 6. is printed on the CD itself and/or on its packaging and has included the language: "CD is the property of the record company and is the intended recipient for personal use only. of this CD shall constitute an agreement to with the terms of the license. Resale or transfer of allowed and may be punishable under state laws." SUF 7. this language has varied over the years, its intent and purpose has always been that promotional CDs are provided only for limited purposes, are the recipients, and their sale or distribution by the recipients is not SUF 8. selects the recipients of each of its promotional CDs from proprietary and updated by various departments within UMG. Each CD is sent with a return address. SUF 9. Those promotional CDs are not accepted by the recipients or are not deliverable are returned to UMG SUF 10. While UMG does not otherwise request the return of CDs from legitimate recipients (among other reasons, because to do so be logistically diffcult, expensive, time consuming, and unnecessary), UMG & the unauthorized sales of its promotional CDs over eBay by locating LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 3 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 auctions on eBay that offer UMG’s promotional CDs for sale and requesting that eBay remove the auctions pursuant to a procedure set up and implemented by eBay known as the Verified Rights Owner (“VeRO”) program. SUF 11. Additionally, if UMG determines that a recipient of its promotional CDs has been offering them for sale, it attempts to delete that individual from the lists of persons to whom promotional CDs are provided. SUF 12. For Augusto, selling promotional CDs (including over eBay) is his occupation and primary source of income (70% to 80% of Augusto’s business is selling promotional CDs). SUF 13. Among the promotional CDs offered for sale and sold by Augusto were promotional CDs embodying fourteen different sound recordings covered collectively by eleven UMG copyright registrations. (the “UMG Promo CDs”) SUF 14. Augusto cannot, or will not, identify his source of the UMG Promo CDs or their original recipients (although he admits he did not receive them from UMG directly). He claims he kept no business records with respect to his sales of promotional CDs. SUF 15. Augusto is well aware of the nature of promotional CDs and, in fact, prominently identifies his product as “Promo CDs” and uses such terms as “rare” and “INDUSTRY EDITION – NOT SOLD IN STORES” to advertise them. SUF 16. He formerly was involved in the music business and at that time received promotional CDs directly from record companies. SUF 17. He knows that promotional CDs contain language that indicates they are licensed for limited purposes to specific individuals and that sale or transfer is not authorized (“It’s not designed to be sold in a normal retail outlet” and “this particular CD wasn’t designed for – was designed for people who work in the industry”). SUF 18. He also is, or should be, aware that eBay, over which Augusto makes the bulk of his illicit sales, warns its sellers that it is “an infringement to sell [promotional CDs] and many copyright holders do care and enforce in this area.” SUF 19. As eBay explains on its website to its sellers: Cassee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 99 ooff 2255 eBay that offer UMG's promotional CDs for sale and requesting that the auctions pursuant to a procedure set up and implemented by eBay as the Verifed Rights Owner ("VeRO") program. SUF 11. Additionally, if determines that a recipient of its promotional CDs has been offering them for to delete that individual from the lists of persons to whom CDs are provided. SUF 12. selling promotional CDs (including over eBay) is his occupation source of income (70% to 80% of Augusto's business is selling CDs). SUF 13. Among the promotional CDs offered for sale and sold were promotional CDs embodying fourteen different sound recordings by eleven UMG copyright registrations. "UMG Promo CDs") SUF 14. Augusto cannot, or will not, identify his source of the UMG Promo their original recipients (although he admits he did not receive them from directly). He claims he kept no business records with respect to his sales of CDs. SUF 15. is well aware of the nature of promotional CDs and, in fact, identifes his product as "Promo CDs" and uses such terms as "rare" "EDITION -NOT SOLD IN STORES" to advertise them. SUF He formerly was involved in the music business and at that time received CDs directly from record companies. SUF 17. He knows that CDs contain language that indicates they are licensed for limited specifc individuals and that sale or transfer is not authorized ("It's not in a normal retail outlet" and "this particular CD wasn't -was designed for people who work in the industry"). SUF 18. He should be, aware that eBay, over which Augusto makes the bulk of his sales, warns its sellers that it is "an infringement to sell [promotional CDs] and holders do care and enforce in this area." SUF 19. As eBay & on its website to its sellers: LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 4 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 “Each promotional item is a copyrighted work. When they initially are distributed they are not sold. They technically remain the property of the record company or the studio that distributed them. The radio stations, movie theatres, etc., that receive them are only licensed to use the promo materials for limited promotional purposes. They are prohibited from selling them or giving them away; the materials themselves often state right on them ‘Not For Sale.’” SUF 20. In a prior lawsuit based on Augusto’s sale of promotional CDs over eBay, brought by two record labels unrelated to UMG, Augusto agreed to a consent judgment that: “Defendant [Augusto] has, on numerous occasions, and despite repeated warnings, offered Plaintiffs’ Promo CDs for sale through an online auction website known as eBay.com. These sales, made without Plaintiffs’ authorization, violated Plaintiffs’ exclusive rights under 17 U.S.C. § 106(3).” SUF 21. Here, too, UMG notified Augusto directly on two occasions that his sale of promotional CDs violated its rights. SUF 22. In addition, UMG provided notices to eBay pursuant to the VeRO program that Augusto’s auctions of UMG’s promotional CDs were infringing. SUF 24. However, because Augusto sent false “counternotices” to eBay, declaring under penalty of perjury that UMG’s notices were “mistaken,” eBay permitted Augusto to re-list those items for sale unless and until UMG filed suit. SUF 25. When Augusto continued blatantly to ignore UMG’s rights, this lawsuit was filed. (The eleven copyrights involved here constitute only a small portion of the UMG copyrights infringed by Augusto in his promotional CD business). Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 1100 ooff 2255 "promotional item is a copyrighted work. When are distributed they are not sold. They remain the property of the record company or that distributed them. The radio stations, movie receive them are only licensed to use the materials for limited promotional purposes. They from selling them or giving them away; the themselves often state right on them `Not For Sale."' SUF 20. lawsuit based on Augusto's sale of promotional CDs over eBay, by two record labels unrelated to UMG, Augusto agreed to a consent that:"[Augusto] has, on numerous occasions, and offered Plaintiffs' Promo CDs an online auction website known as These sales, made without Plaintiffs' violated Plaintiffs' exclusive rights under 17 § 106(3)." SUF 21. UMG notifed Augusto directly on two occasions that his sale of CDs violated its rights. SUF 22. In addition, UMG provided notices to the VeRO program that Augusto's auctions of UMG's promotional infringing. SUF 24. However, because Augusto sent false "counternotices" to eBay, declaring under penalty of perjury that UMG's notices were "mistaken," eBay permitted Augusto to re-list those items for sale unless and until filed suit. SUF 25. When Augusto continued blatantly to ignore UMG's this lawsuit was fled. (The eleven copyrights involved here constitute only a of the UMG copyrights infringed by Augusto in his promotional CD & LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 5 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 II. AUGUSTO HAS INFRINGED UMG’S EXCLUSIVE DISTRIBUTION RIGHTS IN ITS COPYRIGHTED SOUND RECORDINGS. A prima facie case of copyright infringement consists of (1) ownership of copyrights and (2) violation of one of the exclusive rights granted to a copyright owner. See generally 4 M. & D. Nimmer, Nimmer On Copyright § 13.01 (2006). Innocent intent or lack of knowledge is not a defense to liability. See, e.g., Los Angeles News Serv. v. Conus Commc’n Co., 969 F. Supp. 579, 584 (C.D. Cal. 1997).UMG owns the eleven copyrights at issue. SUF 26. Since the works were registered within five years of their publication, they constitute prima facie evidence of the validity of the copyrights and of the facts stated in the certificate, 17 U.S.C. § 410, including ownership. See, e.g., Marisa Christina, Inc. v. Bernard Chaus, Inc., 808 F. Supp. 356, 357 (S.D.N.Y. 1992).3 Augusto’s unauthorized distribution of the UMG Promo CDs violated UMG’s exclusive right to distribute its copyrighted works. 17 U.S.C. §§ 106(3) (exclusive distribution right), 501(a) (“Anyone who violates any of the exclusive rights of the copyright owner … is an infringer of copyright”). Augusto advertised and offered to the public each of the UMG Promo CDs for auction on eBay. SUF 28. Under eBay rules, he was obligated to sell them to the highest qualifying bidder. SUF 29. Augusto never received consent to sell the UMG Promo CDs. SUF 23. His auctions violate UMG’s distribution right under the Copyright Act. Recently, in Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007), the Court referred to A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1014 (9th Cir. 2001) and Hotaling v. Church of Jesus Christ of Latter-Day Saints, These copyright registrations sometimes cover an entire album or compilation of recordings. Such registrations apply to each of the individual tracks in that album. 37 C.F.R. § 202.3(h)(3)(A). The fourteen different, individual sound recordings infringed here are covered by eleven registrations. SUF 27. Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 1111 ooff 2255 HAS INFRINGED UMG'S EXCLUSIVE DISTRIBUTION IN ITS COPYRIGHTED SOUND RECORDINGS. prima facie case of copyright infringement consists of (1) ownership of and (2) violation of one of the exclusive rights granted to a copyright See generally 4 M. & D. Nimmer, Nimmer On Copyright § 13.01 (2006). intent or lack of knowledge is not a defense to liability. See, m Los News Serv. v. Conus Commc'n Co., 969 F. Supp. 579, 584 (C.D. Cal. owns the eleven copyrights at issue. SUF 26. Since the works were fve years of their publication, they constitute prima facie evidence of the copyrights and of the facts stated in the certifcate, 17 U.S.C. ownership. See, e ., Christina, Inc. v. Bernard Chaus, Inc., 356, 357 (S.D.N.Y. 1992).3 Augusto's unauthorized distribution of the UMG Promo CDs violated UMG's right to distribute its copyrighted works. § 106(3) (exclusive right), 501(a) ("Anyone who violates any of the exclusive rights of the owner ... is an infringer of copyright"). Augusto advertised and offered each of the UMG Promo CDs for auction on eBay. SUF 28. Under he was obligated to sell them to the highest qualifying bidder. SUF 29. never received consent to sell the UMG Promo CDs. SUF 23. His UMG's distribution right under the Copyright Act. in Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. Court referred to A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 2001) and Hotaling v. Church of Jesus Christ of Latter-Day Saints, 3 registrations sometimes cover an entire album or compilation of Such registrations apply to each of the individual tracks in that album. § 202.3(h)(3)(A). The fourteen different, individual sound recordings & here are covered by eleven registrations. SUF 27. LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 6 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 118 F.3d 199, 203 (4th Cir. 1997), as authority for the proposition that making available copyrighted works to the public is “deemed distribution” in violation of the exclusive distribution right: “Hotaling held that the owner of a collection of works who makes them available to the public may be deemed to have distributed copies of the works. Similarly, the distribution rights of the plaintiff copyright owners were infringed by Napster users … when they used Napster software to make their collections available to all other Napster users.”508 F.3d at 1162 (italics in original, citations omitted) See Matlow v. Solomon, No. Civ. 04-6109-HO, 2005 WL 309976 *1 (D. Or. Feb. 7, 2005) (defendant’s offer for sale of unauthorized photographs by listing them on eBay violated the Copyright Act, even though he later destroyed the photographs); see also Wildlife Internationale, Inc. v. Clements, 591 F. Supp. 1542, 1547 (S.D. Ohio 1984) (“the distribution, through sale or offer of sale to the public or otherwise … constitutes an infringement”); Universal City Studios Prods. LLLP v. Bigwood, 441 F. Supp. 2d 185, 190 (D. Me. 2006) (using online service to make available motion pictures over the Internet violated plaintiffs’ exclusive right to distribute the motion pictures). Augusto also acknowledged at least an actual sale of a UMG Promo CD. SUF 30 (“Get Stoned”). Augusto also produced documents showing completed sales for two other UMG Promo CDs. SUF 31 (“Just Vibe” and “Read My Mind”). The Perfect 10 Court concluded that the deemed distribution rule did not apply in that case because, unlike Napster and Hotaling, the defendant Google did not have possession of (but only linked to) a collection of infringing images; therefore, it could not be deemed to be distributing them under this authority. 508 F.3d at 1162. Here, of course, Augusto has possession of the infringing UMG Promo CDs he offers for sale on eBay and he actually puts them up for auction, receives bids on them, and sells some, if not all, of them. Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 1122 ooff 2255 203 (4th Cir. for the proposition that making copyrighted works to the public is "deemed distribution" in violation of distribution right: "held that the owner of a collection of works who to the public may be deemed to have copies of the works. Similarly, the distribution of the plaintiff copyright owners were infringed by ... when they used Napster software to collections available to all other Napster users."4 at 1162 (italics in original, citations v. Solomon, No. Civ. 04-6109-HO, 2005 WL 309976 *1 (D. Or. Feb. 7, defendant's offer for sale of unauthorized photographs by listing them on the Copyright Act, even though he later destroyed the photographs); Internationale, Inc. v. Clements, 591 F. Supp. 1542, 1547 (S.D. 1984) ("the distribution, through sale or offer of sale to the public or otherwise infringement"); Universal City Studios Prods. LLLP v. Bigwood, 2d 185, 190 (D. Me. 2006) (using online service to make available pictures over the Internet violated plaintiffs' exclusive right to distribute the pictures). also acknowledged at least an actual sale of a UMG Promo CD. ("Get Stoned"). Augusto also produced documents showing completed other UMG Promo CDs. SUF 31 ("Just Vibe" and "Read My Mind"). 4 10 Court concluded that the deemed distribution rule did not apply in unlike Na ster and Hotaling, the defendant Google did not have but only linked to) a co ec tion of infringing images; therefore, it not be deemed to be distributing them under this authority. 1162. course, Augusto has possession of the infringing UMG Promo CDs he for sale on eBay and he actually puts them up for auction, receives bids on & some, if not all, of them. LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 7 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 There is documentary evidence that at least one other UMG Promo CD was involved in a completed sale, as reflected by the “feedback” on that specific sale posted by its purchaser. SUF 32 (“Say It Right”). Further, Augusto testified that if he offers a promotional CD for sale and it doesn’t sell, he may re-list it under a new auction number. SUF 33. Alternatively, Augusto testified that “a common way to dispose of them” is to give unsold promotional CD away, or he may throw them away. SUF 34. Both are unauthorized distributions. Augusto also sold promotional CDs privately and “offline” when certain of his auctions were disabled by eBay. SUF 35. Finally, Augusto has made it impossible to determine the disposition of the remaining UMG Promo CDs. He cannot (or will not) reveal any information concerning these phonorecords. Even though they were the primary product of his eBay auctions and essentially his sole source of income, he has no documents whatsoever that reflect the source or the sale or the present location of the UMG Promo CDs. SUF 36. He claims not to know whether or not they were sold (but does not outright deny that they were in fact sold). SUF 36. He failed to keep the confirmations of sales provided to him by eBay. SUF 36. He does not even know whether he still possesses any of the UMG Promo CDs. SUF 36. Augusto knew that UMG claimed his auction of UMG’s promotional CDs was infringing. SUF 11, 22. He admits that 80% of the promotional CDs he offers are ultimately sold. SUF 37. The failure to keep records, given that Augusto’s business was selling promotional CDs, that he offered and accepted bids on the UMG Promo CDs and intended to and did sell them, and his inability to state where the UMG Promo CDs are located now or their disposition, is evidence that they were sold in the course of his business. See Hotaling, 118 F.3d at 203 (holding library liable for infringing distribution of copyrighted works by making them available without keeping records of specific instances when the infringing copies actually were distributed because otherwise “a copyright holder would be prejudiced Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 1133 ooff 2255 evidence that at least one other UMG Promo CD was in a completed sale, as refected by the "feedback" on that specifc sale its purchaser. SUF 32 ("Say It Right"). Further, Augusto testifed that if a promotional CD for sale and it doesn't sell, he may re-list it under a new number. SUF 33. Alternatively, Augusto testifed that "a common way to them" is to give unsold promotional CD away, or he may throw them SUF 34. Both are unauthorized distributions. Augusto also sold promotional and "offine" when certain of his auctions were disabled by eBay. Augusto has made it impossible to determine the disposition of the UMG Promo CDs. He cannot (or will not) reveal any information these phonorecords. Even though they were the primary product of his and essentially his sole source of income, he has no documents that reflect the source or the sale or the present location of the UMG SUF 36. He claims not to know whether or not they were sold (but deny that they were in fact sold). SUF 36. He failed to keep the of sales provided to him by eBay. SUF 36. He does not even know he still possesses any of the UMG Promo CDs. SUF 36. knew that UMG claimed his auction of UMG's promotional CDs SUF 11, 22. He admits that 80% of the promotional CDs he offers sold. SUF 37. The failure to keep records, given that Augusto's promotional CDs, that he offered and accepted bids on the Promo CDs and intended to and did sell them, and his inability to state where Promo CDs are located now or their disposition, is evidence that they in the course of his business. See Hotaling, 118 F.3d at 203 (holding liable for infringing distribution of copyrighted works by making them without keeping records of specifc instances when the infringing copies & were distributed because otherwise "a copyright holder would be prejudiced LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 8 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 by a [defendant] library that does not keep records of public use, and the [defendant] library would unjustly profit by its own omission.”). III. THE FIRST SALE AFFIRMATIVE DEFENSE CANNOT SHIELD AUGUSTO’S SALES OF THE UMG PROMO CDs. A. The First Sale Defense is a Limited Affirmative Defense On Which Augusto Bears The Burden of Proof. Augusto’s primary asserted defense to UMG’s claims of infringement is the first sale affirmative defense. 5 SUF 38. That defense is, however, inapplicable here because the first sale defense is limited to owners of copies or phonorecords. It expressly excludes from its provision others, such as Augusto, who may obtain possession but not ownership of copies or phonorecords. Thus, because there was no first sale of the UMG Promo CDs (but only a limited license to specific recipients), the first sale defense cannot apply. The first sale defense is codified in 17 U.S.C. § 109: “(a) The owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner is entitled, without authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.” 17 U.S.C. § 109(a) (emphasis added). . . . “[t]he privilege[] described by subsection (a) [does] not, unless authorized by the copyright owner, extend to any Augusto also alleged the affirmative defenses of estoppel and unclean hands. His sole response to an interrogatory requiring him to state each and every fact on which he based his affirmative defenses (including the first sale defense) was “Augusto bases his affirmative defenses upon the facts alleged in the complaint, and upon additional facts which may emerge on discovery.” Augusto never supplemented this response. SUF 39. Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 1144 ooff 2255 defendant] library that does not keep records of public use, and the [defendant] would unjustly proft by its own omission."). FIRST SALE AFFIRMATIVE DEFENSE CANNOT SHIELD AUGUSTO'S SALES OF THE UMG PROMO CDs. First Sale Defense is a Limited Affrmative Defense On Which Bears The Burden of Proof. Augusto's primary asserted defense to UMG's claims of infringement is the sale affrmative defense. 5 That defense is, however, inapplicable here sale defense is limited to owners of copies or phonorecords. It from its provision others, such as Augusto, who may obtain ownership of copies or phonorecords. Thus, because there was no sale of the UMG Promo CDs (but only a limited license to specifc recipients), sale defense cannot apply. sale defense is codifed in 17 U.S.C. § 109: "(a) The owner of a particular copy or phonorecord made under this title, or any person authorized by is entitled, without authority of the copyright to sell or otherwise dispose of the possession of or phonorecord." 109(a) (emphasis "[t]he privilege[] described by subsection (a) [does] not, by the copyright owner, extend to any 5 also alleged the affirmative defenses of estoppel and unclean hands. sole response to an interrogatory requiring him to state each and every fact on he based his affrmative defenses (including the frst sale defense) was "bases his affrmative defenses upon the facts alleged in the complaint, and facts which may emerge on discovery." Augusto never & response. SUF 39. LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 9 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 person who has acquired possession of the copy or phonorecord from the copyright owner by rental, lease, loan or otherwise, without acquiring ownership of it.” Id. § 109(d) (emphasis added).6 The legislative history also makes clear the narrow limitations of the first sale defense. Those who merely possess copies (like Augusto, who cannot or will not even say where he obtained them) do not have a first sale defense. “Subsection (c) of Section 109 [now subsection (d)] qualifies the privilege specified in subsection (a) … by making clear that [it does] not apply to someone who merely possesses a copy or phonorecord without having acquired ownership of it. Acquisition of an object embodying a copyrighted work by rental, lease, loan or bailment carries with it no privilege to dispose of the copy under section 109(a).” H.R. Rep. No. 94-1476, at 80; S. Rep. No. 94-473, at 72-73 (1975) (emphasis added).7 The first sale defense is an affirmative defense, an exception to the rights of copyright holders, and a limited “privilege.” See American Int’l Pictures v. Foreman, 576 F.2d 661, 665 (5th Cir. 1978) (“because copyright law favors the rights of the copyright holder, the person claiming authority to copy or vend generally must show that his authority to do so flows from the copyright holder”). As an affirmative defense, Augusto has the burden of proving all of the underlying At some time, Augusto began selectively to quote § 109(a) on eBay in advertising his auctions of promotional CDs. However, tellingly, he omitted § d)’s express limitations on that defense. (When asked why, he stated: “That’s just the way I roll.”). SUF 40. 7 The Copyright Act does not define “owner.” However, a licensee is not an owner. Microsoft v. Harmony Computers & Electronics, 846 F. Supp. 208, 213 (E.D.N.Y. 1994) (“Entering into a license agreement is not a ‘sale’ for purposes of the first sale doctrine.”); compare H. R. Rep. No. 94-1476 at 79 (“Outright sale” of a book is an example of “where the copyright owner has transferred ownership.”). Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 1155 ooff 2255 has acquired possession of the copy or from the copyright owner by rental, lease, or otherwise, without acquiring ownership of it." added).6 history also makes clear the narrow limitations of the frst sale Those who merely possess copies (like Augusto, who cannot or will not them) do not have a frst sale defense. "(c) of Section 109 [now subsection (d)] qualifes the privilege specifed in subsection (a) ... by clear that [it does] not apply to someone who merely possesses or phonorecord without having of it. Acquisition of an object a copyrighted work by rental, lease, loan or carries with it no privilege to dispose of the copy 109(a)." H.R. Rep. No. 94-1476, at 80; S. 94-473, at 72-73 (1975) (emphasis added).? sale defense is an affrmative defense, an exception to the rights of holders, and a limited "privilege." See American Int'l Pictures v. F.2d 661, 665 (5th Cir. 1978) ("because copyright law favors the of the copyright holder, the person claiming authority to copy or vend must show that his authority to do so fows from the copyright holder"). defense, Augusto has the burden of proving all of the underlying 6 some time, Augusto began selectively to quote § 109(a) on eBay in his auctions of promotional CDs. However, tellingly, he omitted S 109(d)'s express limitations on that defense. asked why, he stated: "That's the way f roll."). SUF 40. 7 Act does not defne "owner." However, a licensee is not an Microsoft v. Harmon Computers & Electronics, 846 F. Sup. 208, 213 Y. ("into a license agreement is not a `sale' for L first sale doctrine."); comp H. R. Rep. No. 94-1476 at 79 ("Outright sale" of a & an example of w erh e the copyright owner has transferred ownership."). LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 10 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 facts necessary to support that defense. See, e.g., Harmony Computers & Electronics, 846 F. Supp. at 212; Novell, Inc. v. Unicom Sales, Inc., 2004 Copr. L. Dec. ¶ 28,900 at 37,684, No. C-03-2785 MMC, 2004 WL 1839117 *8 (N.D. Cal. August 17, 2004) (defendant bears burden of proof on first sale defense); see also Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 590 (1994) (defendant bears the burden to support fair use affirmative defense). This burden requires that Augusto must trace the chain of title of each specific copy of the UMG Promo CDs he auctioned to the original alleged transfer of ownership, and show the existence of a first sale for that particular UMG Promo CD. That is what he has alleged (SUF 41. Augusto alleges he is the owner of the particular copies of phonorecords at issue in this action), and that is what the law requires he must prove: “The defendant in such actions clearly has the particular knowledge of how possession of the particular copy was acquired, and should have the burden of providing this evidence to the court. It is the intent of the Committee, therefore, that in an action to determine whether a defendant is entitled to the [first sale] privilege established by Section 109(a) and (b), … the burden of proving whether a particular copy was lawfully made or acquired should rest on the defendant.” See H.R. Rep. No. 94-1476, at 81 (emphasis added). This follows from the fact that one who “merely possesses” a copy of a copyrighted work does not satisfy the requirements of the first sale defense. Rather, if Augusto relies on the first sale defense, he must prove a first sale of the particular copy he possessed. He is in the best position to do so; the burden is and should be his. Augusto is the one who obtained the particular copy. Only he knows or should know his source, and only he can, if necessary, use that information to trace the Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 1166 ooff 2255 that defense. See, , Computers & 846 F. Supp. at 212; Novell, Inc. v. Unicor Sales, Inc., 2004 Copr. L. at 37,684, No. C-03-2785 MMC, 2004 WL 1839117 *8 (N.D. Cal. 17, 2004) (defendant bears burden of proof on first sale defense); see also v. Acuff-Rose Music, Inc., 510 U. S. 569, 590 (1994) (defendant bears the support fair use affrmative defense). requires that Augusto must trace the chain of title of each specifc copy of the UMG Promo CDs he auctioned to the original alleged transfer and show the existence of a frst sale for that particular UMG Promo That is what he has alleged (SUF 41. Augusto alleges he is the owner of the copies of phonorecords at issue in this action), and that is what the law prove: "defendant in such actions clearly has the particular of how possession of the particular copy was should have the burden of providing this the court. It is the intent of the Committee, that in an action to determine whether a entitled to the [frst sale] privilege established 109(a) and (b), ... the burden of proving a particular copy was lawfully made or acquired the defendant." See H.R. Rep. No. 94-1476, from the fact that one who "merely possesses" a copy of a copyrighted does not satisfy the requirements of the frst sale defense. Rather, if Augusto the frst sale defense, he must prove a frst sale of the particular copy he is in the best position to do so; the burden is and should be his. is the one who obtained the particular copy. Only he knows or should & his source, and only he can, if necessary, use that information to trace the LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 11 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 copy to the original recipient (and then prove there was a transfer of ownership to that recipient and not a license). Moreover, while UMG provides promotional CDs in limited quantities, generally several thousand copies of any specific promotional CD are sent to recipients. SUF 42. UMG’s lists of recipients constantly are updated, and for these and other reasons, it is not possible to determine with certainty who received all of the copies of all the UMG Promo CDs, let alone the source of the particular UMG Promo CDs obtained after they were sent, and subsequently distributed by Augusto. Even if all of the original recipients of all the UMG Promo CDs could be determined, they would number in the tens of thousands and it still would not be possible for UMG to trace the particular CD Augusto auctioned to a specific recipient. SUF 43. UMG does not “watermark” or otherwise identify each copy of each of its promotional CDs. Of course, UMG as a copyright owner has no obligation to do so and, moreover, it would be prohibitively expensive and impractical to make that attempt. SUF 44. (In any event, even if the CDs were watermarked, UMG would need to obtain the specific CD auctioned by Augusto to tie it to a recipient. Augusto does not know where the CDs are or to whom they were sold. SUF 44.) Since Augusto was not a direct recipient from UMG of any of the UMG Promo CDs at issue, only Augusto could know his source (who may or may not have been an original recipient). SUF 45. Thus, only Augusto can establish “whether a particular copy was lawfully … acquired.” While all the UMG Promo CDs were licensed and there was no transfer of ownership in any of them (see Section B infra), to the extent Augusto claims (as he must for purposes of his affirmative defense) that the particular copy he auctioned somehow was not subject to the license, he must prove it. Augusto has admitted that he cannot provide the requisite proof of a first sale, and, therefore, he cannot prevail on that defense. Augusto cannot relate any of the Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 1177 ooff 2255 the original recipient (and then prove there was a transfer of ownership to and not a license). while UMG provides promotional CDs in limited quantities, several thousand copies of any specifc promotional CD are sent to SUF 42. UMG's lists of recipients constantly are updated, and for these is not possible to determine with certainty who received all of all the UMG Promo CDs, let alone the source of the particular UMG obtained after they were sent, and subsequently distributed by Augusto. all of the original recipients of all the UMG Promo CDs could be they would number in the tens of thousands and it still would not be UMG to trace the particular CD Augusto auctioned to a specifc SUF 43. UMG does not "watermark" or otherwise identify each copy of promotional CDs. Of course, UMG as a copyright owner has no to do so and, moreover, it would be prohibitively expensive and to make that attempt. SUF 44. event, even if the CDs were UMG would need to obtain the specifc CD auctioned by Augusto to to a recipient. Augusto does not know where the CDs are or to whom they SUF 44.) was not a direct recipient from UMG of any of the UMG at issue, only Augusto could know his source (who may or may not recipient). SUF 45. Thus, only Augusto can establish "a particular copy was lawfully ... acquired." While all the UMG Promo licensed and there was no transfer of ownership in any of them see infra), to the extent Augusto claims (as he must for purposes of his defense) that the particular copy he auctioned somehow was not subject he must prove it. has admitted that he cannot provide the requisite proof of a frst sale, & he cannot prevail on that defense. Augusto cannot relate any of the LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 12 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 UMG Promo CDs at issue to the source of any alleged first sale; he could not or would not even identify his source of the UMG Promo CDs; he had no business records or any other way of determining either his source or the original recipient of the UMG Promo CDs; and he did not know the disposition or present location of the UMG Promo CDs. SUF 46. This admitted complete failure of proof on the predicate element of the first sale defense means Augusto cannot defeat UMG’s claims. In Harmony Computers & Electronics, defendants were sued for violation of the exclusive distribution right by the sale of Microsoft software that was provided subject to a limited license. Defendants asserted the first sale defense. In rejecting that defense and granting a preliminary injunction, the Court held: “Defendants fail to prove that the first sale doctrine applies because they do not trace their purchase of Microsoft Products to a ‘first sale’ by Microsoft or any party authorized by Microsoft to sell the Products.” … “In civil actions for copyright infringement, the defendant has the burden of proving that the particular pieces of the copyrighted work that he sold were lawfully made or acquired.” … “[D]efendants have the burden of tracing the chain of title to show that their authority to sell Microsoft Products flows from the copyright holder.” … “Defendants’ only evidence of a chain of title for any of their Products is an invoice of their purchase of several pieces of Microsoft Products from an entity called Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 1188 ooff 2255 Promo CDs at issue to the source of any alleged frst sale; he could not or not even identify his source of the UMG Promo CDs; he had no business any other way of determining either his source or the original recipient of Promo CDs; and he did not know the disposition or present location of the Promo CDs. SUF 46. This admitted complete failure of proof on the of the frst sale defense means Augusto cannot defeat UMG's Computers & Electronics, defendants were sued for violation of distribution right by the sale of Microsoft software that was provided a license. Defendants asserted the frst sale defense. In rejecting a preliminary injunction, the Court held: "fail to prove that the frst sale doctrine applies trace their purchase of Microsoft a `first sale' by Microsoft or any party by Microsoft to sell the Products." "civil actions for copyright infringement, the defendant proving that the particular pieces of the work that he sold were lawfully made or acquired." "[D]efendants have the burden of tracing the chain of title that their authority to sell Microsoft Products from the copyright holder." "Defendants' only evidence of a chain of title for any of Products is an invoice of their purchase of several & Microsoft Products from an entity called LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 13 1 2 3 45 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Innovative Datronics Corp. The fact that defendants bought their Microsoft Products from another party does not by itself establish a first sale.” … “Defendants’ failure to meet their burden of proving a chain of title … precludes the applicability of the first sale doctrine to this case.” 846 F. Supp. at 212-13. Here, too, Augusto’s inability to trace the UMG Promo CDs he sold to a specific “first sale” is a “failure to meet [his] burden of proving a chain of title [and] precludes the applicability of the first sale doctrine to this case.” Id. See, e.g., Microsoft Corp. v. Software Wholesale Club, Inc., 129 F. Supp. 2d 995, 1008 (S.D. Tex. 2000) (summary judgment on first sale defense because “[d]efendants have not met their burden of tracing the chain of title to show a basis for the first-sale doctrine”); Too, Inc. v. Kohl’s Department Stores, Inc., 2002 Copr. L. Dec ¶ 28,521 at 35,382, 2002 WL 31409852, (S.D. Ohio 2002) (“The alleged infringer bears the burden of tracing the chain of title to prove that the first sale doctrine applies.”); NCR Corp. v. ATM Exchange, Inc., 2006 U.S.Dist. LEXIS 30296 at *3-4, 81 U.S.P.Q.2d 1216 (S.D.Ohio May 17, 2006) (same); see also W.F. Patry, 4 Patry on Copyright § 13:16 at 13-36 – 13-37 (2008) (“The first sale doctrine is, therefore, adjudicated on a copy-by-copy basis: if the particular copy or copies at issue are unauthorized, it is unavailing to defendant if other, authorized copies have been sold.”).B. In Any Event, The First Sale Defense Cannot Apply To The Licensed UMG Promo CDs. Given Augusto’s inability to satisfy the predicate element of the first sale defense, the Court need not examine the issue further. However, the first sale defense could not apply in any event because UMG exercised its right, as the copyright owner, to license, rather than transfer ownership to, promotional CDs Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 1199 ooff 2255 Datronics Corp. The fact that defendants their Microsoft Products from another party does itself establish a frst sale." "Defendants' failure to meet their burden of proving a title ... precludes the applicability of the frst sale to this case." 212-13. Augusto's inability to trace the UMG Promo CDs he sold to a specifc "sale" is a "failure to meet [his] burden of proving a chain of title [and] applicability of the frst sale doctrine to this case." Id. Le, em Corp. v. Software Wholesale Club, Inc., 129 F. Supp. 2d 995, 1008 (S.D. (summary judgment on first sale defense because "[d]efendants have not burden of tracing the chain of title to show a basis for the frst-sale doctrine"); Too, Inc. v. Kohl's Department Stores, Inc., 2002 Copr. L. Dec ¶ 28,521 2002 WL 31409852, (S.D. Ohio 2002) ("The alleged infringer bears the tracing the chain of title to prove that the frst sale doctrine applies."); Corp. v. ATM Exchange, Inc., 2006 U.S.Dist. LEXIS 30296 at *34, 81 2d 1216 (S.D.Ohio May 17, 2006) (same); see also W.F. Patry, 4 Pat on § 13:16 at 13-36 -13-37 (2008) ("The frst sale doctrine is, therefore, on a copy-by-copy basis: if the particular copy or copies at issue are it is unavailing to defendant if other, authorized copies have been sold.").Any Event, The First Sale Defense Cannot Apply To The UMG Promo CDs. Augusto's inability to satisfy the predicate element of the frst sale need not examine the issue further. However, the frst sale not apply in any event because UMG exercised its right, as the & owner, to license, rather than transfer ownership to, promotional CDs LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 14 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 containing its copyrighted works. The limited license of the UMG Promo CDs to intended recipients was not a transfer of ownership or a “first sale”: “The distribution right under Section 106(3) includes the right to control not only the ‘sale or other transfer of ownership’ of copies or phonorecords, but also their disposition ‘by rental, lease, or lending.’” Parfums Givenchy, Inc. v. C&C Beauty Sales, Inc., 832 F. Supp. 1378, 1389 (C.D. Cal. 1993), aff’d, 38 F.3d 477 (9th Cir. 1994). If the copyright owner has licensed the copy of its work, rather than transferred title, it retains ownership and there has been no first sale. In that event, sale by the licensee (or anyone obtaining from the licensee) violates the distribution right and constitutes copyright infringement. See, e.g., Adobe Sys, Inc. v. One Stop Micro, Inc., 84 F. Supp. 2d 1086, 1089 (N.D. Cal. 2000) (“a copyright owner does not forfeit his right to distribution by entering into a licensing agreement”). UMG licenses the UMG Promo CDs for free to a limited number and class of people solely for promotional purposes. The select recipients are associated with the music business. SUF 47. Most of the copyrighted sound recordings at issue were embodied in at least one UMG Promo CD offered for sale by Augusto that included the following language: “This CD is the property of the record company and is licensed to the intended recipient for personal use only. Acceptance of this CD shall constitute an agreement to comply with the terms of the license. Resale or transfer of possession is not allowed and may be punishable under federal and state laws.” SUF 48.8 This language constitutes an offer by UMG to enter into an agreement with the recipient based on terms that include retention of ownership by UMG and Some of the sound recordings were embodied on promotional CDs which contained other shorter, but no less equivocal language: “For Promotional Use Only – Not for Sale.” SUF 50. Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 2200 ooff 2255 its copyrighted works. The limited license of the UMG Promo CDs to was not a transfer of ownership or a "frst sale": "The right under Section 106(3) includes the right to control not only the `sale transfer of ownership' of copies or phonorecords, but also their disposition `lease, or lending."' Parfums Givenchy, Inc. v. C&C Beauty Sales, Inc., 1378, 1389 (C.D. Cal. 1993), aff d, 38 F.3d 477 (9th Cir. 1994). If the owner has licensed the copy of its work, rather than transferred title, it and there has been no frst sale. In that event, sale by the licensee obtaining from the licensee) violates the distribution right and constitutes infringement. See, e.g., Adobe Sys, Inc. v. One Stop Micro, Inc., 84 F. 1089 (N.D. Cal. 2000) ("a copyright owner does not forfeit his right by entering into a licensing agreement"). licenses the UMG Promo CDs for free to a limited number and class of for promotional purposes. The select recipients are associated with business. SUF 47. Most of the copyrighted sound recordings at issue in at least one UMG Promo CD offered for sale by Augusto that the following language: "CD is the property of the record company and is the intended recipient for personal use only. of this CD shall constitute an agreement to with the terms of the license. Resale or transfer of allowed and may be punishable under state laws." SUF 48.8 constitutes an offer by UMG to enter into an agreement with based on terms that include retention of ownership by UMG and 8 recordings were embodied on promotional CDs which shorter, but no less equivocal language: "For Promotional Use Only & -Not for Sale." SUF 50. LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 15 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 prohibit sale. Most recipients chose to accept promotional CDs. Promotional CDs include a return address. Promotional CDs that are not deliverable are returned, and a relatively few recipients also return them. (UMG destroys the returned copies.) SUF 49. The UMG Promo CDs sold by Augusto obviously were not returned by their recipients. When a recipient chooses to keep the CD, he or she assents to the terms of the license. See generally 1 Corbin On Contracts § 3.21 at 425-26 (1993) (“an offeree whose conduct indicates assent to the offeror, creates a contract”); 1 Witkin, Summary of California Law § 195 at 228-29 (10th ed. 2005) (“Where the offeree, with freedom to reject them, makes use of services, or other consideration tendered with the offer, this conduct amounts to an acceptance); see, e.g., Arizona Cartridge Remanufacturers Assn. v. Lexmark Int’l, Inc., 421 F.3d 981, 987-88 (9th Cir. 2005) (enforceable contract created by acceptance and use of patented cartridge where there was notice of terms, a chance to reject product, and a reduced price); ProCD, Inc., v. Zeidenberg, 86 F.3d 1447, 1452 (7th Cir. 1996) (“ProCD proposed a contract that a buyer would accept by using the software after having an opportunity to read the license at leisure”) (emphasis in original); Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 403 (2d Cir. 2004) (“It is standard contract doctrine that when a benefit is offered subject to stated conditions, and the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the taking constitutes an acceptance of the terms, which accordingly become binding on the offeree”); see also Storm Impact, Inc. v. Software of Month Club, 13 F. Supp. 2d 782, 785, 791 (N.D. Ill. 1998) (express reservation of right to distribute software made available for free over the Internet was valid and enforceable). No reported decision has discussed the licensing of promotional CDs. However, the principle that possession of copyrighted works may be licensed without transfer of ownership and, therefore, there is no first sale (and no first sale defense), has been applied most significantly in the context of software licensing, where “[a] common method of distribution is through licensing agreements, which Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 2211 ooff 2255 sale. Most recipients chose to accept promotional CDs. Promotional CDs a return address. Promotional CDs that are not deliverable are returned, and few recipients also return them. destroys the returned copies.) The UMG Promo CDs sold by Augusto obviously were not returned by recipients. When a recipient chooses to keep the CD, he or she assents to the the license. See generally 1 Corbin On Contracts § 3.21 at 425-26 (1993) ("an offeree whose conduct indicates assent to the offeror, creates a contract"); 1 Summary of California Law § 195 at 228-29 (10th ed. 2005) ("Where the freedom to reject them, makes use of services, or other consideration the offer, this conduct amounts to an acceptance); see, m Arizona Remanufacturers Assn. v. Lexmark Int'l, Inc., 421 F.3d 981, 987-88 (9th 2005) (enforceable contract created by acceptance and use of patented cartridge was notice of terms, a chance to reject product, and a reduced price); Inc., v. Zeidenberg, 86 F.3d 1447, 1452 (7th Cir. 1996) ("ProCD proposed a a buyer would accept by using the software after having an opportunity at leisure") (emphasis in original); Register.com, Inc. v. Verio, 356 F.3d 393, 403 (2d Cir. 2004) ("It is standard contract doctrine that when a is offered subject to stated conditions, and the offeree makes a decision to with knowledge of the terms of the offer, the taking constitutes an terms, which accordingly become binding on the offeree"); see Impact, Inc. v. Software of Month Club, 13 F. Supp. 2d 782, 785, 791 Ill. of right to distribute software made available free over the Internet was valid and enforceable). decision has discussed the licensing of promotional CDs. the principle that possession of copyrighted works may be licensed transfer of ownership and, therefore, there is no frst sale (and no frst sale most signifcantly in the context of software licensing, & "[a] common method of distribution is through licensing agreements, which LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 16 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 permit the copyright holder to place restrictions upon the distribution of its products.” One Stop Micro, Inc., 84 F. Supp. 2d at 1092. In that way, software copyright owners retain ownership of the physical discs on which their copyrighted software resides. Software licenses prohibiting resale apply to millions of discs even after they have been paid for by the public for general use. Nevertheless, such software licenses customarily are enforced. See, e.g., DSC Comm’n Corp. v. Pulse Comm’n, Inc., 170 F.3d 1354, 1361-62 (Fed. Cir. 1999); MAI Sys Corp. v. Peak Computer, Inc., 991 F.2d 511, 517-519 (9th Cir. 1993); see also Meridian Project Systems, Inc. v. Hardin Construction Co., LLC, 426 F. Supp. 2d 1101, 1106-07 (E.D. Cal. 2006) (shrink wrap license enforceable; defendant had an opportunity to return software and never objected to terms). On the other hand, UMG’s promotional CD licenses apply only to a relatively few discs that are not commercially sold to the public or paid for by recipients who are knowledgeable about their restrictions. The Ninth Circuit recently addressed this issue in a different context in Wall Data v. Los Angeles County Sheriff’s Department, 447 F.3d 769 (9th Cir. 2006). The Sheriff’s Department obtained software for 3,663 installations, but installed the software in 6,007 computers. Wall Data, the software owner, sued for copyright infringement claiming that the additional copies exceeded the limited license under which it had provided the software. The Sheriff’s Department argued that it had purchased and “owned” the copies of the software.9 In holding that there was no transfer of ownership but only a license, the Court enunciated the rule in this Circuit: The question of ownership was important in light of the Sheriff Department’s claim that making the copies was protected under 17 U.S.C. § 117, which permits the “owner of a copy” to make another copy of the program if the additional copy is an “essential step in the utilization of the computer program… [and] is used in no other manner.” 447 F.3d at 784. Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 2222 ooff 2255 the copyright holder to place restrictions upon the distribution of its products." One Stop Micro, Inc., 84 F. Supp. 2d at 1092. In that way, software owners retain ownership of the physical discs on which their copyrighted resides. Software licenses prohibiting resale apply to millions of discs have been paid for by the public for general use. Nevertheless, such licenses customarily are enforced. See, em DSC Comm'n Corp. v. Pulse Comm'n, Inc., 170 F.3d 1354, 1361-62 (Fed. Cir. 1999); MAI Sys Corp. v. Peak Inc., 991 F.2d 511, 517-519 (9th Cir. 1993); see also Meridian Project Hardin Construction Co., LLC, 426 F. Supp. 2d 1101, 1106-07 Cal. 2006) (shrink wrap license enforceable; defendant had an opportunity to and never objected to terms). On the other hand, UMG's CD licenses apply only to a relatively few discs that are not sold to the public or paid for by recipients who are knowledgeable restrictions. Circuit recently addressed this issue in a different context in Wall Los Angeles County Sheriff's Department, 447 F.3d 769 (9th Cir. 2006). Sheriff's Department obtained software for 3,663 installations, but installed the in 6,007 computers. Wall Data, the software owner, sued for copyright claiming that the additional copies exceeded the limited license under it had provided the software. The Sheriff's Department argued that it had "owned" the copies of the software.9 In holding that there was no ownership but only a license, the Court enunciated the rule in this 9 of ownership was important in light of the Sheriff Department's that making the copies was protected under 17 U.S.C. § 117, which permits "owner of a copy" to make another copy of the program if the additional copy is "step in the utilization of the computer program... [and] is used in no & manner." 447 F.3d at 784. LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 17 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Generally, if the copyright owner makes it clear that she or he is granting only a license to the copy of software and imposes significant restrictions on the purchaser’s ability to redistribute or transfer that copy, the purchaser is considered a licensee, not an owner, of the software. 447 F.3d at 785. Of particular relevance here is the Court’s reference to the first sale doctrine in discussing the issue of ownership: Indeed, the first sale doctrine rarely applies in the software world because software is rarely “sold.” Adobe Systems Inc. v. One Stop Micro, Inc., 84 F. Supp. 2d 1086, 1091 (N.D. Cal. 2000) (“[V]irtually all end users do not buy— but receive a license for—software. The industry uses terms such as ‘purchase’ ‘sell,’ ‘buy,’… because they are convenient and familiar, but the industry is aware that all software… is distributed under license.”) 447 F.3d at 769, n. 9. Several courts within this circuit have held that such license restrictions limiting transfer preclude assertion of the first sale defense. See, e.g., One Stop Micro, Inc., 84 F. Supp. 2d at 1093 (summary judgment to plaintiff because copyright in software licensed only for sale to educational users was infringed by distribution to non-educational users); Novell, Inc., 2004 WL 1839117 *10-13, Copr. L. Dec. ¶ 28,900 (N.D. Cal. 2004) (summary judgment on license agreement included in software box); Adobe Systems Inc. v. Stargate Software, Inc., 216 F. Supp. 2d 1051, 1059-60 (N.D. Cal. 2002) (shrink wrap license enforceable); see also S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1088-89 & n.9 (9th Cir. 1989) (licensee of software “would be entitled to possess a copy of the software to enable it to exercise its limited right of use, but would not own that copy. An owner of a copy of Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 2233 ooff 2255 if the copyright owner makes it clear that she or only a license to the copy of software and signifcant restrictions on the purchaser's ability or transfer that copy, the purchaser is not an owner, of the software. relevance here is the Court's reference to the frst sale doctrine issue of ownership: sale doctrine rarely applies in the software because software is rarely "sold." Adobe Systems v. One Stop Micro, Inc., 84 F. Supp. 2d 1086, 1091 Cal. 2000) ("[V]irtually all end users do not buybut a license for-software. The industry uses `purchase' `sell,' 'buy,'... because they are and familiar, but the industry is aware that all software... is distributed under license.") at 769, within this circuit have held that such license restrictions transfer preclude assertion of the frst sale defense. See, e.y., One Stop Inc., 84 F. Supp. 2d at 1093 (summary judgment to plaintiff because in software licensed only for sale to educational users was infringed by to non-educational users); Novell, Inc., 2004 WL 1839117 *10-13, Dec. (N.D. Cal. 2004) (summary judgment on license agreement in software box); Adobe Systems Inc. v. Stargate Software, Inc., 216 F. 1059-60 (N.D. Cal. 2002) (shrink wrap license enforceable); see also v. Payday, Inc., 886 F.2d 1081, 1088-89 & n.9 (9th Cir. 1989) (licensee "would be entitled to possess a copy of the software to enable it to & limited right of use, but would not own that copy. An owner of a copy of LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 18 1 2 3 4 5 6 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 software has certain rights under the Copyright Act which a mere possessor does not.”) citing Section 109 (italics in original). Courts outside the Ninth Circuit have reached similar conclusions. See, e.g., Harmony Computers & Electronics, 846 F. Supp. 2d at 208; Software Wholesale Club, Inc., 129 F. Supp. 2d at 1007-08 (summary judgment rejecting first sale defense); ISC-Bunker Ramo Corp. v. Altech, Inc., 765 F. Supp. 1310, 1331 (N.D. Ill. 1990) (first sale defense does not apply where owner of copyrighted programs “through its licensing agreements, has specifically limited distribution”).10 Since the UMG Promo CDs were licensed, and title and ownership did not pass to their initial recipients, Augusto could not himself receive title and ownership (even if he could establish his chain of title, which he cannot). See American Int’l Pictures, 576 F.2d at 664 (absent a transfer of title “an unwitting purchaser who buys a copy in the secondary market can be held liable for infringement if the copy was not the subject of a first sale by the copyright holder. Thus, unless title to the copy passes through a first sale by the copyright holder, subsequent sales do not confer good title.”); Major League Baseball Promotion v. Colour-Tex, 729 F. Supp. 1035, 1041 (D. N.J. 1990) (“A licensee who has … materially breached the licensing contract has no right to give a sublicense under which the sublicensee can take cover in a copyright infringement case, and therefore, both the licensee and sublicensee can be held liable for acting without authorization and thereby 10 Some district courts prior to Wall Data reached a different conclusion in situations that are distinguishable from the present one. For example, in SoftMan Products Co., LLC v. Adobe Systems, Inc., 171 F. Supp. 2d 1075, 1085 (C.D. Cal. 2001), the district court’s rationale for finding a sale rather than a license was “the transfer of a product for consideration with a transfer of title and risk of loss generally constitutes a sale.” Id. at 1085. See Stargate Software, 216 F. Supp. 2d at 1058-59 (distinguishing and disagreeing with SoftMan; “The court in Softman [sic] dealt with the question of whether the purchaser of a retail collection of Adobe software can re-distribute the collection’s constituent parts.”); see also Meridian Project Sys., 426 F. Supp. 2d at 1106, n.5 (“In SoftMan, the court did not reach the issue of whether ‘shrink wrap licenses’ were enforceable because the court found that the plaintiff never loaded the software, and thus never assented to the EULA.”). Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 2244 ooff 2255 has rights under the Copyright Act which a mere possessor does not.") citing Section 109 (italics in original). Courts outside the Ninth Circuit have conclusions. See, eL Harmony Computers & Electronics, 846 F. Software Wholesale Club, Inc., 129 F. Supp. 2d at 1007-08 judgment rejecting frst sale defense); ISC-Bunker Ramo Corp. v. Altech, 765 F. Supp. 1310, 1331 (N.D. Ill. 1990) (first sale defense does not apply of copyrighted programs "through its licensing agreements, has specifcally limited distribution"). 10 Promo CDs were licensed, and title and ownership did not initial recipients, Augusto could not himself receive title and ownership he could establish his chain of title, which he cannot). See American Int'l F.2d at 664 (absent a transfer of title "an unwitting purchaser who in the secondary market can be held liable for infringement if the copy subject of a first sale by the copyright holder. Thus, unless title to the a first sale by the copyright holder, subsequent sales do not good title."); Major League Baseball Promotion v. Colour-Tex, 729 F. Supp. D. N.J. 1990) ("A licensee who has ... materially breached the contract has no right to give a sublicense under which the sublicensee can in a copyright infringement case, and therefore, both the licensee and liable for acting without authorization and thereby 10 courts prior to Wall Data reached a different conclusion in that are distinguishable from the For example, in SoftMan LLC v. Adobe Systems Inc., 171 F. Supp. 2d 1075, 1085 .court's rationale or in ing a sale rather than a license was "the a product for consideration with a transfer of title and risk of loss constitutes a sale." Id. at 1085. See Star ate Software 2d at and dgreeing with o tMan T e court in Softman [sic] the question of whether the purchaser o tail collection of Adob can re-distribute the collection's constituent parts."); see also Meridian Sys., 426 F. Supp. 2d at 1106, n.5 ("In SoftMan the court i n-ot r he o whether `shrink wrap licenses' were en orcea le because the court found & never loaded the software, and thus never assented to the EULA."). LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2Mitchell Silberberg & Knupp LLP 19 1 2 3 4 56 789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 infringing the licensor’s copyright”); see also Altech Inc., 765 F. Supp. at 1331 (“there is no such thing as a bona fide purchaser for value in copyright law”); cf. Parfums Givenchy, Inc., 832 F. Supp. at 1384 (“a copyright owner may sue ‘any member of the distribution chain.’”). CONCLUSION UMG owns the copyrights to the sound recordings embodied in the UMG Promo CDs. Augusto distributed them without authority. That violates UMG’s exclusive distribution right. Augusto cannot carry his burden of establishing his “chain of title” for the particular copies of the UMG Promo CDs he distributed without authority. In any event, since the UMG Promo CDs were licensed to recipients, there was no transfer of ownership and no “first sale.” UMG is entitled to partial summary judgment on the issue of liability. DATED: April 7, 2008 Respectfully submitted, RUSSELL J. FRACKMAN KARIN G. PAGNANELLI AARON M. WAIS MITCHELL SILBERBERG & KNUPP LLP By: /s/Russell J. Frackman Russell J. Frackman Attorneys for Plaintiff UMG RECORDINGS, INC. Casee 22::0077--ccvv--0033110066--SJJO--AJJW D o Dcuomcuemnet n4t0 40 FFiilleedd 0044//0077//22000088 PPaaggee 2255 ooff 2255 the licensor's copyright"); see also Altech Inc., 765 F. Supp. at 1331 ("there is no such thing as a bona fde purchaser for value in copyright law"); cf. Inc., 832 F. Supp. at 1384 ("a copyright owner may sue `any the distribution chain."'). owns the copyrights to the sound recordings embodied in the UMG Augusto distributed them without authority. That violates UMG's distribution right. Augusto cannot carry his burden of establishing his "of title" for the particular copies of the UMG Promo CDs he distributed authority. In any event, since the UMG Promo CDs were licensed to there was no transfer of ownership and no "frst sale." UMG is entitled summary judgment on the issue of liability. submitted, April 7, 2008 J. FRACKMAN G. PAGNANELLI M. WAIS SILBERBERG & KNUPP LLP J. Frackman for Plaintiff RECORDINGS, INC. & LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=032cd6e2-743e-4894-a993-b9bcda53b5b2