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The Supreme Court’s Landmark First User Copyright Decision

The Supreme Court’s Landmark First User Copyright Decision

Last week the United States Supreme Court issued a landmark copyright ruling in Kirtsaeng v. Wiley (link goes to a PDF of the full decision). The case concerned the “First Sale” Doctrine, which holds that once a consumer lawfully purchases a copyrighted good, the distribution rights embodied in the copyright are exhausted, and the owner of the product has the right to sell or otherwise dispose of that individual good as he or she pleases. To put it another way, if I buy a copy of Baseball Prospectus 2013 from Amazon, read it from cover to cover, and then want to sell my copy to a baseball-loving friend, BP’s copyright in that book does not prevent me from doing so.

The Court’s ruling concerned whether it was legal to import books from other countries and sell them in the US. However, the case applies to all sorts of media, from books to DVDs to copies of movies, software, and potentially a huge range of consumer products. Read on for more detail.

Supap Kirtsaeng was an immigrant from Thailand who had friends and family back home purchase English-language textbooks and resold them in the US. Because the books, which were substantially identical to the US versions, were much cheaper in Thailand, this resulted in both a nice source of profit and a lawsuit from the publisher, John Wiley & Sons, Inc.

The case made its way to the Supreme Court, which considered two apparently conflicting principles found in the US Copyright Act: “Market Segmentation,” which permits a copyright owner to sell the same copyrighted work at different prices in different locations, and the First Sale Doctrine, as described above. Wiley relied on Sections §106(3) (the copyright owner’s exclusive right to distribute) and §602 (which contains an import prohibition.)

Section 109(a) of the Copyright Act sets forth “first sale” doctrine:

“Notwithstanding the provisions of section 106(3) [the section that grants the owner exclusive distribution rights], the owner of a particular copy or phonorecord lawfully made under this title . . . is entitled, without the authority of the copyright owner, to sell or other­ wise dispose of the possession of that copy or phonorecord.” (Emphasis added by the Court.)

The Court determined that the issue came down principally to the italicized words. When Congress passed the Act, did they intend the phrase “lawfully made under this title” to mean:

  • “Lawfully made within the jurisdiction of the US Copyright Act” (meaning, it was a geographic limitation); or
  • “[M]ade ‘in accordance with’ or ‘in compliance with’ the Copyright Act, which would permit the doctrine to apply to copies manufactured abroad with the copyright owner’s permission” – a non-geographic limitation.

The US government, along with many members of the publishing and entertainment industry, asked the Court to take the geographic view and rule in favor of Wiley. A coalition of “Library associations, used-book dealers, technology companies, consumer-goods retailers, and museums…” argued in favor of the non-geographic view. Their preferred interpretation seems fairly simple: once a copyrighted work is legally purchased anywhere in the world, the owner has the right to resell that product anywhere else. They offered a “parade of horribles” that would result from the Court ruling in Wiley’s favor. “For example, a geographical interpretation of the first-sale doctrine would likely require libraries to obtain permission before circulating the many books in their collections that were printed overseas.”

Copyrightable works are found in an almost infinite variety of products manufactured all over the world. The MacBook Pro that I’m typing this on certainly contains copyrighted software and components from a variety of countries. The parties taking Kirtsaeng’s side argued that a ruling in favor of Wiley could, in theory, allow Apple to prevent me from reselling the computer. The same could apply to a book, a cellphone, a car, or almost any other conceivable product.

Ultimately, the Court took the side of Kirtsaeng and articulated a rule that the First Sale Doctrine applies to goods lawfully purchased and manufactured anywhere in the world. There was no compelling evidence in the record that showed that Congress intended for the “lawfully made under this title” phrase to have a purely geographic meaning. The Court also included in its decision a variety of policy considerations, including the following:

The “first sale” doctrine also frees courts from the ad­ministrative burden of trying to enforce restrictions upon difficult-to-trace, readily movable goods. And it avoids the selective enforcement inherent in any such effort. Thus, it is not surprising that for at least a century the “first sale” doctrine has played an important role in American copy­right law.

The American Library Association tells us that library collections contain at least 200 million books published abroad (presumably, many were first published in one of the nearly 180 copyright-treaty nations and enjoy Ameri­can copyright protection…that many others were first published in the United States but printed abroad because of lower costs; and that a geographical interpretation will likely require the libraries to obtain permission (or at least create significant uncertainty) before circulating or otherwise distributing these books…How, the American Library Association asks, are the libraries to obtain permission to distribute these millions of books? How can they find, say, the copyright owner of a foreign book, perhaps written decades ago? They may not know the copyright holder’s present address…And, even where addresses can be found, the costs of finding them, contacting owners, and negotiating may be high indeed. Are the libraries to stop circulating or distributing or displaying the millions of books in their collections that were printed abroad?

In response to concerns from Wiley and those on its side regarding piracy and the inability to price goods according to local market conditions, the Court stated, “A publisher may find it more difficult to charge different prices for the same book in different geographic markets. But we do not see how these facts help Wiley, for we can find no basic principle of copyright law that suggests that publishers are especially entitled to such rights.”

So now it falls to Congress. If they determine that, for policy reasons, the publishers’ concerns are valid, there is nothing to stop them from amending the Copyright Act to once again give publishers the right to prevent importation of goods containing copyrighted works. However, given the force with which the Supreme Court spoke, and the likely backlash from consumers should they try to reverse this decision through legislation, I suspect the publishing and entertainment industry will just have to live with this decision for the time being. Anyone want to buy my gently used MacBook Pro?

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