An appellate court in Seattle has affirmed a federal court ruling that individuals are entitled to re-sell promotional CDs.

The three-judge panel’s decision, filed Jan. 4 in Seattle, upholds a 2008 ruling in U.S. District Court in L.A. in a protracted lawsuit lodged by Universal Music Group against Troy Augusto, who maintains a business, Roast Beast Collectables, that re-sells promo discs.

In its 2007 suit, UMG had maintained that Augusto (who is a former Variety reporter) infringed on the music company’s exclusive right to distribute the discs, and that mailing of discs for promotional purposes constituted a license for use, and did not represent a transfer of ownership.

Augusto, whose company re-sold promo CDs on eBay, had countered that the promo wares were subject to the first sale doctrine, which allows recipients to dispose of the material without approval of the copyright holder.

Ninth Circuit Court of Appeals Judge William C. Canby’s opinion rejected UMG’s arguments and upheld the federal court’s ruling in Augusto’s favor. It turned largely on the fact that since the promotional CDs were not specifically ordered material, they could be considered a gift and disposed of as the recipient saw fit.

Also, the court noted, there was no evidence that recipients of promo CDs agreed to any implied licenses, despite statements to that effect affixed to the promo discs.

After two consecutive court defeats, UMG now has the option of taking its case to the U.S. Supreme Court.

A UMG spokesman could not be reached for comment.