<b>Decision of Note:</b> Record-Rent Ban Does't Apply to Literary Works

The court added: 'The first sale doctrine ensures that the copyright monopoly does not intrude on the personal property rights of the individual owner, given that the law generally disfavors restraints of trade and restraints on alienation. In passing the record rental exception, ' Congress effectively altered the traditional copyright bargain and extended the copyright monopoly for a limited set of works ' The specific problem addressed by Congress in 1984 ' rampant piracy of popular musical recordings ' does not apply to sound recordings of literary works. When evidence surfaced of a new class of works in need of Sec. 109(b) protection ' computer software ' Congress amended the statute to explicitly exempt the works from the first sale doctrine ' Absent such an express statement from Congress regarding audiobooks, there is no evidence that Congress intended to alter the copyright bargain, and we see no reason to extend Sec. 109(b) beyond its original context.'

But the appeals court allowed Brilliance Audio to proceed with its trademark-infringement claim. Courts have recognized two exceptions to trademark law's first-sale doctrine: inadequate notice to the public that the plaintiff's product has been repackaged, and material differences between a trademark owner's goods and an alleged infringer's goods.

The Sixth Circuit explained that in the audiobooks case: '[T]he notice of repackaging is inadequate because it creates the misrepresentation that '[d]efendants have a long-standing relationship with Plaintiff and that the activities of Defendants are authorized and sponsored by Plaintiff' ' The complaint also alleges that the inadequate packaging is likely to result in consumer confusion that will dilute the value of the trademark. ' Although the complaint does not specifically use the word 'material' in describing the product difference and leaves some ambiguity in allegations as to whether the product is in fact different or only the packaging and marketing, we cannot conclude that plaintiff has alleged insufficient facts to permit granting relief.'

The U.S. Court of Appeals for the Sixth Circuit decided, in a case of first impression, that the federal ban on renting or lending sound recordings doesn't apply to audiobooks. Brilliance Audio Inc. v. Haights Cross Communications Inc., 05-1209.

Brilliance Audio filed suit over Haights' unauthorized repackaging and relabeling of Brilliance-Audio retail audiobooks as Brilliance library editions for rental, lease and lending. The district court dismissed the plaintiff's claims.

Under the copyright first-sale doctrine, 17 U.S.C. Sec. 109(a), the owner of a copy of a work generally may pass it on in any manner. But the Record Rental Amendment of 1984, 17 U.S.C. Sec. 109(b)(1)(A), states:

Notwithstanding the provisions of subsection (a), unless authorized by the owners of a copyright in the sound recording[,] … and ' in the musical works embodied therein, [ ] the owner of a particular phonorecord ' may [not], for the purposes of direct or indirect commercial advantage, dispose of, or authorize the disposal of, the possession of that phonorecord ' by rental, lease, or lending, or by any other act or practice in the nature of rental, lease, or lending.'

Affirming the district court in part, the Sixth Circuit noted: '[T]he combination of the legislative history, the context in which the statute was passed, and the policy rationales behind both Sec. 109 and copyright law in general provide strong evidence that Congress intended to exclude only sound recordings of musical works from the first sale doctrine ' At the time Congress adopted the exception in 1984, the exclusive focus of the testimony and the legislators was on protecting the music industry.'

The court added: 'The first sale doctrine ensures that the copyright monopoly does not intrude on the personal property rights of the individual owner, given that the law generally disfavors restraints of trade and restraints on alienation. In passing the record rental exception, ' Congress effectively altered the traditional copyright bargain and extended the copyright monopoly for a limited set of works ' The specific problem addressed by Congress in 1984 ' rampant piracy of popular musical recordings ' does not apply to sound recordings of literary works. When evidence surfaced of a new class of works in need of Sec. 109(b) protection ' computer software ' Congress amended the statute to explicitly exempt the works from the first sale doctrine ' Absent such an express statement from Congress regarding audiobooks, there is no evidence that Congress intended to alter the copyright bargain, and we see no reason to extend Sec. 109(b) beyond its original context.'

But the appeals court allowed Brilliance Audio to proceed with its trademark-infringement claim. Courts have recognized two exceptions to trademark law's first-sale doctrine: inadequate notice to the public that the plaintiff's product has been repackaged, and material differences between a trademark owner's goods and an alleged infringer's goods.

The Sixth Circuit explained that in the audiobooks case: '[T]he notice of repackaging is inadequate because it creates the misrepresentation that '[d]efendants have a long-standing relationship with Plaintiff and that the activities of Defendants are authorized and sponsored by Plaintiff' ' The complaint also alleges that the inadequate packaging is likely to result in consumer confusion that will dilute the value of the trademark. ' Although the complaint does not specifically use the word 'material' in describing the product difference and leaves some ambiguity in allegations as to whether the product is in fact different or only the packaging and marketing, we cannot conclude that plaintiff has alleged insufficient facts to permit granting relief.'