On October 29, the Supreme Court heard the arguments of a copyright case involving the right to resell imported goods in the United States. The goods in question were college textbooks but the outcome could affect whether copyrighted goods made overseas can be resold in the U.S. without consent from the copyright holder. Kirtsaeng v. John Wiley & Sons, Inc. may focus on the five-pound appendages lugged around by undergraduates, but any product made overseas with a U.S. copyright—from shoes to laptops—could be affected. That makes Kirtsaeng potentially one of the most important decisions the Court will make this season.
Here’s the back story: Supap Kirtsaeng traveled to the U.S. from Thailand to attend Cornell and to earn a doctorate in math from University of Southern California. Along the way, Kirtsaeng set up his own business of sorts through eBay and sold $900,000 worth of books printed abroad by Wiley & Sons. He used the profits, among other things, to pay for his education.
In 2009, Wiley won a copyright infringement lawsuit against Kirtsaeng in the U.S. District Court for the Southern District of New York (SDNY). Kirtsaeng then appealed to the U.S. Court of Appeals for the 2nd Circuit in New York. The 2nd Circuit sided with SDNY. Kirtsaeng was ordered to pay $600,000 for infringing a textbook publisher’s copyrights when he resold eight textbooks that had been printed by the Asian subsidiary of the U.S.-based Wiley & Sons. Each international edition ended up costing Kirtsaeng $75,000 per book.
Kirtsaeng appealed the decision, claiming that Wiley lost its right to control sales of the book when his friends and family legally bought them in Thailand. This is known as the “first sale doctrine,” which holds that the publisher of a book only gets to control the original purchase of a book. After that, whoever bought the book can resell the book. The first sales doctrine is what makes used bookstores (and used record stores, along with many other retail shops) possible.
There are two relevant provisions of copyright law that are at hand—and in apparent conflict. The first, 17 USC § 109(a), states that “the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.” But another provision, 17 USC § 602(a)(1), states that the “importation into the United States, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under section 106, actionable under section 501.”
The two provisions create a precarious situation and raise the question now before the Court: Does the first sale doctrine apply when applying to imported books? The difficulties in answering that question raise another, which has never quite been settled once and for all: Do U.S. copyright laws actually cover products made outside the U.S.?
These questions have been raised before, in the case
Costco v. Omega, which was a 4-4 split
decision, since Justice Elena Kagan recused herself from any
decision. In that case, watchmaker Omega claimed the Costco had
infringed on Omega’s right to authorize retailers in the U.S. by
selling merchandise it bought from third parties. Because Omega
watches have a copyrighted design on them, the suit proceeded under
copyright law and Costco claimed that the first-sale doctrine
immunized them from any sort of infringement. A trial court ruled
in favor of Costco, but then the U.S. Court of Appeals for the 9th
Circuit reversed the decision, saying that the first sale doctrine
didn’t cover this instance. With the deadlock in the Supreme Court,
the 9th Circuit’s decision was upheld. In a 1998
case, Quality King v. L'anza , the Supreme Court
decided that the first sale doctrine did cover exported copies made
in the U.S. that are then re-imported back to the U.S. for sale
without the owner’s consent.
While the Kirtsaeng case has obvious connections to those two earlier rulings, something different is at stake. According to the SDNY document these books were printed overseas by Wiley & Sons’ subsidiary Wiley Asia. These books also included “notices stating that the books are copyrighted in the U.S.”—these notices were then decided insufficient “to satisfy” the act. Yet, on the back cover of these editions it states plainly, “this book may not be exported….importation of this book to another region without the Publisher’s authorization is illegal and is a violation of the Publisher’s rights.” The SDNY court decided for Wiley & Sons that its copyright was indeed infringed upon by Kirtsaeng, considering that Wiley still owns the copyright within the overseas subsidiary.
The Supreme Court will try to further decipher the law and decide if first sale applies. During the oral argument, the justices and lawyers walked through a “parade of horribles”—the moniker the given to hypothetical negative situations that might occur under different situations. The idea is to show the implications of a ruling that goes one way or another. The nightmare scenarios ranged from banning the reselling of cars to preventing libraries from lending books to stopping museums from buying art from collectors (rather than directly from artists).
Justice Stephen Breyer and Ted Olson, the attorney representing Wiley, duked it out in a discussion of what “horribles” could happen if Wiley prevailed (read the transcript here). Breyer asked Olson whether people would be able to resell their foreign cars, especially if they are loaded with copyrighted sound systems and copyrighted GPS systems. “Now, under your reading,” Breyer asked, “the millions of Americans who buy Toyotas could not resell them without getting the permission of the copyright holder of every item in that car which is copyrighted?”
After multiple attempts, during which they sounded like a married couple fighting over who left the stove on, Breyer coaxed an answer of sorts out of Olson:
MR. OLSON: There may be —
JUSTICE BREYER: Is that right?
MR. OLSON: There may be just -