Of all the things to occupy record labels’ time, I wouldn’t have thought any would be devoted to tracking down the sale of lawfully made Promotional CDs on eBay. I’m wrong. There have been a number of such suits (two of whom are against the same individual), but in one the EFF has taken up defendant’s cause. Here is a link to EFF’s site, which contains a press release, the complaint, and the answer.
It is not only Promo CDs that are getting cracked down on; inexplicably, there has been an increase on so-called state “pawn shop” laws, most recently in Florida. In Florida, stores buying second-hand merchandise for resale must apply for a permit, thumb-print CD sellers and get a copy of the seller’s driver's license. Stores are limited to issuing store credit, and furthermore must hold the merchandise for 30 days before re-selling them. Not surprisingly, this has resulted in the closure of a number of such stores or in stores ceasing the sale of used CDs. (See this article in Ars Technica). And copyright owners wonder why they have a bad reputation among consumers.
In the promo CD case, the first sale doctrine will be a key element of the defense. The record label does not dispute that the promo CD was lawfully made but contends that a legend stating it was given under a license prevents application of that doctrine since the license terms prohibited resale. I have a few of these promo CDs, bought in second hand stores (in NYC, not Florida). I have always regarded efforts to make a sale (or in the case of promos, a gift), into a license just by saying so, is legally deficient. Putting a license label on something but treating in every other way as a sale, doesn’t seem to me to represent the strongest position, as the 2001 Softman/Adobe case showed. Yet, there is the Seventh Circuit’s ProCD versus Zeidenberg going the other way. Perhaps the promo CD case will distinguish ProCD by considering the effort to make the promo a license to be ineffectual in comparison, but all such analyses point out an Achilles heel in first sale: a federal defense is subject to the vagaries of state law.