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High Court Upholds Copyright First-Sale Doctrine in Case of Reselling Foreign Books

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by Publius
Posted March 20, 2013, 7:49 AM

Joe Mullin or Ars Techica reports:

The importation of copyrighted goods made abroad has been an increasingly contentious issue in recent years. Easy access to Internet resale markets like eBay and Amazon have made it possible for a new breed of entrepreneurs to buy low and sell high in a wide array of areas. The Supreme Court handed these resellers a major victory today, issuing a decision [PDF] that makes it clear that the "first sale" doctrine protects resellers, even when they move goods across national boundaries.

Those upstarts have peeved a lot of corporations, and some of them used copyright law to fight back. Textbook maker John Wiley & Sons sued a Thai student-entrepreneur named Supap Kirtsaeng, who had been buying cheaper (but non-pirated) versions of various textbooks in his home country, bringing them to the US, and selling them to his fellow students stateside on eBay. The price differentials were so big that there was quite a bit of money to be made; at trial, the publishing company's lawyers hammered home the fact that they had counted up $1.2 million in receipts over the life of Kirtsaeng's business.

Wiley argued those profits should be barred by copyright law. Their right to control prices abroad was actually part of their copyright grant, they argued. The textbook company won a jury verdict against Kirtsaeng, which was upheld by the US Court of Appeals for the 2nd Circuit, and Kirtsaeng appealed to the Supreme Court, arguing that his business was protected by the "first sale" doctrine.

Today's decision vindicates the "first sale" doctrine, which allows the owner of a particular copy of a work to do whatever she wants with it after purchasing it. It overrides first sale losses in both the 9th and 2nd Circuits and makes it clear that digital commerce can flourish in the Internet era, even when it crosses borders.

The 6-3 opinion was authored by Justice Steven Breyer, perhaps the justice most skeptical of intellectual property rights. The dissent was authored by Justice Ruth Ginsburg, who has long favored powerful copyright privileges. Justices Antonin Scalia and Anthony Kennedy also joined the dissent.

The decision throws out a $600,000 damages award that was granted to Wiley.

Section 109(a) of copyright law describes the first sale doctrine, which applies to any work "lawfully made under this title." The question in this case is the exact meaning of that phrase. The publishers argued for a "geographic" reading, meaning it actually applied to copyrighted works made in the US. Kirtsaeng argued for a "non-geographic" reading, suggesting that first sale applied to any goods that were "lawful," in other words, legitimate, non-pirated goods.

If the publishers' argument had been accepted, some of the results would have been dramatic. The first sale doctrine would basically stop existing for goods made outside the US, which would actually give corporations a strong incentive to move manufacturing abroad—surely not a result that Congress intended.

That possibility alarmed not just Internet companies like eBay, but also libraries, used book sellers, and museums. Libraries, for instance, would have been required to get permission to circulate many books that were printed abroad. While Wiley's lawyers argued that was part of a "parade of horribles" that hadn't happened in the 30 years that the geographical interpretation had been around, today's Supreme Court decision notes that those things actually have a very good possibility of happening, if the high court doesn't uphold first sale. "[T]he law has not been settled for so long in Wiley’s favor," wrote Breyer for today's majority. "The Second Circuit in this case was the first Court of Appeals to adopt a purely geographical interpretation."

At the end of the day, for the majority, this came down to an issue of consumers' rights. Breyer writes:

Putting section numbers to the side, we ask whether the “first sale” doctrine applies to protect a buyer or other lawful owner of a copy (of a copyrighted work) lawfully manufactured abroad. Can that buyer bring that copy into the United States (and sell it or give it away) without obtaining permission to do so from the copyright owner? Can, for example, someone who purchases, say at a used bookstore, a book printed abroad subsequently resell it without the copyright owner’s permission?

In our view, the answers to these questions are, yes.

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