In a landmark ruling on March 19th, the Supreme Court held in Kirtsaeng v. John Wiley & Sons, Inc., No. 11-697, that the “first sale” doctrine – which permits lawfully acquired copies of copyrighted works to be resold by their owners – also applies to works manufactured overseas. By holding that the first sale doctrine applies to goods manufactured abroad as well as those manufactured in the United States, the Court reversed a Second Circuit decision upholding a jury determination that Petitioner Supap Kirtsaeng was liable for willful copyright infringement and owed publisher John Wiley & Sons $600,000 in damages. See Mar. 19, 2013 Slip Op.
The Story Begins in Thailand
Supap Kirtsaeng, a Thai citizen who attended graduate school in the U.S., asked his friends and family in Thailand to purchase and ship him copies of foreign edition, English-language textbooks, that were less expensive than the U.S. editions. Kirtsaeng subsequently resold the textbooks to students in the U.S. for profit. U.S. book publisher Wiley assigned the right to publish, print and sell its foreign versions of English-language textbooks abroad to its wholly-owned Asian subsidiary. Each of Wiley’s Asia-manufactured textbooks state that absent permission, the textbooks may not be taken into the United States. In 2008, Wiley sued Kirtsaeng in United States District Court for the Southern District of New York, alleging that Kirtsaeng’s unauthorized importation and resale of the textbooks constituted copyright infringement. The “first sale” doctrine in copyright law allows the owner of a “lawfully made” copy of a copyrighted work to sell or otherwise dispose of that copy without limitations imposed by the copyright owner. 17 U.S.C. §109(a). For example, once a copy of a copyrighted novel has been lawfully sold or transferred, the buyer has the right to sell or otherwise distribute that particular copy. Section 603(a)(1) of the Copyright Act, however, provides that importation, without the owner’s permission, of a copyrighted work acquired abroad is an act of infringement.
“First Sale” Defense Prohibited
In the district court, Kirtsaeng was prohibited from asserting the “first sale” defense. After the trial, the jury found that Kirtsaeng willfully infringed Wiley’s copyrights and assessed statutory damages of $600,000. The United States Court of Appeals for the Second Circuit affirmed, holding that the “first sale” doctrine only applies to copies of copyrighted works that are “lawfully made under this title,” which it interpreted to mean only copyrighted works manufactured in “territories in which the Copyright Act is law,” i.e., not to works manufactured abroad. The Supreme Court granted certiorari to resolve the conflict between the Copyright Act’s first sale defense and Section 602(a)(1) of the Copyright Act, which prohibits the importation of a copyrighted work “without the authority of the owner,” as applied to a copy of a copyrighted work that was made and legally acquired abroad and then imported into the United States.
6-3 Opinion Finds No Geographical Limitation
In the 6-3 opinion authored by Justice Breyer, the Court focused on the geographical limitation arguments made by both parties. Wiley argued that the “first sale” doctrine did not apply because copies can only be “lawfully made under this title” if the copies were made in the United States. Therefore, it argued, the “first sale” doctrine only limits the publisher’s rights to control distribution of copies if the copies are made in the United States. In contrast, Kirtsaeng argued that the “first sale” doctrine applies to all copies that are manufactured “in accordance with” or “in compliance with” United States copyright law, regardless of the location where those copies were printed or manufactured. The textbooks at issue were manufactured in accordance with United States law, Kirtsaeng argued, because Wiley had authorized its subsidiary to manufacture the textbooks, and therefore the “first sale” doctrine permitted him to import and resell the textbooks without Wiley’s permission. The majority found Kirtsaeng’s arguments persuasive. The Court reasoned that Section 109(a)’s plain language, its context, and the common-law history of the “first sale” doctrine “favored a non-geographical interpretation.” Kirtsaeng v. John Wiley & Sons, Inc., No. 11-697, slip op. at 8 (S. Ct. Mar. 19, 2013) (emphasis in original). The Court found that Section 109(a) made no mention of geography. See id. at 9. (“neither ‘under’ nor any other word in the phrase means ‘where’”). Additionally, the Court determined that because the definition of “under” can mean “in accordance with,” Section 109(a)’s “lawfully made under this title” language, when read literally, meant “made in accordance with” or “in compliance with” the Copyright Act. Id. Moreover, the Court found that that historical and contemporary statutory context indicated that Congress “did not have geography in mind” when writing Section 109(a). Id. The Court also discussed the “first sale” doctrine’s common law history and the effect of a geographical limitation on specific entities in holding that the “first sale” doctrine applies to goods lawfully manufactured abroad. Specifically, the Court found that the common-law “first sale” doctrine, with its “impeccable historic pedigree” made no geographical distinctions and had played an important role in American copyright law. Id. It also considered examples of how entities, such as libraries, book dealers, technology companies and museums, would be affected by a geographical limitation on the “first sale” doctrine because these entities had long-relied on the “first sale” doctrine when operating their businesses. The Court found that a geographical interpretation of Section 109(a) would “fail to further basic constitutional copyright objectives, in particular ‘promot[ing] the Progress of Science and useful Arts.’” Id. citing U.S. Const., Art. I, §8, cl. 8.
Dissent Warns of Consequences to Publishers
Justice Ginsburg (joined by Justice Kennedy and partially joined by Justice Scalia) authored a forceful dissent, warning of the serious consequences the decision would have for publishers. Ginsburg rejected the Court’s adoption of an “international exhaustion” regime, under which the authorized distribution of a particular copy anywhere in the world exhausts the copyright owner’s distribution right everywhere with respect to that copy. Justice Ginsburg explained in detail that the legislative history of the Copyright Act shows that Congress intended to provide copyright owners with a remedy against the unauthorized importation of foreign-made copies of their works, even if those copies were made and sold abroad with the copyright owner’s authorization. Therefore, Justice Ginsburg concluded, the United States should adhere to a national-exhaustion regime, under which a copyright owner’s right to control distribution of a particular copy is exhausted only within the country in which the copy is sold. In that scenario, Kirtsaeng’s unauthorized importation of foreign-made textbooks would have infringed Wiley’s copyrights, Justice Ginsburg explained, and thus she would have affirmed the Second Circuit’s judgment. Justice Kagan concurred, joined by Justice Alito, and indicated full support for the Court’s application of the first sale doctrine to works manufactured abroad. Justice Kagan also noted that, “[i]f Congress thinks copyright owners need greater power to restrict importation and thus divide markets,” Congress can alter the impact of the decision by legislating to establish a broader importation right. Sources: Kirtsaeng v. John Wiley & Sons, Inc., Case No. 11-697 (Sup.Ct.)
This article was prepared by Laura J. Borst (email@example.com / 612 321 2206), Rita Weeks (firstname.lastname@example.org / 212 318 3213) and Shelby Knutson (email@example.com / 612 321 2207) of Fulbright’s Intellectual Property and Technology Practice.