MUMBAI: A US federal district court has ruled that selling promo CDs on eBay does not infringe copyright. The court ruled against Universal Music Group which had sued Troy Augusto, who regularly sells promo CDs on eBay.

Universal claimed that music labeled "promotional use only" are the company's property and can never be resold or even thrown away and filed a copyright infringement lawsuit.

eBay seller Troy Augusto offered rare and collectible music which also included promotional CDs. He found these "promo" CDs at used record stores and resold them on eBay. The Electronic Frontier Foundation (EFF) and the San Francisco law firm of Keker & Van Nest took Augusto's case to fight for the proposition that a copyright owner can't take away a consumer's first sale rights just by putting a 'promotional use only' label on a CD. His lawyers argued that "first sale" guidelines allow him to resell the material without permission from the copyright holder.

The court rejected the notion that these labels create a "license," concluding that the CDs are gifts. According to the opinion, "UMG gives the Promo CDs to music industry insiders, never to be returned. ... Nor does the licensing label require the recipient to provide UMG with any benefit to retain possession." (The court also found that federal postal laws relating to "unordered merchandise" establish that promo CDs are gifts to their recipients, according to the EFF.) The ruling sets an important precedent for lawsuits dealing with music ownership issues are becoming common with software vendors, laser printer manufacturers and patent owners trying to strip consumers of their first sale rights with unilateral labels, licenses and notices.