Today Public Knowledge, along with the Electronic Frontier Foundation and U.S. PIRG, filed a brief asking the Supreme Court to review a lower court decision in the case John Wiley & Sons, Inc. v. Kirtsaeng on used textbook sales that could have enormous ramifications for consumers and businesses across the country that sell or lend copies of copyrighted goods, from books to toys to automobiles.
At the heart of this case is a provision in copyright law called the first sale doctrine. The first sale doctrine was codified in Section 109 of the Copyright Act by Congress, and it allows the lawful owner of a particular copy of a copyrighted work to sell or otherwise dispose of that copy without getting permission from the copyright owner. Without this right, copyright law would prohibit any distribution of a copy of a work without the copyright owner’s permission. Thanks to the first sale doctrine, a person who buys a book (for example) can resell, give away, or lend that physical copy without needing the copyright owner’s permission. This idea is intimately connected with the fundamental concept that owning a copyright is distinct from owning the physical copies that contain a copyrighted work. When I buy a copy of a novel, I don’t get any ownership in the copyright to that novel, but I am the owner of that particular copy. Likewise, the copyright owner still owns the novel’s copyright, but does not own the copy that I’ve bought, and therefore can’t control how I dispose of that copy.
But in Kirtsaeng’s case, the Second Circuit held that the first sale doctrine only applies to copies that are made within the geographic territory of the U.S. As a result, copyright owners need only move their manufacturing operations abroad in order to get perpetual control over the redistribution of their works. Consumers who (legally) buy foreign-manufactured copies would therefore be prohibited from reselling or lending those copies to anyone else. This decision could hurt trade in secondary markets for any goods that contain a copy of a copyright-protected work. The Second Circuit’s reading encourages copyright owners to move their manufacturing jobs abroad to get indefinite control over all of the copies, and they can use this control to keep used copies from competing with new copies in the marketplace. This harms both consumers and retailers who participate in secondary markets: consumers will have to pay full retail price for a new copy or go without, and retailers will have to shut down operations that support secondary markets (like eBay’s auctions or Amazon.com’s marketplace for used goods).
The impact of this decision is many times worse when you consider just how many products contain copyrighted works in today’s world. Toys for Tots may be illegal because toys can have copyright-protected designs and are often manufactured abroad. Owners of foreign-made cars will be unable to resell them because cars often contain computers that run copies of copyright-protected programs. Libraries will only be able to stock U.S.-made books on their shelves. Even producers of non-copyrighted goods can seize control by simply putting their good in foreign-made packaging with a copyright-protected design on it. Of course, this decision also gives copyright owners a perverse incentive to move all of their manufacturing abroad to get perpetual distribution rights, so consumers may find it harder and harder to buy American-made goods anyway.
In this case, Supap Kirtsaeng moved to the U.S. from Thailand for college and graduate studies, and he paid for tuition by having his family ship him the foreign editions of textbooks that he could resell in the U.S. Kirtsaeng could earn a profit doing this because publishers charge American students far more for textbooks than they charge students in other countries. The books’ publisher sued Kirtsaeng, arguing that he had violated the publisher’s importation right under Section 602 of the Copyright Act. Kirtsaeng countered that he was protected under the first sale doctrine because he was the legal owner of the (legally made) copies.
At trial, the jury was only informed of the publisher’s interpretation of the law, and it subsequently found Kirtsaeng liable for $600,000 for infringing eight works (Kirtsaeng didn’t have that much money, so at the publisher’s request the court ordered Kirtsaeng to hand over his computer, printer, and golf clubs). On appeal, the U.S. Court of Appeals for the Second Circuit sided with the publisher, reasoning that since the first sale doctrine is restricted to copies “lawfully made under this title” it only applies to copies manufactured within the geographic territory of the U.S.
The Supreme Court could fix all this by adopting Kirtsaeng’s (and PK’s) interpretation of Section 109(a). Kirtsaeng is now asking the Supreme Court to review the Second Circuit’s decision, arguing that copies “lawfully made under this title” include all copies made legally, according to Title 17 (which contains federal copyright law), regardless of where the copies were manufactured. Since Section 602 defines the importation right as part of the distribution right, and the distribution right is limited by the first sale doctrine, it follows that the importation right must also be limited by the first sale doctrine. Section 602 is much less powerful under this interpretation, but it still has a purpose. Importing infringing copies is still prohibited, and a foreign company that’s hired to produce copies that does not legally own those copies must still get the copyright owner’s permission to import them into the United States. Read in this light, the first sale doctrine does not render Section 602 moot any more than it renders the general distribution right moot.
The Supreme Court should take this opportunity to clarify and correct the federal circuit courts’ confused and contradicting decisions on this question. For example, the Ninth Circuit has held that the first sale doctrine does apply to foreign-made copies if the copyright owner has sold the copy within the U.S., but the Supreme Court tied 4-4 when it tried to resolve the question, and the Second Circuit has explicitly rejected the Ninth Circuit’s approach. The Court should resolve this circuit split and protect consumers’ ability to sell, lend, and give away their own personal property.