The Trouble with Texts: SCOTUS Weighs in on Foreign Textbooks and the Copyright Act
Did you ever wonder why you don’t hear the gentle knock of government agents at your door soon after selling something, like your used Twilight DVD, on eBay or Amazon? No, there’s no law against bad taste, but have you ever considered you could be infringing on someone’s copyright? If not, don’t worry; Congress has done your thinking for you. Under the Copyright Act of 1976’s “first sale doctrine,” once a person has acquired a copy of something “lawfully made” under the act, he has the right to resell that copy without the copyright holder’s consent. Sounds simple enough—once you have paid for or are in otherwise lawful possession of your favorite vampiric-fantasy flick, you can do with it as you please. But the realities of ambiguous law and conflicting policies ensure these matters are rarely so effortless. The question now facing the United States Supreme Court in Kirtsaeng v. John Wilely & Sons, Inc. is: “Has a copyright been infringed upon when a product is manufactured and purchased overseas and then imported into the United States?”
The question has been answered three different times in three different ways by three different U.S. circuit courts. The Second Circuit decided that a foreign made and purchased copy could never be resold in the United States without the copyright holder’s permission. The Ninth Circuit has held that once the copyright holder permits the sale of copies in the United States foreign owners may freely resell their copies here. Finally, the Third Circuit reasoned that once the copyright holder permits the first sale abroad, copies may be lawfully imported into the Unites States without further permission. Which holding, if any, the Supreme Court chooses to make the law of the land could have far reaching effects on the secondary market for copyrighted material that has blossomed in the age of the internet.
Kirtsaeng received Supreme Court certiori after the Second Circuit’s complete rejection of foreign importation. Supap Kirtsaeng is a Thai man who immigrated to the United States in 1997. While working towards his mathematics PhD. from the University of Southern California, Kirtsaeng received shipments of foreign-printed textbooks, which were far cheaper than the domestically printed editions. Some of these foreign-edition textbooks were printed by a subsidiary of John Wiley & Sons, Inc. called Wiley Asia. No doubt influenced by our American-entrepreneurial spirit, Kirtsaeng went on to sell those foreign made textbooks on eBay for profit. John Wiley & Sons, Inc. brought a suit against Kirtsaeng and a jury awarded the company $600,000 in damages for copyright infringement. The Second Circuit Court of Appeals affirmed. Now it is up to the Supreme Court to decide the scope of this “first sale doctrine.”
In making its determination of what the law is–or what the law should be, depending on your philosophical point of view—the Supreme Court will weigh a variety of doctrinal and policy arguments.
The ambiguity arises in the interaction between three sections of the statute. The first section, 109, is the Copyright Act’s blanket first sale doctrine section discussed above. The second section, 602, labels a non-permitted importation as an infringement on the “exclusive right to exclusively distribute . . . under section 106” The third section, 106, seems to limit what it means to infringe on a person’s exclusive right to distribute their copies. The winner of the statutory debate will have to show which section controls and/or modifies the other sections in order to achieve the proponent’s desired result. At the heart of this statutory debate is whether or not Congress, despite its seeming ban on importation without consent, meant to allow the importation of goods once the copyright holder had received payment for the copies sold abroad. Does such a circumstance mean “lawfully made under this title” as the first sale doctrine in Section 109 requires?
Among Kirtsaeng’s arguments is the idea that if Congress intended to limit the first sale doctrine to the United States, they could have simply stated in Section 109 that a purchaser is free to resell a copy made in the United States once it has been lawfully acquired. Instead, Kirtsaeng argues, Congress makes no such territorial limitation in Section 109. Moreover, while section 609 labels importation without consent a violation of a copyright holder’s “exclusive right to distribute,” section 106 specifically states that the copyright holder’s “exclusive right to distribute” is limited by the first sale doctrine. Meaning that once the rest of the act has been complied with, importation after the lawful first sale abroad will not violate the statue. Thus, the first sale doctrine trumps the anti-importation language.
By inserting the anti-importation ban in section 602, the argument goes, Congress simply meant a few things. First, it meant to close any possible loophole where an unauthorized copy could be made outside the U.S. and then imported. Second, it meant to provide a copyright remedy for a copyright holder if one of its’ foreign distributors went rogue and decided to start selling products to the U.S. These reasons have nothing to do with the legitimate resale market and do not limit the first sale doctrine.
John Wiley & Sons, Inc. responds to Kirtsaeng in part by arguing that the Copyright Act of 1976 does not apply outside the United States. Therefore, the “lawfully made under this title” language in the first sale doctrine can only apply to goods manufactured and purchased in the United States. It is further argued that under Kirtsaeng’s reading of the statute, the ban on importation is so unreasonably weak and limited that Congress could not have intended it. Lastly, for thirty years courts have chosen to not extend the first sale to imported works manufactured and sold abroad and Congress has yet to intervene and correct them.
But experience tells us that Supreme Court decisions are not always the simple result of statutory analysis. There are interesting policy considerations on both sides that the Court, whether admittedly or not, will have to consider to reach its determination.
On the one hand, we have to weigh how strongly we want to protect a copyright holder’s interest. Kirtsaeng argues that the main purpose of the first sale doctrine is to prevent a copyright holder from indefinitely maintaining the rights to an individual product and receiving fair compensation for his work more than once. If someone sells a product in Thailand for $80, he received his asking price and it would not be fair to allow him to retain continued control over the product he just sold. And forget fairness, if the Court decides the first sale doctrine does not apply to goods made and paid for outside the U.S., it will cripple the secondary market for goods that an enormous number of U.S. libraries (which own 200 million foreign works) and individuals rely on. Goodwill, the Salvation Army, resellers of automobiles, Netflix, and even hosts of garage sales, would all be subject to a copyright holder’s fiat. As Kirtsaeng similarly argues in his brief: if you think it unrealistic that grandma’s garage sale would get slapped with an injunction, you might want to talk to Kirtsaeng about how he made a few thousand dollars profit by reselling the textbooks he purchased and then got slammed with a $600,000 judgment against him. That was by a single, relatively small, publisher. How much more forgiving will Universal Studios be in protecting its Twilight franchise?
Well, allow Wiley to retort. First, as far as fairness goes, it cuts both ways. Products are sold at different values in different countries because of each country’s different relative market value. Most Thai students simply cannot afford to purchase the textbooks at U.S. prices. Rather than denying Thai students the product altogether, Wiley Asia produces cheaper versions and sells them at the appropriate price. Imagine if Kirtsaeng’s first sale doctrine analysis extended to another area of intellectual property law—patents. Low pharmaceutical prices of impoverished nations would skyrocket once international market forces affected them—arguably to the point where they would be unattainable for those in need. Last, but not least, there is the fear of outsourcing. This factor weighed heavy on the mind of the Second Circuit even though it maintained its’ ultimate opinion was based solely on statutory interpretation and Congress’ intent.
Advocates on both sides have also debated whether the common law origin of the right of first sale compels section 109, where the first sale doctrine is codified, to apply to all geographical locations. On the one hand it may be argued the principles of the first sale doctrine are merely set to prevent a copyright holder from receiving two bites at the apple, so to speak. That principle applies equally well in all geographical locations. Yet at least one amicus brief argues that the right to first sale formed around a copyright holder’s right to “vend;” a right that existed only in the U.S., not abroad.
It’s not the first time this issue reached the Supreme Court’s docket. In Wholesale Corp. v. Omega, the Supreme Court examined this very issue and ended with a 4-4 split because Justice Kagan took no part in the decision. Kirtsaeng, however, presents some different–and perhaps stronger—arguments to the Court both in terms of policy and statutory analysis. What remains to be seen is which side’s fears and analyses at least five justices will share.