United States copyright law provides the owner of a copyright with certain rights, including the right to prevent unauthorized distribution or sale of a copyrighted work. Section 602(a)(1) of the Copyright Act states that the right to prevent importation into the United States is included in the owner’s right to control distribution. However, under the first sale doctrine, set forth in Section 109 of the Act, the sale of a work “lawfully made under this title” exhausts the copyright owner’s exclusive distribution right, allowing the work to be resold, given as a gift, imported, or otherwise disposed of as the purchaser of the work sees fit.
The Supreme Court previously held in Quality King Distributors v. L’anza Research Int’l, Inc. that the first sale doctrine covers the foreign sale of a work that was printed in the United States. The Supreme Court left unanswered whether a book that was both printed and sold abroad qualifies as a work “lawfully made under” the Copyright Act. In Kirtsaeng v. John Wiley & Sons, Inc., the Supreme Court considered this question, and held that the first sale doctrine covers copyrighted works that are both printed and sold abroad.
Kirtsaeng involved a lawsuit by textbook publisher Wiley against mathematics Ph.D. student Supap Kirtsaeng, a citizen of Thailand. In order to create different price points for books sold domestically and internationally, Wiley printed two different versions of many of its textbooks. The U.S. version was printed and sold in the United States, typically at a higher price, while a foreign version was printed abroad, and sold only abroad, typically for a lower price. The foreign versions contained a statement that they were authorized for sale only in Europe, Asia, Africa, and the Middle East, and warned that the publisher may take legal action to enforce its rights.
When Mr. Kirtsaeng came to the United States to pursue his Ph.D., he asked his friends and family to purchase multiple copies of several textbooks from bookstores in Thailand, and to send the purchased books to him in the United States. He then resold the books to customers in the United States for a higher price, reimbursed his friends and family, and pocketed the difference.
In 2005, Wiley brought a federal lawsuit in the Southern District of New York, alleging unauthorized importation and sale of its copyrighted works by Mr. Kirtsaeng. Mr. Kirtsaeng defended that the books he acquired were lawfully made and sold, and thus Wiley’s right to prevent importation and resale was exhausted under the first sale doctrine. The district court concluded that the first sale defense was not available to Mr. Kirtsaeng, believing that the doctrine did not apply to “foreign-manufactured goods.” On appeal, the Second Circuit affirmed, holding that the requirement that the goods be “lawfully made under this title” meant that it only applied to books printed or sold within the boundaries of the United States.
Interpreting the phrase “lawfully made under this title,” the Supreme Court concluded that a non-geographical interpretation was most appropriate, and that the first sale doctrine applies to all works that are made in compliance with or in accordance with United States Copyright Law. Thus, the first sale doctrine applies to copyrighted works that are both printed and sold abroad, and Mr. Kirtsaeng’s resale of the foreign versions of Wiley’s textbooks was perfectly legal. The Supreme Court reversed the Second Circuit and remanded the case to the district court.
The Supreme Court’s decision in Kirtsaeng poses several potential consequences. First, publishers argue that it will be much more difficult to provide lower-priced international editions of textbooks without undercutting the price of U.S. versions. Until the Supreme Court’s decision in Kirtsaeng, resellers were operating in a gray area of copyright law. The Supreme Court’s decision may ultimately lead to an increase in the number of resellers, as well as an increase in the number of customers who feel comfortable purchasing an unauthorized international version of a copyrighted work. In response, publishers may decide to raise prices of international versions, or change the content or organization of the international versions to make them less appealing to American purchasers.
Second, Kirtsaeng raises questions regarding the application of the first sale doctrine to other areas of the law, such as patents. The Supreme Court had the opportunity to consider the issue of international patent exhaustion in NineStar Technology Co. v. ITC, but denied review. In the absence of more specific guidance from the Supreme Court, lower courts may differ about how Kirtsaeng should apply, if at all, in the patent context.
Third, Kirtsaeng may encourage publishers to promote adoption of e-textbooks instead of paper textbooks. Unlike a physical copy of a book, e-books typically come with a license agreement or digital rights management software that allows only one reader to use the book, thus preventing resale of an e-textbook to others. E-textbooks also make price discrimination based on geography or other characteristics much easier, because a publisher need not worry that the e-book will be resold in a different market, thus undercutting their price. While there are current attempts in the courts to apply the first sale doctrine to e-books and other digital content, it appears at least for now that courts are generally upholding restrictions on resale of digital goods.