KIND OF HUGE: U.S. Supreme Court rules that copyright law's "first-sale" doctrine applies to works lawfully manufactured abroad

Posted by Charles Colman

LAW OF FASHION's thoughts on this important case to follow...

[UPDATE (3/20/13): Maybe.  Like Rebecca Tushnet, LOF is finding that it doesn't have a ton to say about the Supreme Court majority's ruling in Kirtsaeng right now -- except that it was on point.]

[UPDATE (4/6/13): Actually, this writer has discovered that he has quite a bit to say about why he doesn't have much to say about Kirtsaeng.]

For your convenience and enjoyment, LOF has posted some key excerpts from the majority, concurring, and dissenting opinions, below.  For a breakdown of the Court's ruling, consult the "Syllabus" prefacing the opinions; after that, check out insightful commentary by Ron Coleman on LIKELIHOOD OF CONFUSION®, James Grimmelmann on Publishers Weekly, and Eric Goldman on Forbes.

 

 

Excerpts from Justice Breyer's majority opinion (italics in original; bold and hyperlinks added):

We must decide whether the words “lawfully made under this title” restrict the scope of §109(a)’s “first sale” doctrine geographically. The Second Circuit, the Ninth Circuit, Wiley, and the Solicitor General (as amicus) all read those words as imposing a form of geographical limi­tation. The Second Circuit held that they limit the “first sale” doctrine to particular copies “made in territories in which the Copyright Act is law,” which (the Circuit says) are copies “manufactured domestically,” not “outside of the United States.” 654 F. 3d, at 221–222 (emphasis added). Wiley agrees that those five words limit the “first sale” doctrine “to copies made in conformance with the [United States] Copyright Act where the Copyright Act is appli­cable,” which (Wiley says) means it does not apply to copies made “outside the United States” and at least not to “for­eign production of a copy for distribution exclusively abroad.” Brief for Respondent 15–16. Similarly, the Solicitor General says that those five words limit the “first sale” doctrine’s applicability to copies “‘made subject to and in compliance with [the Copyright Act],’” which (the Solicitor General says) are copies “made in the United States.” Brief for United States as Amicus Curiae 5 (hereinafter Brief for United States) (emphasis added). And the Ninth Circuit has held that those words limit the “first sale” doctrine’s applicability (1) to copies lawfully made in the United States, and (2) to copies lawfully made outside the United States but initially sold in the United States with the copyright owner’s permission. Denbicare U. S. A. Inc. v. Toys “R” Us, Inc., 84 F. 3d 1143, 1149–1150 (1996).

 

Under any of these geographical interpretations, §109(a)’s “first sale” doctrine would not apply to the Wiley Asia books at issue here. And, despite an American copy­right owner’s permission to make copies abroad, one who buys a copy of any such book or other copyrighted work— whether at a retail store, over the Internet, or at a library sale—could not resell (or otherwise dispose of) that partic­ular copy without further permission.

 

Kirtsaeng, however, reads the words “lawfully made under this title” as imposing a non-geographical limita­tion. He says that they mean made “in accordance with” or “in compliance with” the Copyright Act. Brief for Petitioner 26. In that case, §109(a)’s “first sale” doctrine would apply to copyrighted works as long as their manu­facture met the requirements of American copyright law. In particular, the doctrine would apply where, as here, copies are manufactured abroad with the permission of the copyright owner. See §106 (referring to the owner’s right to authorize).

 

In our view, §109(a)’s language, its context, and the common-law history of the “first sale” doctrine, taken together, favor a non-geographical interpretation. We also doubt that Congress would have intended to create the practical copyright-related harms with which a geograph­ical interpretation would threaten ordinary scholarly, artistic, commercial, and consumer activities. See Part II–D, infra. We consequently conclude that Kirtsaeng’s nongeographical reading is the better reading of the Act.



. . . 



Wiley and the dissent claim that a nongeograph­ical interpretation will make it difficult, perhaps impos­sible, for publishers (and other copyright holders) to divide foreign and domestic markets. We concede that is so. A publisher may find it more difficult to charge different prices for the same book in different geographic markets. But we do not see how these facts help Wiley, for we can find no basic principle of copyright law that suggests that publishers are especially entitled to such rights . . . .

[T]he Constitution’s language nowhere suggests that its limited exclusive right should include a right to divide markets or a concomitant right to charge different purchasers different prices for the same book, say to increase or to maximize gain. Neither, to our knowledge, did any Founder make any such suggestion. We have found no precedent suggesting a legal preference for interpretations of copyright statutes that would pro­vide for market divisions. . . .

 

Whether copyright owners should, or should not, have more than ordinary commercial power to divide international markets is a matter for Congress to decide. We do no more here than try to determine what decision Congress has taken.

 

 

Excerpts from Justice Kagan's concurrence (hyperlinks added):

John Wiley is right that the Court’s decision, when combined with Quality King, substantially narrows §602(a)(1)’s ban on unauthorized importation. Quality King held that the importation ban does not reach any copies receiving first-sale protection under §109(a). See 523 U. S., at 151–152. So notwithstanding §602(a)(1), an “owner of a particular copy . . . lawfully made under this title” can import that copy without the copyright owner’s permission. §109(a). In now holding that copies “lawfully made under this title” include copies manufactured abroad, we unavoidably diminish §602(a)(1)’s scope—indeed, limit it to a fairly esoteric set of applications[.]

 

At bottom, John Wiley (together with the dissent) asks us to misconstrue §109(a) in order to restore §602(a)(1) to its purportedly rightful function of enabling copyright holders to segment international markets. I think John Wiley may have a point about what §602(a)(1) was designed to do; that gives me pause about Quality King’s holding that the first-sale doctrine limits the importation ban’s scope. But the Court today correctly declines the invitation to save §602(a)(1) from Quality King by destroying the first-sale protection that §109(a) gives to every owner of a copy manufactured abroad. That would swap one (possible) mistake for a much worse one, and make our reading of the statute only less reflective of Congressional intent. If Congress thinks copyright owners need greater power to restrict importation and thus divide markets, a ready solution is at hand—not the one John Wiley offers in this case, but the one the Court rejected in Quality King.

 

Excerpts from Justice Ginsburg's dissent (hyperlinks added):

To justify a holding that shrinks to insignificance copy­right protection against the unauthorized importation of foreign-made copies, the Court identifies several “practical problems.” Ante, at 24. The Court’s parade of horribles, however, is largely imaginary. Congress’ objective in enacting 17 U. S. C. §602(a)(1)’s importation prohibition can be honored without generating the absurd conse­quences hypothesized in the Court’s opinion. I dissent from the Court’s embrace of “international exhaustion,” and would affirm the sound judgment of the Court of Appeals.

Because economic conditions and demand for particular goods vary across the globe, copyright owners have a financial incentive to charge different prices for copies of their works in different geographic regions. Their ability to engage in such price discrimination, however, is undermined if arbitrageurs are permitted to import copies from low-price regions and sell them in high-price regions . . . .

The Court does not deny that under the language I have quoted from Quality King, Wiley would prevail. Ante, at 27. Nevertheless, the Court dismisses this language, to which all Members of the Quality King Court subscribed, as ill-considered dictum. Ante, at 27–28. I agree that the discussion was dictum in the sense that it was not essen­tial to the Court’s judgment. See Quality King, 523 U. S., at 154 (GINSBURG, J., concurring) (“[W]e do not today resolve cases in which the allegedly infringing imports were manufactured abroad.”). But I disagree with the Court’s conclusion that this dictum was ill considered. Instead, for the reasons explained below, I would hold, consistently with Quality King’s dictum, that §602(a)(1) authorizes a copyright owner to bar the importation of a copy manufactured abroad for sale abroad.

 

FULL OPINIONS:

Kirtsaeng v. John Wiley & Sons, 11-697 (U.S. Mar. 19, 2013)