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Supreme Court Extends Reach Of The First Sale Doctrine Under The Copyright Act

The U.S. Supreme Court held that the first sale doctrine under the Copyright Act extends to goods lawfully manufactured abroad and purchased in the United States.  Kirtsaeng v. John Wiley & Sons, Inc., Case No. 11-697 (U.S. March 19, 2013) (available here).  John Wiley & Sons, Inc. (“Wiley”) publishes academic textbooks and often assigns its rights to publish, print, and sell foreign editions of the books to its wholly owned foreign subsidiary (“Wiley Asia”).  Wiley Asia’s books have a warning on them that they are not to be brought into the United States without permission.  Supap Kirtsaeng moved from Thailand to the United States to study mathematics, and purchased English textbooks in Thailand for a lower price than their U.S. counterparts.  Kirtsaeng then sold the books and kept the profits.  Wiley sued, claiming the unauthorized importation and resale of the textbooks was infringing Wiley’s right to distribute under § 106(3) of the Copyright Act and infringed on § 602’s import prohibition.  17 U.S.C.  §§ 106(3), 602.  Kirtsaeng’s defense was that his actions were protected by the “first sale” doctrine under § 109 of the Copyright Act.  The lower court rejected his defense, stating that the first sale doctrine does not apply to goods produced abroad.  At the jury trial, Kirtsaeng was found have willfully infringed on Wiley’s U.S. copyrights.  The appellate court affirmed, finding that §109(a)’s “lawfully made under this title” language implied that the first sale doctrine did not apply to copies of U.S. copyrighted works manufactured abroad.  The Supreme Court reversed, holding that the first sale doctrine applies to copies of a copyrighted work lawfully made abroad.

§ 106 of the Copyright Act lays out the exclusive rights a copyright owner has over the copyrighted work, including the exclusive right to distribute copies to the public.  17 U. S. C. §106(3).  The Copyright Act places limitations on these exclusive rights.  The statutory “first sale” doctrine provides: “Notwithstanding the provisions of section 106(3) [for exclusive distribution rights], the owner of a particular copy or phonorecord 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 or phonorecord.”  17 U. S. C. §109(a).  This means that once a copyright owner lawfully sells a copy of the copyrighted work, the purchaser of that copy, and subsequent owners, can dispose of that copy as they wish.  However, §602(a)(1) states that unauthorized importation into the U.S. of copies of a work that were acquired outside of the U.S. is an infringement of the copyright owner’s exclusive right to distribute.  Thus, §602 refers directly to §106(3).  In an older Supreme Court case, the Court held that §602(a)(1)’s reference to §106(3)’s exclusive distribution right incorporates the limitations of §106(3), including the first sale doctrine of §109.  Quality King Distributors, Inc. v. L’anza Research Int’l, Inc., 523 U. S. 135, 145 (1998).  However, the L’anza decision considered a copy that was manufactured in the U.S. and purchased abroad.

The issue before the Supreme Court was whether the first sale doctrine protects a buyer of a copyrighted work lawfully manufactured abroad (whether § 109’s “lawfully made under this title” language creates a geographic limitation on the first sale doctrine).  The Court determined that it did.  “[A] nongeographical interpretation provides each word of the five-word phrase with a distinct purpose. The first two words of the phrase, ‘lawfully made,’ suggest an effort to distinguish those copies that were made lawfully from those that were not, and the last three words, ‘under this title,’ set forth the standard of ‘lawful[ness].’ Thus, the nongeographical reading is simple, it promotes a traditional copyright objective (combatting piracy), and it makes word-by-word linguistic sense.”  Wiley, Slip Op. P. 9.  To support its conclusion, the Court compared § 109(a)’s present language of  “lawfully made under this title” with its predecessor’s  “lawfully obtained” language.  Neither language mentions geography, and Congress had other reasons for editing the language text.

The Court did concede that a non-geographical interpretation would make it nearly impossible for copyright holders to divide foreign and domestic markets.  However, the Court did not see how this theory helped Wiley’s case because nothing in the Copyright Act suggests that a copyright holder is entitled to such a right.  “To the contrary, Congress enacted a copyright law that (through the ‘first sale’ doctrine) limits copyright holders’ ability to divide domestic markets. And that limitation is consistent with antitrust laws that ordinarily forbid market divisions.”  Wiley, Slip Op. P. 32.  As a result, the Court reversed, finding that the first sale doctrine extends to copies of copyrighted materials lawfully manufactured abroad.

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