One provision of the U.S. Copyright Act says it’s infringement to import items subject to copyright into the United States without the copyright owner’s permission. Another provision says somebody who legally acquires ownership of a copyrighted work can resell it at will without violating any right of the copyright owner. When a clever Thai math student had his friends and family at home buy up low-cost textbooks printed by a subsidiary of a U.S. publisher for sale only in foreign markets and mail them to him so he could resell them in the United States, the two provisions were placed in conflict. In an important ruling, the U.S. Supreme Court decided that the purchaser's right to resell — the so-called “first sale” doctrine — trumped the copyright owner's right to ban importation without its permission. Kirtsaeng v. John Wiley & Sons, Inc., ___ U.S. ___, 2103 WL 1104736 (March 19, 2013).
But getting to that result took the Supreme Court three opinions and almost 70 pages. Still, it was a clearer outcome than the 4-4 split the last time the Court considered the issue.1 The Court was deluged with amici briefs from publishers, software developers, entertainment industry companies, libraries, museums and retailers, among others. The big policy issue in the case was how to balance the interests of copyright owners on one hand — who would prefer to be able to segment their markets and charge higher prices in wealthier markets like the U.S., and lower ones in the developing world — and various interests on the other, who would prefer to see broader availability of what might be called cheaper copyright gray market goods imported from abroad. The outcome: gray goods trumped copyright protection.
More precisely, the six-justice majority opinion by Justice Breyer concluded that Section 109(a) of the Copyright Act, which codifies the “first sale” doctrine, applied even if the goods in question had been made outside the United States (as here, where the Asian licensee of the U.S. copyright owner had printed the books offshore). That meant Kirtsaeng was free to resell the books bought in Thailand by his family and friends at higher prices in the U.S., notwithstanding Section 602(a)(1), which bans importing foreign-made copies without the copyright owner’s blessing.
The decision has wide-rippling implications. By adopting what has been termed an international exhaustion viewpoint (that any sale anywhere exhausts the copyright owner’s right to control further sale), some wondered if the Supreme Court now would do the same in the patent area. (Within a week, however, it refused to grant certiorari in a patent case presenting the issue. 2) Others wondered how publishers and others would adapt their marketing practices. Would they raise foreign prices? Lower U.S. prices? Try to convert sales into licenses, perhaps by adding other features, or offering material only online? Or would they ask Congress to overturn the decision?
Both Justice Kagan’s concurrence and Justice Ginsburg’s dissent suggest one route such legislation could take. If Section 602(a)(1) is read (or amended) to permit suit against the importer of the copyrighted goods made abroad, rather than against the reseller, that might help to square the circle in many cases. But don’t hold your breath — there are well-financed, powerful interests on both sides.