Billboard reported last Thursday that a federal District Court in Los Angeles has denied a motion by Universal Music Group to find an eBay Inc. (NASDAQ: EBAY) seller who sold promotional CDs the label claims are its property (and thus not eligible for sale) liable for copyright infringement. UMG argued in its motion that a label printed on the discs stating they "were promotional and could not be sold" gives the holders of the CDs the right to listen only and not sell the CDs. According to the BBC, the motion from UMG was first filed against eBay seller Troy Augusto in May 2007 and resulted in the cancellation of an auction and threats from eBay.

The federal court argued that the label could not prevent that sale, and Billboard added that copyright law states "once the legal title to a lawfully made copy of a copyrighted work is transferred, then the person who obtains that copy owns it and may dispose of it." That does not mean an owner of the item can copy and sell the new version for profit ,though. Troy Augusto, the eBay seller targeted by UMG, argued to the court that the recipients of the CDs from UMG could treat the items as gifts under federal law and the court agreed with this assessment.

The yearlong affair between Universal Music Group, Troy Augusto and eBay, brings a larger question into the fold: What is the point of these promotional CDs? Before the advent of the digital market, physical copies distributed to sell new music via the radio made perfect sense, and in many ways they still do because these items are easily played on stations. But, with MP3 files and stores like Apple Inc.'s (NASDAQ: AAPL) iTunes Store leading the way for sales and marketing, could the record industry make promotional MP3s available to both radios and consumers?In many ways, that very event is what occurred in late April when EMI Group and its band Coldplay released the single "Violet Hill" from the band's website only a mere two minutes after the song debuted on BBC Radio 1. It was available for free for a week and eventually saw over two million downloads. Additionally, a promotional 7" vinyl record was also made available with an early May issue of British music newspaper NME. While these facts indicate that EMI and Coldplay played up both the traditional promotional avenues, as well as giving fans a record through the magazine, the more exciting piece should be the download version that was freely distributed.

More than anything, despite Coldplay's status as a hugely successful band even when critics downplay their releases, like 2005's X&Y, the fact that "Violet Hill" saw over two million downloads should be a strong sign to EMI and the other music companies that freely distributed tracks can be used to market new music without distributing promotional CDs to radio stations. How unlikely would it be that a radio DJ out there did not check out the free download anyway, or even promote it before playing the song? Odds are that the first broadcast on BBC Radio 1 featured some note about the upcoming download that day. The song has also been announced as a new download track for Activision Inc.'s (NASDAQ: ATVI) Guitar Hero III: Legends of Rock.

In the end, while the court ruling favors collectors and fans, it should not signal that the music industry will stop trying to limit what is done with "their products." That's the truly nice thing about using MP3's as promotional tools instead of CDs or vinyl records. No claim can ever be made that a freely, legally downloaded track from a music label or band website should be returned to the label. A label would also be hard pressed to try and force a music fan and listener to erase the track from their computer's library. It's easy, it's accessible, and it's a generous and friendly gesture that the music industry cannot take back.