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A 'Total Victory' for the First Sale Doctrine from the Supreme Court
by
Posted On March 25, 2013


In a powerful and conclusive opinion, the U.S. Supreme Court declared that copyright’s First Sale doctrine applies to all legal copyrighted works regardless of where they are manufactured. The decision in the case of Kirtsaeng vs. John Wiley & Sons, Inc. clarified a longstanding question of whether First Sale applied to copyrighted works that had been manufactured outside of the U.S. With the court’s decision, groups as diverse as libraries, museums, eBay resellers, and used bookstores can resell, lend, or display copyrighted works without interference from the copyright owner or publisher. Publishers and trade organizations expressed disappointment and argued that the decision will have repercussions over international trade in copyrighted works.

The First Sale doctrine (found at Title 17, Section 109 of the U.S. Code, available online at www.law.cornell.edu/uscode) indicates that once the copyright owner authorizes the “first sale” of a particular copy of a copyrighted work, the owner of that particular copy is entitled to resell, lend, or otherwise dispose of that copy without further permission of the copyright owner. The law requires that the person be the “owner” of the particular copy (which restricts the First Sale doctrine to items that are sold, not licensed), and that the particular copies be “lawfully made under this title.”

The court’s case arose from the story of a student from Thailand by the name of Supap Kirtsaeng. Kirtsaeng attended college and graduate school in the U.S. and quickly discovered that many of his textbooks were available in Thailand at substantially lower prices than offered in the U.S. Kirtsaeng arranged for family and friends to purchase books for him in Thailand and send them to him in the U.S. He began obtaining then reselling additional books on eBay, eventually grossing sales of nearly $900,000 and netting a profit of $100,000.

The books were published under license by an Asian subsidiary of John Wiley & Sons, Inc. and were labeled for sale in certain Southeast Asian countries only. On learning of Kirtsaeng’s activities, Wiley sued him for copyright infringement, arguing that copyright law gave Wiley the right to limit distribution of the books, and that Kirtsaeng’s activities infringed on that right. In response, Kirtsaeng argued that the First Sale doctrine allowed him as the legal owner of the physical copies to resell them without restriction.

Both the trial and appellate courts found in favor of Wiley. In both cases, the courts held that because the works were manufactured outside of the U.S., the First Sale doctrine did not apply. Specifically, the courts held that the First Sale doctrine only applied to works that were “lawfully made under this title” with “this title” referring specifically to U.S. copyright law. U.S. copyright laws apply only in the U.S., not in the Southeast Asian countries where the books were manufactured and sold. The court determined that because the textbooks were not manufactured in the U.S., they were not made “under this title” and the First Sale doctrine did not apply.

In a 30-page opinion by Justice Stephen Breyer and joined by five other justices, including Chief Justice Roberts, the Supreme Court indicated that the lower courts misinterpreted the phrase “lawfully made under this title.” The opinion held that the phrase applied to works that were made under the authority of and in accordance with U.S. copyright law, regardless of where they were specifically manufactured.

The court’s extensive opinion identified three legal grounds for finding that First Sale applies to foreign made works. First, the Court parsed the phrase, “lawfully made under this title” in great detail. It found that the phrase did not support Wiley’s “geographic interpretation” argument that it only applied when the item was manufactured in the U.S. Instead, it determined that the words “lawfully made,” simply distinguished works that were authorized by the copyright owner from those that were not, and that “under this title” refers to the copyright law and its rules for determining lawfulness. The court’s review of the history of copyright law dating from the 1700s supported this straightforward interpretation. By contrast, the court found that Wiley’s proposed geographic interpretation of the phrase created “linguistic problems.”

The court also gave careful consideration to written arguments made by associations of libraries, museums, used-book dealers, and consumer-goods retailers advocating for a broad interpretation of First Sale. The court found that the concerns of these organizations—such as libraries not being able to lend foreign printed books, museums not being able to display foreign produced art, or the foreign produced software and packaging that are integrated into U.S. consumer goods—amounted to a potential list of “horribles” that could result in “intolerable consequences” for users, lenders, and resellers of potentially $2.3 trillion worth of imported goods.

The court lastly addressed technical arguments raised some years earlier in a previous Supreme Court case. That case addressed the interaction between the First Sale doctrine and a separate provision in copyright law allowing restrictions on importation of copyrighted works. (Specifically, Title 17, Section 602 of the U.S. Code.) The court determined that the import restrictions did not limit the First Sale doctrine, but they applied to situations were copyrighted works were imported—prior to being sold—without the authority of the copyright owner.

In an equally strong dissenting opinion, Justice Ginsburg challenged the “parade of horribles” that the librarians, resellers, and museums had outlined. She pointed out the nearly complete absence of lawsuits over these alleged “horribles.” She also argued that other provisions of copyright law served to protect librarians and others from the “anticipated horribles.” Looking more broadly, Ginsburg argued that the court’s interpretation of the First Sale doctrine was inconsistent with the U.S.’s long-held position in international trade negotiations over copyrighted materials and risked “undermining the United States’ credibility on the world stage.”

The Library Copyright Alliance and users’ rights advocate Public Knowledge hailed the decision as a “total victory” for libraries, ownership rights, and the public. The Library Copyright Alliance said that the decision “ensures that libraries can rely on the critically important principle of first sale to continue lending the estimated 200 million foreign-made volumes in our collections.” For its part, John Wiley & Sons indicated that it was “disappointed” in the decision, describing it as “a loss for the U.S. economy, and students and authors in the U.S. and around the world.”

The Association of American Publishers (AAP) also issued a statement of disappointment and suggested that Congress might want to consider “the impact of the Court’s divided ruling on the ability of U.S. producers to effectively compete in global markets.” The AAP indicated that it was “prepared to participate in advocacy before Congress on revisions in the application of First Sale in the global copyright marketplace.” Given that there is language scattered throughout the Court’s opinion suggesting that because Congress is responsible for the First Sale doctrine and how it is interpreted and applied, it may well be that Congress will respond to the Kirtsaeng decision with a fresh look at First Sale.


George H. Pike is the director of the Pritzker Legal Research Center at Northwestern University School of Law. He writes the Legal Issues column and feature articles for Information Today.

Email George H. Pike

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Comments Add A Comment
Posted By Jill Bedford3/26/2013 9:43:25 PM

I wonder if this will apply to ebooks. Right now if you purchase a 2nd hand e-reader - the original owner has to delete their purchases because of accounts for access. Interesting implications....

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