Two aspects of the U.S. Supreme Court’s recent ruling in the Kirtsaeng v. John Wiley & Sons, Inc. copyright case are immediately remarkable. First, the Court ruled 6-3, a clear majority, in favor of petitioner Kirtsaeng and the argument that the First Sale doctrine applies to copyrighted goods purchased overseas and then imported into the United States, even though similar facts and issues split the Court 4-4 (Kagan recused) three years ago in the Costco v. Omega case (see my articles on this case here). Second, the case stands as one of the few limitations imposed on the scope of copyright in this new century, which started with the Court’s approving the constitutionality of the Sonny Bono Copyright Term Extension Act in 2003.
The case concerned the scope of the First Sale doctrine: once a copyright owner has made a lawful sale of a particular copy of copyrighted work, the owner’s rights are exhausted, and the owner can no longer control what happens to that particular copy, which can then be resold, leased, given as a gift or even destroyed without risk of copyright infringement liability. The First Sale doctrine is codified as a provision of the Copyright Act (Section 109(a)). The essential issue of the case was whether the First Sale doctrine extends to goods lawfully purchased overseas because the Importation Ban principle of the Copyright Act, which holds that importing copies of copyrighted works into the U.S. without the permission of the copyright owner constitutes copyright infringement (Section 602(a)), appears to limit the First Sale doctrine to U.S. borders. For many years, certainly well before the advent of Costco v. Omega, publishers and other manufacturers of copyrighted goods have seen these provisions as clashing, unharmonious bedfellows in the Copyright Act. In this recent case, Supap Kirtsaeng, a Thai student pursuing a doctorate in California, asked his family and friends in Thailand to purchase inexpensive English-language copies of textbooks published by Wiley Asia and to ship them to Kirtsaeng in California, so that Kirtsaeng could then sell those copies at higher prices on eBay to U.S. customers. Wiley sued Kirtsaeng for copyright infringement under the Importation Ban, and Kirtsaeng invoked the First Sale doctrine as a defense. Most of the ink spent in the briefs went to arguments interpreting language in §109(a), which states that the First Sale principle applies to copies “lawfully made under this title.” For Wiley, the key phrase was “under this title,” which Wiley interpreted as “pursuant to Title 17” in reference to the Copyright Act. So, for Wiley, the First Sale doctrine applies only to goods made in the United States where the U.S. Copyright Act applies. For Kirtsaeng, “lawfully made” is the key phrase because it means that the First Sale doctrine can apply to copyrighted goods manufactured anywhere in the world, so long as they are made with the authority of the copyright owner and in accordance with Title 17.
Supreme Court engaged in extensive definitional analysis of the disputed language, including citing the Oxford English Dictionary’s entries for words like “under,” and historical analysis of the First Sale doctrine, including citations to Lord Coke’s 1628 treatise on the Laws of England before determining that Wiley’s geographical interpretation “bristles with linguistic difficulties” and concluding that Kirtsaeng’s interpretation has more legal, historical and grammatical support. It is surprising that Breyer’s opinion states the case for a non-geographical interpretation of the First Sale doctrine so forcefully, and that his opinion was joined by Roberts, Thomas, Alito, Sotomayor and Kagan when, three years earlier, the split decision in Costco v. Omega affirmed the Ninth Circuit’s ruling that the First Sale doctrine only applies within U.S. borders and, more recently in this case, the Second Circuit had agreed with the Ninth Circuit and found for Wiley. Precedent and the facts of this case seemed poised to tip the scales in Wiley’s favor.
Though it came as a surprise, the Supreme Court’s ruling certainly brings clarity to the First Sale doctrine. A lawful first sale anywhere in the world extinguishes the copyright owner’s right to control downstream sales of that particular copy. Through this clarity, the ruling greatly benefits entities in resale industries for which the First Sale doctrine is operational lifeblood: resellers of used appliances containing copyrighted software (everything from cars to laptops), used book dealers, other used media dealers, libraries, art galleries, museums and archives. This clarity, an unanticipated surprise in an era of lengthened copyright duration, will almost certainly generate commercial growth in the resale industries. Further, the publishers and other industry practitioners who, before the dust has even settled from this case, appear to have lost copyright enforcement and import controls under this ruling, may use the new clarity to develop new business models that generate revenue in ways unforeseen a few weeks ago. The ruling is a game changer, but such changes usually engender innovation in U.S. business.