In Brief:  The First Sale Doctrine doesn’t always apply to gray market goods.

In the olden days, you’d buy an album and when you grew tired of it you’d sell the album to a used record store. That’s because you owned the physical record and once you bought it, that record was yours to do with as you please. This is called the “First Sale Doctrine”. Nowadays most people download their tunes. They still buy or rent it but now they don’t have a physical embodiment of the music. Relying on the First Sale Doctrine, ReDigi Inc. had offered a service whereby you could upload your digital music that you legally purchased from iTunes and resell it. Capitol Records LLC had a problem with that. Capitol Records sued ReDigi for copyright infringement arguing that the First Sale Doctrine doesn’t apply to digital files. The act of uploading the files to ReDigi’s server was creating a copy without permission. The Second Circuit Court of Appeals affirmed a judgment in Capitol Records’ favor. ReDigi also argued that its use was Fair Use. The court held against ReDigi on that as well because ReDigi was commercially motivated, made no changes to the copyrighted works, used the entire works, and resold the digital music files in the same market as the copyright owners.

A repaired Rolex may not be a Rolex. %CUT% In Trademark Law, the “First Sale Doctrine” allows a consumer who buys a trademarked item to resell it without having to pay a license fee. But there are limits. In Rolex Watch USA, Inc. v. Krishan Agarwal, the defendant refurbished Rolex watches and then resold under the trademarked name. When Rolex sued him for trademark infringement, Agarwal asserted the affirmative defense of the First Sale Doctrine. The court rejected the argument. The court examined the impact of the modifications on the original product. If the modifications create a new product, it can no longer be sold using the trademark. In this case, Agarwal replaced dials and bracelets that weren’t authentic Rolex items. Agarwal offered to include a disclaimer. But the court held that the disclaimer would be confusing because the refurbished watch was really a new product.