Who Pays the Songwriter Under First Sale Defense?

by Tamera H. BennettAugust 20, 2007

Universal Music Group sued Troy Augusto for copyright infringement based upon Mr. Augusto’s offering for sale and selling of musical compact discs marked “Promo Only.” Mr. August secures promotional compact discs from various sources and then sells them on eBay.

Pursuant to 17 U.S.C. § 109(a), musical compact discs/tapes/albums can be sold or otherwise disposed of by the party in possession of the compact disc, without authority from the copyright owner. The big question raised in the lawsuit and other articles reporting the lawsuit revolves around the marking of the compact discs as Promo Only along with other legends regarding not selling the CD’s overriding the language of § 109(a).

Here is my question for the day that has yet to be addressed: Who pays the artist, producer, music publisher/songwriter and yes even the record label when “promo only” copies are sold?

Assume I am a music publisher. I will issue a license to Universal for one of their artists to record one of my songs. I will include language in the license similar to the following:

…provided, however, that no such royalty shall be payable with respect to promotional Phonorecords sent to disc jockeys, reviewers, and the like, which are clearly marked “Promotional Records Not For Sale” and which are not being distributed by Licensee for resale.

In my scenario, as the publisher I consent to a certain number of promo copies being manufactured and distributed and agree not to collect a royalty for those copies.

Suddenly, with the proliferation of online retailers such as Augusto, more and more royalty free recordings are moving in the marketplace without payment to the songwriter, publisher, artist, producer and label.

What is the solution? I am not sure. As much as I would like to see Universal prevail in this case and have a court announce Augusto’s action constitute copyright infringement, I do not think that is going to happen.

With a huge percentage of record labels providing digital content to radio stations and promoters, I wonder exactly how many promo copies are even pressed these days. Maybe this issue will resolve itself as fewer and fewer actual compact discs are made.