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No. 08-1423

In The
Supreme Court of the United States

Costco Wholesale Corp.,
Petitioner,

v.

Omega, S.A.,
Respondent.

On Petition for a Writ of Certiorari to the United States Court
of Appeals for the Ninth Circuit

INTEREST OF THE AMICI

Public Knowledge and the Electronic Frontier Foundation respectfully
submit this brief in support of the petition for writ of certiorari to
the United States Court of Appeals for the Ninth Circuit.¹ Public Knowledge is a
non-profit public interest organization devoted to protecting
citizens’ rights in the emerging digital information culture and
focused on the intersection of intellectual property and technology.
Public Knowledge seeks to guard the rights of consumers, innovators, and
creators at all layers of our culture through legislative,
administrative, grass-roots, and legal efforts, including regular
participation in copyright and other intellectual property cases that
threaten consumers, trade, and innovation.

The Electronic Frontier Foundation (EFF) is a nonprofit civil liberties
organization working to protect consumer interests, innovation, and free
expression in the digital world. EFF and its more than 13,000 thousand
dues-paying members have a strong interest in assisting the courts and
policy-makers in striking the appropriate balance between intellectual
property and the public interest.

This case threatens the ability of consumers and businesses alike to
control and dispose of all lawfully acquired goods that contain
a copyrighted work made outside the United States. In an increasingly
interconnected world, where the manufacturing of tangible products and
knowledge goods can be distributed easily and widely, consumers should
be confident that they retain the same rights to their belongings
regardless of where those goods or their labeling were produced. The
decision below provides a recipe for ensuring that all goods –
consisting of copyrighted content or not – can no longer be
lawfully resold, given away, or imported after a lawful sale abroad. It
is critical that certiorari be granted and that the law be clear that
150 years of common law on personal property can not be overridden by
misconstruing a copyright statute 30 years after its passage. See,
e.g., Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 351
(1908) (identifying the first sale doctrine and observing that
“[t]o add to the right of exclusive sale the authority to control
all future retail sales, by a notice that such sales must be made at a
fixed sum, would give a right not included in the terms of the
statute”).

SUMMARY OF ARGUMENT

By wrongly deciding that it is illegal to import a lawfully-purchased
watch because it has a logo inscribed on the back, the Ninth Circuit has
opened the door to extensive harm to U.S. consumers and businesses
alike. The decision below creates an interpretation of the law that will
bar all distributions of copyrighted works manufactured overseas. It
also provides a recipe to take otherwise unremarkable goods and, by
adding a minimal copyrighted work like a logo, render them immune from
resale in or parallel import into the United States – two
activities with a history as old as the nation both in terms of legality
and providing broad consumer benefits. See, e.g., H.R. Rep.
98-987, at 1 (1984) (“The first sale doctrine has its roots in the
English common law rule against restraints on alienation of
property.”). Further, this recipe provides incentives for both
U.S. and non-U.S. producers to move their manufacturing out of the
country for goods intended to be sold both here and abroad.

The consequences of this ruling should not be underestimated. Resellers
– be they online auction houses like eBay, individual users of
those services, or local antique stores – will be subject to
strict copyright liability and extensive damages if they sell products
whose label or logo happens to have been made abroad.² With no way to find out where
a logo was made, and no incentive for the producer to provide that
information, it will become nearly impossible to safely resell even
products which remain lawful to resell. And with the incentive to move
manufacturing abroad, the destruction of the secondary market and
parallel imports is likely to rapidly expand to cover all
goods.

There is no evidence that Congress intended that such an inconsistent
reading of the law be used to enable such expansive changes to the trade
and retail landscape. If the Ninth Circuit’s decision, based on an
erroneous interpretation of the Copyright Act, is allowed to stand, then
consumers, importers, retailers, and resellers will pay the price.
Therefore, to prevent extensive harm to countless consumers and
businesses, the Court should grant the writ of certiorari and reverse
the decision of the court below.

ARGUMENT

The court should grant the writ of certiorari because the decision below
is erroneous and does widespread harm to consumers and businesses
engaged in the lawful use and sale of goods that may have been
manufactured abroad.

I. The Consequences of Allowing the Decision Below to Stand Include
Far-Reaching Damage to Trade, Innovation, and the General Public
Interest

In its decision, the Ninth Circuit interprets §109 in a way that
precludes its application to any works manufactured abroad. See
Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982, 983 (9th Cir.
2008).³ By failing
to protect lawful purchasers from §602’s import prohibitions,
this interpretation will preclude the entire secondary market in
copyrighted works made outside the United States. See 17 U.S.C.
§602. Furthermore, the Ninth Circuit’s decision has created a
blueprint for eliminating long-standing rights in personal property. By
manufacturing goods abroad and attaching minimal copyrighted works such
as logos to them, producers will now be able to prevent the importation
of any foreign-made, lawfully purchased goods as well as the reselling,
lending, or otherwise disposing of goods that have been lawfully
imported to the United States.

A. The Decision Below Prevents the Resale of Any Goods Containing
Foreign-Made Copyrighted Works, Even When Lawfully Imported

When carried to its logical conclusion, the statutory interpretation
announced by the Ninth Circuit will eliminate the secondary market for
any goods containing a copyrighted work, even when that work was
imported and sold by the original copyright owner. If “lawfully
made under this title” is read as equivalent to “lawfully
made within the United States,” then the first sale doctrine (as
codified in 17 U.S.C. §109) will cease to operate not only for
parallel imports – goods sold lawfully outside the United States
and then imported by someone not authorized by the copyright holder
– but for any works manufactured outside of the United
States.⁴

This creates new harms, unintended and of immense scope:

1. The Inability to Resell Lawfully Purchased Goods Does Direct Harm to
Consumers and Resellers

Two aspects of the lower court’s ruling do direct harm to
consumers and resellers. First, the interpretation of §109 removes
a vast scope of copyrighted works from the first sale doctrine. Second,
by applying this ban on resale to goods to which a copyrighted work is
affixed, the Ninth Circuit’s decision jeopardizes secondary
markets in all goods.

i. Eliminating First Sale for Copyrighted Works Harms Consumers and
Resellers

If §109’s protections are eliminated, lawful copies of works
cannot be resold, given away, lent, or displayed without the copyright
owner’s permission. If those protections are conditioned upon the
place of manufacture of the work, owners will be unable to determine
whether or not they are protected, and so these activities will be
effectively foreclosed for all works.

Without first sale, all §106 rights remain with the copyright owner
even after a copy of a work is lawfully sold. For instance, §106(3)
provides copyright holders with the exclusive right to distribute copies
of copyrighted works by sale or other transfers of ownership.
See 17 U.S.C. §106(3). Thus, without the first sale
doctrine, the owner of a copy of a work cannot legally sell it or give
it away.

Section 109 prevents such unwieldy scenarios, and in doing so forms the
basis for our uses of, and market in, information, goods, and creative
works. If, as the lower court contends, first sale requires a
domestically-produced copy, then no portion of §109 will ever apply
to a foreign-made work. Since exhaustion is only triggered when the copy
is “lawfully made under this title,” and since the origin of
any given copy cannot be changed once it has been “made,”
the Ninth Circuit’s basic reading of this phrase will never allow
the distribution right to be exhausted, even after an authorized import.

The Ninth Circuit’s reading of §109, if applied plainly,
would eliminate the first sale doctrine for all foreign-made copies of
works. This result undoes 150 years of common and statutory law
demonstrating that the purchaser of an item – even if that item
contains a copyrighted work – has the right to dispose of it as
they wish. See, e.g. Sebastian Int’l., Inc. v. Consumer
Contacts, Ltd., 847 F.2d 1093, 1096 (3d Cir. 1988) (“The
first sale rule is statutory, but finds its origins in the common law
aversion to limiting the alienation of personal property.”) and
sources cited therein.

Given this newly-extended liability, a reseller of copyrighted works,
whether a massive used bookstore or a neighborhood yard sale, would be
barred from the simplest transaction, if the copy of the work at issue
had been manufactured outside the United States. Readers will suddenly
require the consent of a publisher or author before lending their
favorite foreign books to a friend. Libraries and archives stand to
suffer particular harm under this interpretation. In many cases, the
secondary market is the only source for out-of-print books and
other copyrighted works or goods containing these works. With the
elimination of §109’s protections, libraries and archives
will no longer be able to add to their collections unless both they and
the seller can be entirely sure that the works in question were not
manufactured abroad and that they will not face extensive damages as a
result of the sale.

The damage done by this rule is also not limited to resale.
Section106(5) grants copyright holders the exclusive right to publicly
display works. See 17 U.S.C. §106(5). Absent the first
sale doctrine as embodied in §109(c), the owner of a particular
copy will not be able to display that copy: the buyer of a poster could
not hang it in her window; an auction house could not display an
imported product bearing a copyrighted label. Similarly, a newspaper
subscriber could not display a memorable front page in his publicly
accessible office.

Furthermore, if one adopts at face value the interpretation that a copy
must be made in the United States, first sale is eliminated no matter
who imports the goods in question. If a copyright-owning record label
were itself to import a foreign-manufactured compact disc to
the United States and sell it to a consumer, that consumer will not be
able to give or lend it to a friend or sell it to a dealer without the
record label’s permission.

ii. Applying the Ruling Below to Goods Merely Containing a Copyrighted
Work Allows These Harms to Spread Further

However, this is not the full extent of the harm that the decision below
will visit upon consumers. In its decision, the Ninth Circuit has
provided a recipe for eliminating not just parallel imports of
copyrighted works, but parallel imports of all goods. Under the
lower court’s ruling, goods which contain a work protected by
copyright in the United States cannot be lawfully imported and sold
without permission. The bar to obtaining copyright protection in the
United States is low. Nearly any logo will be copyrighted; all that
remains is for the manufacturer to deposit copies of the logo with the
Copyright office, 2-7 Nimmer on Copyright §7.18 (2009),
pay a $35 or $45 fee, id. §7.24., and it will gain the
ability to obtain an injunction against importing of the item, as well
as the ability to have imported items impounded or destroyed.
See 17 U.S.C. §§411(a), 502-03.

The case at hand illustrates this plan perfectly. Omega is seeking to
enjoin importation of watches by leveraging the copyrighted logo
engraved on the back of the watch, unknown to any but the
wearer. Omega, 541 F.3d at 983. No copyright on any other part
of the watch is at issue, and there are no allegations that the watches
are counterfeit or that the trademark embodied in Omega’s logo is
being used in violation of relevant trademark laws.

The harm caused by the elimination of first sale thus goes far beyond a
seller’s ability to vend books, music, software, or movies. All
resellers who carry or display goods with labels or logos manufactured
abroad will become infringers. Imported wines bearing copyrighted labels
will be kept from auction houses, retail resellers, and gift bags alike.
Foreign cars will not be resold except, possibly, through
“authorized” dealers. Articles of clothing sewn overseas
carrying copyrighted logos or tags will be barred from being sold to
thrift stores, handed down to friends, or donated to charitable
organizations. Auction houses will be unable to sell or display fine art
without locating the source and ensuring it is domestic or authorized.
Neither a pawnbroker nor a jeweler will be able to place an Omega watch
on display in his window without authorization. Even Belgian chocolates
bearing a copyrighted imprint on their packaging or on the confections
themselves will create infringement liability once dropped into a
child’s Christmas stocking.

The chilling effect of the Ninth Circuit’s interpretation on
resale is not limited to goods containing works made abroad. In most
cases, resellers will have no idea whether a work’s label was made
in the United States or in Switzerland. Given the expanded control this
rule gives producers, they will have no incentive to make it clear to
resellers where the label was made. As a result, no thrift shop, used
furniture dealer, or online marketplace will be able to safely sell or
display any goods bearing a logo or label because of the mere
possibility that it was originally made elsewhere. Given the scope of
potential damages, many would-be resellers will reasonably choose not to
take the risk at all. And with the possibility of copyright liability
for a purchaser who later resells or gives away a product, even those
resellers willing to take the risk are likely to find themselves without
a market to sell to.

By cramming the trade in other goods into the copyright law regime, the
lower court’s decision also expands the application of the
extensive damages offered under copyright law. At the very minimum,
violators are liable for actual damages, see 17 U.S.C.
§504(b), which can rise rapidly when an expensive item (such as an
Omega watch) is at issue. Perhaps worse, if the work is registered,
infringers are liable for between $750 and $30,000 per work in statutory
damages regardless of the actual value of the work involved, or up to
$150,000 in the case of willful infringement, see 17 U.S.C.
§504(c).

Through this unwarranted extension of copyright, brand owners could thus
maintain control over the tangible goods they have produced long after
they have released them into the stream of commerce, allowing for price
discrimination nonpareil. Producers could allow resale only through
“authorized” secondary markets, or permit only gifts, or
simply foreclose the secondary market altogether. But regardless of what
tack a manufacturer chooses to take, anyone who purchases those goods
will only be able to resell or give them away by risking becoming a
copyright infringer.

2. Manufacturers Can Deliberately Foreclose the Secondary Market by
Manufacturing Abroad

If §109 does not apply to goods manufactured abroad that contain
copyrighted works, then the Ninth Circuit has provided a recipe for all
manufacturers – domestic or foreign – to eliminate the
secondary market. A manufacturer need only step outside the United
States and add a logo, print a photograph, attach instructions, or embed
software in their products to ensure that the lawful purchaser of those
goods is no longer allowed “without the authority of the copyright
owner, to sell or otherwise dispose of the possession of that”
item. See 17 U.S.C. §109. Thereafter, anyone who does any
of these things is automatically a copyright infringer.

It is also important to note that copyrighted trademarks are not the
only mechanism by which manufacturers can use the Ninth Circuit’s
decision to prevent parallel imports. Any copyrighted work will have the
same effect. Other examples abound: an inscription on a picture frame,
software embedded in a CD player or installed on a home computer hard
drive, and the instruction manual attached to a camping tent will all
create the same collateral damage to trade as a copyrighted logo.

Under this interpretation of §602, a California wine producer could
choose to have labels produced in Mexico with the result that no one
could give away or resell a bottle of their wine without permission. Car
manufacturers could have their logos manufactured internationally and
foreclose the used car market entirely. And, of course, this scheme
applies to copyrighted works, too: for instance, printers of books could
move their manufacturing abroad to eliminate the used book store market.

Thus, in addition to harming consumers and businesses who rely on the
secondary market, this rule gives an unintended and perverse advantage
to both domestic and foreign manufacturers who choose to have their
goods made abroad rather than in the United States by giving them
superior control over the distribution of those goods. If copyright law
is misused to create strong incentives to move manufacturing abroad,
U.S. manufacturers and consumers will pay the price, both in increased
costs and lost control over personal property.

B. The Ninth Circuit’s Interpretation Will Allow Enjoining of
Parallel Imports, Contrary to Congressional Intent and Rational Policy

Parallel imports benefit both consumers and U.S. businesses who rely on
the ability to bring lawfully purchased goods into this country. The
decision below not only harms these consumers and businesses by
extending copyright far beyond its proper scope, but runs contrary to
express congressional intent.

1. By Co-Opting Copyright Law to Restrain Parallel Imports, the Ruling
Below Runs Contrary to Congressional Intent

The purpose of the monopoly granted by copyright law is

no[t] primarily designed to provide a special private benefit or
control trade. Rather, the limited grant is a means by which an
important public purpose may be achieved. It is intended to motivate
the creative activity of authors and inventors by the provision of a
special reward, and to allow the public access to the products of their
genius after the limited period of exclusive control has expired....
The copyright law, like the patent statutes, makes reward to the owner
a secondary consideration.

Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 429
(1984). This purpose has nothing to do with control of trade, import, or
price discrimination in non-copyrighted goods, and any reward obtained
through those methods is secondary.

The case at bar illustrates the degree to which copyright is being used
as a means of circumventing these principles: the watches to which Omega
attaches its globe logo are, after all, the primary concern and the
source of the value to Omega and Costco that are driving this
litigation. The value of the creative expression embodied within the
logo itself is marginal. Its use here is not as a creative work in
itself, nor even as a mark of origin or authenticity (as distinct from
the numerous other trademarks on the watch), but to provide a veneer by
which copyright law may by applied to stop parallel imports of goods
which would otherwise fall outside the purview of Title 17’s
unique restrictions.

In fact, the Ninth Circuit considered and properly rejected any recovery
in the Omega v. Costco fact pattern twenty years ago (notably,
well after the passage of §602). In a similar case pled under
trademark law, the court explained that,

[i]f [the plaintiff] chooses to sell abroad at lower prices than those
it could obtain for the identical product here, that is its business.
In doing so, however, it cannot look to the United States trademark law
to insulate the American market or to vitiate the effects of
international trade. This country’s trademark law does not offer
[the plaintiff] a vehicle for establishing a worldwide discriminatory
pricing scheme.

NEC Elecs. v. CAL Circuit Abco, 810 F.2d 1506, 1511 (9th Cir.
1987).

Copyright law likewise does not provide a vehicle “for
establishing a worldwide discriminatory pricing scheme” for all
goods, which is exactly what the decision below does. Rather,
“[t]his case comes to us in the guise of an alleged copyright
infringement but, in reality, is an attempt by a ... manufacturer to
prevent the importation of its own products by the ‘gray
market.’” Sebastian International, 847 F.2d 1093,
1094 (3d Cir. 1988) (addressing a similar case in the context of a
domestic manufacturer).

Furthermore, there is no evidence that in creating §602, Congress
intended to create this international price discrimination system or
restrict imports for all goods through copyright law enforcement. The
statute and accompanying legislative history make no suggestion that
§602 could or should be used to exert any control over the
importation of goods which are not themselves copyrighted. Further,
several statutes passed since the creation of §602 in 1976 have
expressed a continued understanding and intent that parallel imports
remain legal and continue to benefit consumers. See, e.g.,
Stop Counterfeiting in Manufactured Goods Act, Pub L. No.
109-181, §(b)(3)(B), 120 Stat. 285, 287 (codified as amended at
18U.S.C. §2320(e)(b) (2006)) (explicitly exempting authorized uses
of marks from the act’s prohibitions on the import of
“counterfeit marks”); 151 Cong. Rec. S12714-01 (2005)
(statement of Rep. Lofgren) (“Parallel markets are those in which
third parties lawfully obtain goods and make them available in discount
stores. Not only has this practice been upheld by the Supreme Court, but
it also saves consumers billions of dollars each year ...We now have a
bill that protects manufacturers, targets illegitimate actors, protects
consumers, and leaves the legitimate parallel market unscathed.”).

2. Restraining Parallel Imports Creates Tangible Harms to Consumers,
Retailers, and the Economy

A robust parallel market has provided a tremendous benefit to the
American economy by providing lower-cost alternatives to consumers and
creating a robust, competitive market for resellers of imported goods.
The decision below’s effect on the parallel import market and
consumer costs and the resulting harm to U.S. commerce stand to measure
in the billions of dollars. See, e.g., 151 Cong. Rec. H3699-05
(2005) (statement of Rep. Conyers) (“Not only has [the parallel
market] been upheld by the Supreme Court, but it also saves consumers
billions of dollars each year.”)

In 1985, Time Magazine reported that the secondary market
constituted approximately $5.5 billion of the nation’s retail
trade. Raji Samghabadi, Inside the Gray Market, Time Magazine
(Oct. 28, 1985), available at http://www.time.com/time/magazine/article/0,9171,960231,00.html.
Since then and since Quality King, this number has grown
significantly, to the benefit of free trade and consumers. By 2000,
“the U.S. market for gray goods [was] somewhere between $10 and
$20 billion a year.” Olga Kharif, The Global Economy’s
Gray-Market Boom, BusinessWeek Online (Nov. 30, 2000),
available at
http://www.businessweek.com/bwdaily/dnflash/nov2000/nf20001130_555.htm.
In 2009, the parallel market in information technology alone is
estimated to be more than $40 billion a year. Romana Autrey &
Francesco Bova, Gray Markets and Multinational Transfer
Pricing, Harv. Bus. School Working Paper No. 09-098, at 1 (Feb. 25,
2009), available at http://www.hbs.edu/research/pdf/09-098.pdf.

Consumers are obvious beneficiaries of this market as they enjoy
competitive prices and savings versus a scheme where they are charged as
much as they are able to bear. See, e.g., Ryan L. Vinelli,
Bringing Down the Walls: How Technology is Being Used to Thwart Parallel
Importers Amid the International Confusion Concerning Exhaustion of
Rights, 17 Cardozo J. Int’l & Comp. L. 135, 143 (Winter
2009). Well-known stores like “T.J. Maxx, Marshall’s, Ross,
and Loehmann’s sell billions of dollars of gray market designer
clothing, shoes, perfumes, luggage, jewelry, china, and other goods
every year . . . for lower prices than in department stores or
boutiques.” Kimberly Reed, Levi Strauss v. Tesco and E.U.
Trademark Exhaustion: A Proposal for Change, 23 Nw. J. Int’l
L. & Bus. 139, 165 (Fall 2002) (citation omitted). More recent
figures show revenues from T.J. Maxx and Ross Stores to be at $19
billion and $6.4 billion, respectively. See CNN Money, TJX Companies
Inc, at http://money.cnn.com/quote/quote.html?symb=TJX
(last visited June 17, 2009); CNN Money, Fortune 500, Ross
Stores, at
http://money.cnn.com/magazines/fortune/fortune500/2009/snapshots/10153.html
(last visited June 17, 2009).

In the current economy, more and more families rely on the competition
among discount retailers to keep prices affordable. Unfortunately, the
success of these businesses and the consumer welfare that results from
this competition are now jeopardized by the gutting of the first sale
doctrine. Without §109’s protections, American consumers will
suffer increased cost and decreased availability in markets far outside
the scope of copyright law.

II. The Ninth Circuit’s Interpretation of 17 U.S.C. §109 is
Erroneous

The lower court interprets the phrase “lawfully made under this
title” to act as a geographic restriction rather than a legal one.
This interpretation is inconsistent with the intent and operation of
§109 and Congressional policy towards parallel imports, and will
lead to absurd and contradictory results throughout Title 17 and the
U.S. Code generally. These incongruities and their potentially
devastating results indicate that the Ninth Circuit’s reading of
the statute is incorrect and in need of reversal.

A. Properly Read, “Lawfully Made Under This Title” Allows
§109 to Apply to Sales of Works Made Outside the United States

The Ninth Circuit concluded that the phrase “lawfully made under
this title” precludes application of 17 U.S.C. §109 to sales
made internationally. For several reasons, this conclusion is neither
necessary nor reasonable.

1. A Reasonable Reading Allows §109 to Apply to International Sales
Without Requiring Extraterritorial Application of the Law

The phrase “under this title” is used throughout Title 17
(and the rest of the United States Code) to mean “under the terms
of the statutes within.” While the laws of the United States Code
generally apply only within the geographic boundaries of the United
States, it requires a large and unnecessary logical leap to assume that
“under this title” must be interchangeable with
“within the United States.” Should Congress wish to create
an explicit geographic limit on the conditions for the provision's
application, the phrase “within the United States,” and many
other variations on that theme, are readily available.⁵

It does not require an extraterritorial application of United States law
to read §109’s condition as something other than a geographic
restriction. A number of other provisions within Title 17 rely upon the
status of actions and occurrences abroad.

For instance, 17 U.S.C. §104(b) states that published works
“are subject to protection under this title” if the work is
first published in any nation that is a “treaty party.”
See 17 U.S.C. §104. Any work published in Switzerland (a
party to the Berne Convention and the WIPO Copyright Treaty, among
others), is therefore, according to §104, “under [Title
17].” Section104 guarantees, within the United States, protection
of the copyrights of works created elsewhere. Far from applying the
Copyright Act extraterritorially, such a determination merely
acknowledges the existence of a foreign work as a relevant fact that
bears upon the protected status it shall enjoy in the United
States.

The Ninth Circuit’s own precedent acknowledged that work
manufactured abroad could be “lawfully made under this
title.” By holding that a copy of a work manufactured abroad but
sold in the United States was protected by §109, the Ninth Circuit
implicitly recognized that §109’s language applied to a work
made outside the United States. See Parfums Givenchy, Inc. v.
Drug Emporium, Inc., 38 F.3d 477 (9th Cir. 1994). Although
other portions of the holding of Drug Emporium have been
implicitly overruled by Quality King, see infra
§2, p. 24, it demonstrates a recognition that it requires no
extraterritorial application of United States law to take note of a
work’s sale or legal status in another country. Doing so does not
in any way affect the rights of parties conducting business under
foreign law. Instead, only the application of United States law, within
the United States, is affected by determinations of §109’s
applicability.

2. The Lower Court’s Reading is Inconsistent With the Statue and
Results in Contradictions With This Court’s Precedents

The lower court's interpretation of “under this title” in
§109 directly contradicts the language of the statute and clear
Congressional intent. See Robinson v. Shell Oil Co.,
519 U.S. 337, 340-41 (1997) (holding that the first step in interpreting
a statute is determining its plain and unambiguous meaning; plainness or
ambiguity is “determined by reference to the language itself, the
specific context in which that language is used, and the broader context
of the statute as a whole”). Literally applying the Ninth
Circuit's interpretation of §109 will eliminate secondary sales of
copyrighted material produced outside of the United States. As discussed
above, such a result is absurd on its face.

The Ninth Circuit attempted to mitigate some of this absurdity by
grafting a judicial alteration onto its existing interpretation. In
Parfums Givenchy, Inc. v. Drug Emporium, Inc., the
Ninth Circuit held that first sale applies to §602 when copies were
made overseas but “there has been a ‘first sale’ in
the United States.” 38 F.3d 477, 481 (9th Cir. 1994). This
additional complication was motivated in part because the court
recognized that its continued interpretation of §109 “would
lead to absurd and untenable results,” including the fact that
“foreign manufactured goods would receive greater copyright
protection than goods manufactured in the United States.” Drug
Emporium, 38 F.3d at 482, n.8.

The lower court chose not to decide whether the holding in Drug
Emporium runs afoul of this Court’s binding precedent in
Quality King Distribs., Inc. v. L’anza Research Intn’l,
Inc.. 523 U.S. 135. See Omega, 541 F.3d at 990.
However, Quality King held explicitly that “the owner of
goods lawfully made under the Act is entitled to the protection of the
first sale doctrine in an action in a United States court even if
the first sale occurred abroad.” Quality King, 523
U.S. at 145 n.14 (emphasis added).

Because the place of initial sale is the only material distinguishing
factor between Drug Emporium and the decision below, Drug
Emporium is “clearly irreconcilable” with existing
Supreme Court and Ninth Circuit law, and is no longer controlling law in
the Ninth Circuit. See Miller v. Gammie, 335 F.3d 889, 893 (9th
Cir. 2003) (holding that “in circumstances... where the reasoning
or theory of our prior circuit authority is clearly irreconcilable with
the reasoning or theory of intervening higher authority, a three-judge
panel should consider itself bound by the later and controlling
authority”). We note that if, somehow, the holding of Drug
Emporium survives, the dire consequences of the lower court’s
holding here are only slightly mitigated: resale, lending, and other
distribution of lawfully purchased goods will still be unlawful if the
copyrighted work it contains is first sold abroad, and the place of
initial sale will remain impractical or impossible to determine.
Further, parallel imports will still be completely foreclosed, as, by
definition, they occur without the copyright owner’s consent.

Moreover, the Ninth Circuit’s two-step rule for applying §109
to imported works does not solve the problem of foreign goods receiving
greater protection than domestically-produced ones. According to the
lower court, works made in the United States are subject to the first
sale doctrine, while goods made elsewhere are not. Rather than
attempting to create a workable market by judicially creating a
non-statutory exemption to a skewed reading of the statute, this Court
should rationalize the law with its precedents and with practicable
reality by insisting upon a proper reading of §109.

B. The Ninth Circuit’s Interpretation of “Lawfully Made
Under this Title” is Inconsistent with its Use Throughout Title 17

As Petitioners have noted, the full phrase “lawfully made under
this title” appears in two other contexts within Title 17. In each
case, using the Ninth Circuit's interpretation of the phrase results in
manifest absurdity, whereas understanding it as meaning “made not
in contravention of Title 17” permits a logically consistent
reading.

Section 110 of Title 17 provides copyright exceptions for specific
educational uses. In particular, §110(1) allows the performance or
display of copyrighted works in a classroom setting. However, this
exception is conditioned in part upon a two-pronged test: the copy used
to make the performance or display must have been “lawfully made
under this title,” and the person responsible for the performance
must not “kn[o]w, or ha[ve] reason to believe” that the copy
“was not lawfully made.” See 17 U.S.C.
§110(1).

If one assumes, as the Ninth Circuit does, that “lawfully made
under this title” requires that the copy at issue be manufactured
domestically, then classrooms would find themselves unable to show
foreign-made copies of works, provided that the instructor knew or had
reason to believe that the works were not lawfully made. Stranger still
is the fact that, under this awkward interpretation, an instructor could
find herself liable for copyright infringement should she hold a
mistaken belief that a work was not lawfully made even if it
was lawfully made abroad and imported. If the first prong of the test
merely requires a film be of foreign manufacture, and the second
requires only a reason to believe the copy is unlawful, it would still
be an infringement to show a legitimately made and imported work, if the
instructor believed it to be an infringing reproduction.

Similar oddities arise from applying the Ninth Circuit’s
interpretation to the Audio Home Recording Act, which requires the
producers of digital audio recording devices and digital audio media to
pay a royalty to copyright holders whose works have been embodied in
sound recordings “lawfully made under [Title 17].” Audio
Home Recording Act of 1992, Pub. L. No. 102-563, 106 Stat. 4237
(codified at 17 U.S.C. §§1001(7), 1006(a) (1992)). Under the
Ninth Circuit’s interpretation of this phrase, no royalty payments
could flow even to United States-based artists if copies of their works
were manufactured overseas and imported through authorized channels for
sale here. Such a result is plainly inconsistent and must therefore be
rejected.

CONCLUSION

For these reasons, the Court should grant the petition for a writ of
certiorari.

Respectfully submitted,

Jeffrey Pearlman
Sherwin Siy
Gigi B. Sohn
Counsel of Record

Public Knowledge
1875 Connecticut Ave. NW
Suite 650
Washington, DC 20009
(202) 518-0020
Counsel for Amici Curiae

¹ No counsel for a
party authored this brief in whole or in part, and no such counsel or
party made a monetary contribution intended to fund the preparation or
submission of this brief. No person other than the amicus
curiae, or its counsel, made a monetary contribution to its
preparation or submission. Petitioner has consented to the filing of
this briefand Respondent has filed a letter with the Court granting
blanket consent for amici. Parties have been given at least 10
days notice of amici’s intention to file.
Petitioner’s letter of consent has been filed with the Office of
the Clerk of this Court.

² Liability for
direct infringement of a copyright owner’s exclusive rights
regardless of the defendant’s knowledge or intent. See,
e.g., Shapiro, Bernstein & Co. v. H. L. Green Co.,
316 F.2d 304, 308 (2d Cir. 1963). Copyright owners who have registered
their works are also entitled to statutory damages ranging between $750
and $150,000 per work infringed. See 17 U.S.C. §504(c).

³ As discussed
below, see infra §II.A.2, p. 24, the Ninth
Circuit’s exception for first sales occurring in the United
States is no longer operative law.

⁴ Section 109 only
applies to “cop[ies] ... lawfully made under this title.”
See 17 U.S.C. §109.

⁵ Indeed, the
phrase “within the United States” is used in 17 U.S.C.
§1309, and a rudimentary search reveals it is used several
thousand times elsewhere in the United States Code. See,
e.g.,
http://www.google.com/search?q=%22within+the+United+States%22+site:cornell.edu/uscode/&hl=en&start=10&sa=N&cts=1244817723796.