Supreme Court

Will the Supreme Court Kill Used Bookstores?

The ruling in Kirtsaeng v. Wiley & Sons just may do that.

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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 –

JUSTICE BREYER: Am I right or am I wrong? Am I off base or am I wrong — am I right?

MR. OLSON: There are other defenses, but that is not this case. This case is not —

JUSTICE BREYER: Well, how do you distinguish? How do you distinguish?

MR. OLSON: The government — the government would argue for a broader interpretation under what was made under this statute, whether that would include the importation or the distribution in commerce. That's an argument that the government makes, but it's not necessary to decide this case.

Breyer gave more examples of hypothetical horribles where buyers might get screwed after buying imported products that contain copyrighted material. His list included "libraries with three hundred million books bought from foreign publishers that they might sell, resell or use" and "museums that buy Picassos." Olson replied, "When we talk about all the horribles that might apply in cases other than this—museums, used Toyotas, books and luggage, and that sort of thing—we're not talking about this case."

On the other side, E. Joshua Rosenkranz, the attorney for Kirtsaeng, posed the idea of how this could impact manufacturing jobs. Rosenkranz tried to explain that a ruling for Wiley & Sons would entice publishers and copyright holders to keep manufacturing overseas, so they could control resale rights at a global scale.

"A U.S. manufacturer who wants to sell into the U.S. market has this incentive to go and send jobs overseas. It's an irresistible incentive if the law is — if this Court says the law is." Justice Ruth Bader Ginsburg questioned Rosenkranz if this has in fact ever happened. Rosenkranz swears by it, but came up short on providing a case.

After all is said and done with the hearing, this case has gone beyond the walls of the Court of Last Resort. The case has attracted internet big shots like eBay and Overstock as well as other stakeholders in second-hand stuff such as The American Library Association and Goodwill Industries. Together, along with many other businesses, associations and organizations, they have created a coalition called the Owners' Right Initiative (ORI).

If the Court sides with Kirtsaeng, copyright holders could have a mess on their hands—trying to get ahold of royalties, not only for publishing companies, but for authors, artists, and content creators. A snowball effect could occur. If the creators of content aren't receiving any royalties due to re-importation, then they might not be as keen to put out so many versions. But then they may increase prices to compensate for that lost revenue stream.  

The resellers could see some major damage too—from cultural exchange to online businesses. Damn near everyone has resold something in their lives, at a garage sale or on Craigslist. A victory for Wiley could mean a bigger snowball could roll down the hill, running right over eCommerce, small businesses, libraries, museums, and the lady down the street who is trying to sell foreign knick-knacks.

Whatever decision is rendered, it seems safe to say that it won't be a perfect solution. Who out of the two groups will take a bigger fall? Publishers, movie studios, and others in the entertainment industry will suffer by not being able to stop imports from their cheapest markets abroad. If that happens, we can expect the price of all licensed goods, from textbooks to DVDs, to spike as copyright holders try to make as much as possible on domestic sales. But resellers could have a cliff that is sharper on the way down.

What needs to change is the mentality around doing business. Kirtsaeng may seem like a entrepreneurial David taking on a corporate Goliath, but that's not quite right in the bigger picture. You have major companies such as eBay, Google, and Costco embracing the idea of reselling, while other business, as large or larger, favor making the practice a crime. Copyright is enshrined in the Constitution specifically as a means to benefit society, not particular industries or business models, a point which often gets lost in legal battles. After decades of copyright-holder-friendly legislation plainly at odds with technological innovation that undercuts everybody's ability to control distribution and reproduction, it's increasingly difficult to argue that consumers are well served by strict enforcement of existing laws.

The Supreme Court's decision will be announced sometime in the coming months. Depending on that decision—and it's far from clear how the majority will rule—we may start to see a real-life "parade of horribles" by the beginning of next summer. And no matter what this decision says, you can expect to see a flood of similar cases in the future.

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58 responses to “Will the Supreme Court Kill Used Bookstores?

  1. In my experience, used bookstores are just vast repositories of used copies of the lesser Clancy novels.

    1. Don’t forget Stephen King.

      And around here they’re usually hippie magnets. I suppose losing used bookstores would be ‘bad’, but I can’t say as how I’ll notice.

      1. Also Heritage Press books. Actually, we have some decent used-book stores where I live, and they provide employment for hippies emeriti.

    2. The good used book stores just don’t take crap. I have a few good ones nearby. But my observation/experience is that most are full of romance novels. It’s like a library for lonely middle aged women.

  2. Heh, I did this in college, and ya the book had a big note on the inside cover stating “NOT FOR SALE OR RESALE IN THE US”. Even if I agreed that reselling the textbooks was wrong, which I do not, the price that sellers like wiley charge are exorbitant, they should have known someone would do something like this.

    Also, one of the last books i had to buy was an online Ebook from Wiley, where you had to log into a website to view the book. Its an obvious attempt to force people to buy a textbook from the publisher and not from the school bookstore or elsewhere.

    1. One thing that textbook publishers have done to offer a lower cost option are loose leaf versions of textbooks that you can stick in a binder.

      I got this for my microbiology textbook, but the thing was so massive that there wasn’t a binder I could stick in without tearing the pages, allowing them to fall out in a disorganized mess.

    2. Huh. It was a little while ago now, but when I was in college, it was the standard practice to sell back your text books (for like 15% of what you paid) at the end of the year if you wanted to get rid of them. And used copies were often available at the school bookstore.

      1. In better organized schools, student books clubs were created where you can exchange books for others. Some are done by credit, some offer cash if they are able.

        College book stores buy used books at 15% of price, then resell at 85%. So they make the profit twice on one book.

        Be as smart as your book store, organize so students can trade books =.

      2. Reselling books originally intended to be sold in the US is not a problem.

  3. Ah, yes, I have fond memories of paying an exorbitant price for some oversized softcover text in college, from which I was required to actually rip pages out, write on them, and turn them in. Absolutely no photocopies accepted. I’m sure it was just a coincidence that the author of the textbook and the professor for the course were the same person.

    1. Wow. It’s amazing what people can devise when they’re not constrained by morality.

      At my Alma Mater, a certain professor used his own textbook for a course he taught. He came under attack for it, until he pointed out that he was selling the book to the students at cost and was not personally profiting. How is that not standard practice at every university?

      1. At cost? Why not just distribute digitally and allow people to print or copy? Cost is effectively $0.

        I call BS on the “at cost”. Unless the prof includes the cost of his labor, marketing, distribution, etc.

        1. Why not just distribute digitally and allow people to print or copy?

          In many cases the prof in question would like to someday get a book deal, so they don’t want digital copies floating around the net.

      2. For graduate math courses this is actually somewhat common, since often a professor is not pleased with how the few available texts are written. Though the text is usually spiral-bound by the department rather than made into a normal-looking textbook.

        1. Every college professor I had would tell us how sorry they were that publishing companies charged so much but only one ever actually attempted to do anything about it. Most still insisted on students buying the newest edition of a text book each year. But I had a biology professor who believed that everything a person needed to know for an undergraduate biology course was readily available online for free. So he said we could either buy the $180 official text book or he made a Word document available to us with links to what he felt were the best web pages online to explain each concept we were learning. Sites varied from other college professor websites to Wikepedia but the information was all legitimate. I always felt he was the only professor who was sincere when he said he felt bad about book prices.

    2. Hopefully that wasn’t for an ethics class.

  4. I love used bookstores, but the Internet stabbed them in the heart years ago. At best, all SCOTUS can do at this point is push them into an open grave.

    1. It’s not just used bookstores though. Its anything sold overseas that someone tries to resell. That includes Ebay, Amazon, craiglist, the wantAd, garage/yard sales, ect.

      1. I understand that. I was just reacting the headline.

    2. Did they? Seems to me they’ve become a massive network of mini-warehouses bound together by Amazon and bn.com.

      1. But that model is not one that requires much in the away of retail space. And the seller end took to ebay/amazon/bn as well, cutting out the middle man of the bookstores all together.

        Besides, for the collector of books, the utility of the used bookstore was an asymmetry of information about the value of books on the part of the owner and the buying customer, one that they also exploited on the seller end (when the stores were buying stock.)

        My ability to buy a $300 Philip K. Dick first edition for $2 dollars is gone along with the bookstores ability to buy it for $2 and sell it for $300 themselves.

        Of course, the ability to just buy the book online whenever I wanted at a fair market value killed the collecting impulse, revealing it was always the hunt and superior knowledge that I enjoyed.

        1. ^This^

          I used to have a routine run of luck just checking crappy autobiographies for there once-famous author’s signatures.

          I once found a Houwes U.S.iana aa title in a trade-a-paperback shop. It was the only hardcover in there not about God or condensed by Reader’s Digest. There wasn’t even any BOtMC.

          1. (aa as in rarer and/or more desirable than A, yet not quite a B according to the esteemed Wright Howes)

        2. It’s still possible find good ones. Even though the local Salvation Army and Goodwill stores have online bookstores now and skim the cream of the donations for them, they often miss things. In recent months I’ve found one $300 and a half-dozen $50+ books.

          And here’s a puzzler for the economists. In theory, online bookselling should have a flattening effect on pricing, but it doesn’t seem to have done so. Many, many books on Amazon or Bookfinder are priced all over the map. E.g. you’ll have a like-new first edition in a dust jacket for $10, and someone else has the same book but an an ex-library “with the usual markings” for $25.

          1. You’re in San Fransisco? Your pickings are much more abundant.More than enough to make up for the increased competition.

    3. I still occasionally scout in thrift stores just for nostalgia’s sake. The last time I was in some shithole town and there was a guy scanning all the USB #s with his smartphone.He looked like he’d already hit all the dumpsters for aluminum cans that morning.

      1. You mean UPCs, but many of the best finds predate UPCs.

        1. Yes, UPCs. I was assuming (incorrectly?) the UPC contained USB data.I was just surprised as he obviously knew what he was doing yet seemed uncaring or oblivious to the older books and ephemeral material.

  5. If you’re not allowed to sell it, do you truly own it?

    1. No, which is what online music, book, and game retailers have been acting like for years.

    2. Renting until a bug in software pops up. Then you own it.

    3. you don’t own copyright material. you own the material it is on, and you have the right to use the information on it.

    4. Heidi Fleiss likes this.

  6. I’m surprised SCOTUS hasn’t already allowed Congress to ban price arbitrage in the name of Interstate Commerce.

    1. Ideas! You are giving them!

    2. It is kind of bizarre that they even bother with the copyright clause post-Wickard. Maybe they just like to pretend the enumerated powers doctrine is still in use?

      I have a leftist friend who loves the omnipotent commerce clause, but thinks the copyright clause is overridden by the 1st amendment, but I’m not ready to go that far.

      1. Our government has moral authority because it is based on an ideal. If they abandon that ideal, they abandon their moral authority and all that is left is brute force.

        Brute force is not exclusive to governments. Criminal gangs have it too, and are just as moral as a government that relies solely on brute force.

        A citizen has a duty to resist a criminal, how is a criminal government any different?

  7. This problem should go away if everyone just bought an item made only by American hands. Stop buying things made by foreigners.

    A small loss for liberty, a big win for America!

    1. WHERE an item is MADE is irrelevant. It is where the first point of sale occurs.

    2. I would also add that a loss of liberty is never a win for America.

  8. Ok. So Section 602 references Section 106, which says:

    “Subject to sections 107 through 122, the owner of copyright under
    this title has the exclusive rights to do and to authorize any of
    the following…”

    The copyrights are subject to the “first sale” doctrine in Section 109, which is referenced by Section 106, which is referenced by Section 602. Doesn’t that make Section 109 (the first sale exclusion) primary? The SCOTUS should rule in the seller’s favor.

    This will probably come down to a question of legislative history, however.

    1. This will probably come down to a question of legislative history what Anthony Kennedy had for breakfast, however.

  9. “we can expect the price of all licensed goods, from textbooks to DVDs, to spike as copyright holders try to make as much as possible on domestic sales.”

    I don’t think so. Increasing the domestic price would only encourage more importation of the cheaper foreign versions. Instead, we would we see convergence of prices and domestic prices drop and foreign prices increase due to a combination of market arbitrage and effort by the producer to minimize the gain from arbitrage.

    I think the court will apply the first sale doctrine. It is the only way it makes sense. The law generally is designed for the benefit of consumers, and there is no benefit to allow producers to segregate markets.

    1. Actually, I suspect the publisher’s response would be to not offer discounted foreign versions of the same textbooks.

      To some extent they already do this. Most of the international editions have the problem numbers rearranged so US students who purchase them are screwed if the prof assigns homework from the book…which most lazy ones do.

      1. I don’t know. There is a central marketing concept of putting out a product line that meets demand at every price point. The point of having a cheap international edition is to give yourself a chance to make money off of poorer international customers. It’s the same basic reason that car manufacturers make many different options packages for each model. Sell the cheapest to your poorer consumers and the most expensive to luxury consumers.

        So I think that the publishers would continue selling different “models” of textbooks to make money from poorer consumers. Sure, the books would eventually wind up in the West. Too fucking bad.

  10. The point about copyright being enshrined in the Constitution is moot because the SCOTUS hasn’t read that clause in generations.

    The Constitution plainly states “for limited Times” and not “until Disney runs out of the money to fund campaigns at which point Sony will take over for them until the 5 major owners of our culture collectively run out of money…”.

    1. Sony will run out of money well before Disney. They just reached junk status.

  11. Because capitalism is illegal. That last little shred, your ability to easily sell your legal and legally acquired possessions goes next.

    1. The books Kirtsaeng imported were not legal. It said so right on them.

      1. Who cares what it said on them? There are many examples of products saying shit that simply isn’t true. Even ones that purport to give legal status. For instance, the numerous cases filed against companies who have claimed patent protection (stamped on their products) when they either never had a patent or their patent had expired. Manufacturers may mislead.

        Or they may simply be wrong. It’s pretty clear that 17 USC 109 and 17 USC 602 are in conflict with one another in this case. There are reasonable cases to be made that what Kirtsaeng did was legal and that what he did was illegal. It’s certainly not prima facie obvious however.

        1. Interesting…from the legislative history of 17 USC 602:

          “however, the articles may be returned to the country of export whenever it is shown to the satisfaction of the Secretary of the Treasury that the importer had no reasonable grounds for believing that his or her acts constituted a violation of law.”

          It would seem that, even if Kirtsaeng loses on the 109 vs. 602 issue, he might have an affirmative defense against paying the $75,000 per violation. I’d think it’s reasonable to believe that Section 109 made his actions legal. However, he has to show that he had no reasonable grounds to believe his acts were illegal? That sounds like a high burden of proof. And definitely beyond the preponderance of evidence usually required by civil cases (which copyright should be).

  12. Another example of IP law being hopelessly out of touch with reality. Books are anachronisms. There’s simply no way to stop an ebook at an imaginary geographic line. Book publishing is going the way of the recording industry and nothing can save it. Certainly not 9 senile lawyers.

  13. Seventeen USC ? 109(a) and 17 USC ? 602(a)(1) are not in apparent conflict. In statutory interpretation, the specific overrides the general, and hence 17 USC ? 602(a)(1) applies.

  14. You know you’re wrong when even Stephen Breyer sounds rational and thoughtful when arguing with you.

  15. This is a straightforward case. The copyright covers new book sales, not used book sales. So it prohibits a wholesaler or importer to import and sell books in the US. But Kirtsaeng was selling used books! Poor Wiley & Sons–they are not able to realize all of the theoretical gains of their price discrimination.

  16. Correct me if I’m wrong: but shouldn’t Wiley’s gripe only be limited to those books manufactured for sale in Thailand and not the US? The Supreme Court in order to decide this case correctly would not prohibit the resale of any items manufactured with the intent to sell in US Market, regardless of where it is manufactured. There are very few true “imports” on amazon, for example. Most of what is bought and sold in US was manufactured specifically for that market. The question is: has this distinction been taken into consideration? Will it?

  17. Bookstores will not be killed, it is good have people need these.

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