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IP Alert: Supreme Court Rules First Sale Doctrine Applies to Foreign-Made Goods in Kirtsaeng v. John Wiley & Sons

April 1, 2013

As previously reported, on March 19, in Kirtsaeng v. John Wiley & Sons, Inc., the U.S. Supreme Court ruled that the “first sale” doctrine of the Copyright Act applied to products made abroad. This 6-3 decision authored by Justice Breyer reversed rulings by the district court and Second Circuit that the first sale doctrine did not apply to foreign-made products.

Under the first sale doctrine, the purchaser of a physical copy of a copyrighted work may give or sell that purchased copy to another without infringing the copyright owner's exclusive distribution rights. Specifically, the law provides “the owner of a particular copy . . . lawfully made under this title . . . is entitled without the authority of the copyright owner to sell or otherwise dispose of the possession of that copy . . .” (17 U.S.C. § 109(a)). In Kirtsaeng, the Court held that the phrase “lawfully made under this title” is not geographically limited to first sales in the United States.

John Wiley & Sons, Inc. (“Wiley”), published two versions of its textbooks, an American version printed and sold in the U.S. and a foreign version printed and sold abroad. Wiley authorized its wholly owned foreign subsidiary to publish, print, and distribute its English language textbook abroad. On each copy published abroad by the subsidiary, Wiley included language specifying that such foreign-made copies were authorized only for sale in Europe, Asia, Africa, and the Middle East and could not be exported out of these regions without Wiley’s permission.

Supap Kirtsaeng, a Thai citizen and student, was sent copies of foreign-edition English language textbooks at Thai bookshops. These textbooks sold at lower prices than the versions sold in the U.S. Kirtsaeng resold the textbooks in the U.S. at a profit.

Wiley sued Kirtsaeng for copyright infringement, claiming that his reselling of its foreign-made textbooks in the U.S. violated its exclusive right to distribute its copyrighted textbooks. Kirtsaeng argued that the first sale doctrine permitted him to resell in the U.S. the textbooks published and first purchased in Thailand. The district court rejected this contention and awarded statutory damages. On appeal, the Second Circuit affirmed, holding that the first sale doctrine applies only to copies made in territories where the U.S. Copyright Act is law. The Supreme Court granted Kirtsaeng’s petition for a writ of certiorari on this question.

The Court concluded that “Kirtsaeng’s non-geographical reading [of the first sale doctrine] is the better reading of the Act.” In reaching this conclusion, the Court analyzed several factors, including the text of the current statute, the legislative history of this portion of the Copyright Act, the underlying common law doctrine from which the first sale doctrine arose, and industry practices of book sellers, libraries, museums, and retailers.

The Court considered the current language of the first sale doctrine in Section 109(a) and noted that the statute says nothing about geography. Rejecting the dissent’s interpretation that the wording could be interpreted to mean goods made where the Copyright Act is applicable, the Court determined that “lawfully made under this title” means goods “made ‘in accordance with’ or ‘in compliance with’ the Copyright Act.”

The Court also compared the text of the current and previous versions of the statute and concluded that the changes resulting in the current language were not made to introduce a geographical limitation. The previous version of the statute protected “the transfer of any copy the possession of which has been lawfully obtained.” The current statute reads that, “the owner of a particular copy . . . lawfully made under this title” may sell that copy. The Court reasoned that this change was made to prevent non-owners, such as theater lessees of leased films, from being able to assert the first sale doctrine as a defense in infringement situations. Further, reading a geographical interpretation into the current law would “grant the holder of an American copyright . . . permanent control over the American distribution chain . . . in respect to copies printed abroad but not in respect to copies printed in America.” The Court rejected that Congress would have intended such a result.

The Court also considered the underlying common law first sale doctrine from which the current Section 109(a) arose and found that the common law doctrine made no geographical distinctions: “‘[W]hen a statute covers an issue previously governed by the common law,’ [this Court] must presume that ‘Congress intended to retain the substance of the common law.’” 

Finally, the Court considered the practices of book sellers, libraries, museums, and retailers. Such entities are not in the habit of asking copyright owners for permission before selling, lending, or displaying copies of works made abroad. The Court observed that the practices of these entities illustrate how deeply embedded their reliance is upon an interpretation of the first sale doctrine without geographic restrictions.

The Court reversed and remanded the case to the Second Circuit, and subsequently remanded two additional copyright decisions that raised similar issues (Liu v. Pearson Education, Inc., et al. and Kumar v. Pearson Education, Inc., et al.).

The Court also was presented with a petition for a writ of certiorari in Ninestar Technology Co., Ltd. et al. v. International Trade Commission et al., a patent case in which Ninestar purchased used printer cartridges in Asia and refilled and resold the cartridges in the U.S. In Ninestar, the Federal Circuit held that only initial sales of the printer cartridges in the U.S. (as compared to initial sales abroad) could exhaust U.S. patent rights. While many expected the Court to grant the certiorari petition, the Court denied the petition after issuing its decision in Kirtsaeng.

The Kirtsaeng decision has significant ramifications for publishers and resellers of copyrighted works. For more information, please contact Fitch Even attorney Alisa C. Simmons, the author of this alert.

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