Monday 29 October 2012

Second hand books: US Supreme Court considers the first sale doctrine

Today the US Supreme Court hears the opening arguments in Kirtsaeng v. John Wiley & Sons Inc., labelled as one of the most important copyright cases of the decade. The case is about whether works manufactured outside the US can be resold in the US without the permission of the copyright owner.
The case will deal with two apparently conflicting provisions in the US Copyright Act. Section 602(a)(1) says that (without permission) importation into the US of copies of a protected work is an infringement of the exclusive right to distribute copies under section 106. This protects the copyright owner's importation right.

In practice, this does not prevent parallel imports: indeed the grey market in the US was valued by Deloitte at USD 63 billion in 2009. Importers rely on section 109(a) of the US Copyright Act which says that anyone who buys a work which is "lawfully made under this title" (meaning under the Copyright Act), may re-sell that work without the permission of the copyright holder. This is the first sale doctrine, which is similar to the principle of exhaustion in Europe, both of which aim to allow a second hand market for goods.

In this case Supap Kirtsaeng, originally from Thailand, realised that he could import textbooks from Thailand and sell them in the US, on eBay, at a profit. John Wiley & Sons a textbook publisher noticed that Kirtsaeng was re-selling some of its textbooks. These were editions intended for distribution outside the US. They were of slightly lower quality and were of course sold at a much lower price, enabling Kirtsaeng to make a profit of USD 37,000.

Wiley sued Kirtsaeng for copyright infringement, and the judge at first instance barred Kirtsaeng from relying on the first sale doctrine as the books were manufactured outside the US. The first instance judge found in Wiley's favour and awarded damages of USD 600,000. This was upheld on appeal: the 2nd US Circuit Court of Appeals held that the first sale doctrine was inapplicable because the wording "lawfully made under this title" at section 109(a) referred only to copies manufactured in the US. The case now proceeds to the Supreme Court.
This is not the first time that this issue has reached the Supreme Court: in 2010, it upheld a 9th Circuit decision that the first sale doctrine did not apply to works manufactured outside the US (in relation to Costco's sale of grey market Omega brand watches). Unhelpfully however there was no opinion as the decision was the result of a 4-4 tie.

This time around Kirtsaeng's legal team is arguing that if the appeal is dismissed by the Supreme Court any businesses which rely on resales (such as eBay), as well as second hand cars (containing copyright protected software), second hand bookshops and DVD rentals, and also libraries and museums which acquire works from around the world, will be affected. The Library Copyright Alliance (LCA) filed an amicus curiae brief with the US Supreme Court in support of Kirtsaeng.
Wiley argues however that the court does not need to address what happens to the first sale doctrine in the event of an authorised importation and that it should focus on unauthorised import and sale.

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