On March 19, 2013, in Kirtsaeng v. John Wiley &
Sons, Inc., the Supreme Court held that the "first
sale" doctrine applies to copies of a copyrighted work
lawfully made abroad. This landmark ruling, by a 6-3 margin,
reversed the Second Circuit's holding that the phrase
"lawfully made under this title" in 17 U.S.C.
§109(a) limits the "first sale" doctrine to works
manufactured in territories governed by U.S. copyright law.
John Wiley & Sons, Inc., an academic textbook publisher, sued
Kirtsaeng, a Thai-born U.S. student, for importing and reselling
foreign editions of Wiley textbooks. Wiley claimed that
Kirtsaeng's unauthorized importation and resale of its books
infringed Wiley's exclusive right to distribute under
§106(3) as well as the importation prohibition in §602.
Kirtsaeng argued that because the foreign editions were
"lawfully made" and acquired legitimately,
§109(a)'s "first sale" doctrine permitted
importation and resale without Wiley's further permission. The
district court held that Kirtsaeng could not assert this defense
because the doctrine does not apply to goods manufactured abroad.
The Second Circuit affirmed.
Justice Breyer (joined by Chief Justice Roberts and Justices
Thomas, Alito, Sotomayor, and Kagan) delivered the opinion of the
Court holding that the "language, its context, and the
common-law history of the 'first sale' doctrine, taken
together, favor a non-geographical interpretation" of
§109(a). Among other factors, Justice Breyer noted that
§109(a) says nothing about geography and that the
"manufacturing clause" of the U.S. Copyright Act was
phased out in an effort to equalize treatment of copies made in the
U.S. and copies made abroad. He warned that a geographical
interpretation of the "first sale" doctrine would grant
the holder of a U.S. copyright, including a foreign national,
"permanent control over the American distribution chain
(sales, resales, gifts, and other distribution) in respect to
copies printed abroad but not in respect to copies printed in
America." Yesterday's ruling also cautioned that a
geographical interpretation would impede libraries from freely
lending books by requiring them to verify the origin of each book
or risk being subject to infringement claims for distribution of
copies made abroad. Justice Kagan wrote a concurring opinion,
joined by Justice Alito. Justice Ginsburg wrote a robust dissenting
opinion, joined by Justices Kennedy and Justice Scalia, in which
she objected to the concept of "international exhaustion"
and contended that this ruling is flatly inconsistent with
Congress' objective of protecting copyright owners from
unauthorized copies flooding into this country from abroad.
This ruling also removes some of the uncertainty left by the
Court's 4-4 split decision in Costco Wholesale Corp. v.
Omega, S.A., 131 S.Ct. 565 (2010). In Costco, the
Court affirmed the Ninth Circuit's holding that the "first
sale" doctrine does not apply to copyrighted watch designs
distributed and imported for unauthorized sale in the U.S. In that
decision, Justice Kagan recused herself and the remaining justices
were equally divided. The 6-3 decision in Kirtsaeng means
that at least one of the justices changed his or her view on the
matter.
What This Means for You
This ruling is likely to decrease the overall value of U.S. copyrights. A decision to allow your work to be published or copied abroad may severely diminish the market for your work in the U.S. because importers who may have acquired your work at lower prices may now compete with you in the market.
On Friday, the Court will consider whether to grant certiorari as to a similar question regarding patents, i.e., whether the initial authorized sale outside the U.S. of a patented item terminates all patent rights to that item, in Ninestar Technology Co., Ltd., et al. v. International Trade Commission, et al. The Court will likely announce its decision on certiorari on Monday.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
