Sunday, June 10, 2012

The U.S. Supreme Court has agreed to hear a case involving “gray market” resale of copyrighted works and the defense of the “first sale doctrine.” The “first sale doctrine” in copyright law permits the owner of a lawfully made copy of a copyrighted work to resell or otherwise dispose of that copy without limitations imposed by the copyright holder. Kirtsaeng v. John Wiley & Sons, Inc., Docket No. 11-607 (Supr. Ct., April 16, 2012). Essentially the same issue was raised at the Supreme Court in 2010 but the Court ended up in a 4-4 split (with Justice Kegan recusing herself).

Textbook publisher John Wiley & Sons brought a copyright infringement suit against Kirtsaeng, a graduate student from Thailand. Kirtsaeng’s friends and family shipped him foreign editions of Wiley textbooks printed abroad by Wiley’s affiliate Wiley Asia, which Kirtsaeng then sold on commercial websites such as eBay for allegedly substantial profits. Wiley alleged that Kirtsaeng violated Wiley’s copyrights by unauthorized importation of textbooks only intended for a foreign market. Kirtsaeng attempted to proffer the “first sale doctrine” as a defense but the district court rejected the applicability of the defense to foreign editions of textbooks. A jury found Kirtsaeng liable for willful copyright infringement and awarded Wiley $600,000 in statutory damages.

On appeal to the Second Circuit, Kirtsaeng argued that the district court erred in holding that the first sale doctrine was not an available defense, but the U.S. Court of Appeals for the Second Circuit affirmed the district court (see IP Update, Vol. 14, No. 9 ). The 2d Circuit, reviewing § 109(a) of the Copyright Act, codification of the first sale doctrine, noted that the language limiting its application to works “lawfully made under this title” was ambiguous such that the statute neither compelled or foreclosed application of the first sale doctrine to works manufactured abroad. Therefore, the 2d Circuit then looked to § 602(a)(1) of the Copyright Act, which prohibits the importation of a work acquired abroad without the copyright owner’s authorization, and the Supreme Court’s guidance in Quality King Distributors, v. L’anza Research International. Quality King involved copyrighted works manufactured in the United States that were exported to foreign distributors, who then re-imported the works back into the United States for resale without the copyright owner’s permission. In that context, the Supreme Court unanimously held that the first sale doctrine limited the scope of § 602(a) and thus the foreign distributor who re-imported the works could assert the first sale doctrine as a defense. However, the Quality King Court did not rule on whether the first sale doctrine would apply to works manufactured outside of the United States, however. Nevertheless, the 2d Circuit in Kirtsaeng held that the first sale doctrine only applies to products physically manufactured in the United States. To find otherwise, the court reasoned, would nullify the protections of § 602(a)(1) in the vast majority of cases.

In granting certiorari, the Supreme Court order indicated it will consider whether such a foreign-made product can never be resold within the United States without the copyright owner’s permission; can sometimes be resold within the United States without permission, but only after the owner approves an earlier sale in this country; or can always be resold without permission within the United States, so long as the copyright owner authorized the first sale abroad. Oral arguments will be heard in the fall of 2012.