The "first sale" doctrine expresses one of the most important limitations on the reach of copyright law. The idea, set out in Section 109 of the Copyright Act, is simple: once you've acquired a lawfully-made CD or book or DVD, you can lend, sell, or give it away without having to get permission from the copyright owner. In simpler terms, "you bought it, you own it" (and because first sale also applies to gifts, "they gave it to you, you own it" is also true).
Seems obvious, right? After all, without the "first sale" doctrine, libraries would be illegal, as would used bookstores, used record stores, and video rental shops (and their modern variants, like LaLa and other CD-swapping communities).
But the copyright industries have never liked first sale, since it creates competition for their titles (you could borrow it from a friend, pick it up at a library, or buy it from a used book seller on Amazon).
It also reduces their ability to impose restrictions on how you use the work after it is sold. For example, at the turn of the 20th century, book publishers tried to impose a minimum resale price on books by putting a notice in every copy. In the 1930s, record labels put "private use only, not for broadcast" notices on records in an attempt to block radio stations from playing their records without additional payment. In the 1980s, movie studios tried the same thing with video cassettes, trying to control the video rental business. Congress, the courts, and free markets have consistently rejected these efforts to undermine the first sale principle.
But that hasn't stopped Universal Music Group (UMG). In May, UMG sued Roast Beast Music for auctioning "promo CDs" on eBay, CDs which Roast Beast Music had itself purchased from used record stores around Los Angeles. Apparently, UMG has been harassing a number of eBay sellers, sending bogus DMCA takedown notices to eBay, getting auctions suspended and accounts terminated.
This week, EFF took up the case on behalf of Roast Beast Music, filing papers in court answering UMG's allegations and counter-suing them for the bogus DMCA takedowns. The critical question is whether UMG can trump first sale by printing "promotional use only, not for resale" notices on the CDs that they routinely give away to radio stations, journalists, and tastemakers of all kinds. Many of these CDs then find their way into the bins of used record stores.
If UMG is right, then copyright owners of all kinds can strip away our first sale rights by putting these kinds of "label licenses" on their wares. Next thing you know, CDs, books, DVDs, and video games could be festooned with "notices" that erode a customer's first sale, fair use, and other rights.
We've seen how software vendors use "shrinkwrap" and "clickthru" licenses to whittle away our rights. And we've seen how Lexmark has used "label licenses" to attack the secondary market in toner cartridges. This case is about turning the tide and holding the line at first sale.
(On a related note, it appears that UMG also thinks you shouldn't be allowed to buy "import" CDs, either. And don't forget, we've also had to sue UMG after its music publishing arm went after a 29-second YouTube video of a baby dancing to a Prince song. UMG is really distinguishing itself these days.)
