Tag Archives: Book

On October 29, the Supreme Court heard the arguments of a
copyright case involving the right to resell imported goods in the
United States. ;The goods in question were college textbooks
but the outcome could affect whether copyrighted goods made
overseas can be resold in the U.S. without consent from the
copyright holder. Kirtsaeng v. John Wiley & Sons, Inc.

may focus on the five-pound appendages lugged around by
undergraduates, but any product made overseas with a U.S.
copyright—from shoes to laptops—could be affected. That makes
Kirtsaeng potentially one of the most important decisions
the Court will make this season.
Here’s the back story: Supap Kirtsaeng traveled to the
U.S. from Thailand to attend Cornell and to earn a
doctorate in math from University of Southern California. Along the
way, Kirtsaeng set up his own business of sorts through eBay and
sold $900,000 worth of books printed abroad by Wiley & Sons. He
used the profits, among other things, to pay for his education.
In 2009, Wiley won a copyright
infringement ;lawsuit against
Kirtsaeng in the U.S. District Court for the Southern District of
New York (SDNY). Kirtsaeng then appealed to the U.S. Court of
Appeals for the 2nd Circuit in New York. The 2nd Circuit sided with
SDNY. Kirtsaeng was ordered ;to pay $600,000 for infringing a
textbook publisher’s copyrights when he resold eight textbooks that
had been printed by the Asian subsidiary of the U.S.-based Wiley
& Sons. Each international edition ended up costing Kirtsaeng
$75,000 per book.
Kirtsaeng appealed the decision, claiming that Wiley lost its
right to control sales of the book when his friends and family
legally bought them in Thailand. This is known as the “first sale
doctrine,” which holds that the publisher of a book only gets to
control the original purchase of a book. After that, whoever bought
the book can resell the book. The first sales doctrine is what
makes used bookstores (and used record stores, along with many
other retail shops) possible.
There are two relevant provisions of copyright law that are at
hand—and in apparent conflict. The first, 17 USC § 109(a), states
that “the owner of a particular copy or phonorecord lawfully made
under this title, or any person authorized by such owner, is
entitled, without the authority of the copyright owner, to sell or
otherwise dispose of the possession of that copy or phonorecord.”
But another provision, 17 USC § 602(a)(1), states that the
“importation into the United States, without the authority of the
owner of copyright under this title, of copies or phonorecords of a
work that have been acquired outside the United States is an
infringement of the exclusive right to distribute copies or
phonorecords under section 106, actionable under ;section
501.”
The two provisions create a precarious situation and raise the
question now before the Court: Does the first sale doctrine apply
when applying to imported books? The difficulties in answering that
question raise another, which has never quite been settled once and
for all: Do U.S. copyright laws actually cover products made
outside the U.S.?
These questions have been raised before, in the case
Costco v. Omega, which was a 4-4 split
decision, since Justice Elena Kagan recused ;herself from any
decision. In that case, watchmaker Omega claimed the Costco had
infringed on Omega’s right to authorize retailers in the U.S. by
selling merchandise it bought from third parties. Because Omega
watches have a copyrighted design on them, the suit proceeded under
copyright law and Costco claimed that the first-sale doctrine
immunized them from any sort of infringement. A trial court ruled
in favor of Costco, but then the U.S. Court of Appeals for the 9th
Circuit reversed the decision, saying that the first sale doctrine
didn’t cover this instance. With the deadlock in the Supreme Court,
the 9th Circuit’s decision was upheld. In a 1998
case, ;Quality King v. L’anza , the Supreme Court
decided that the first sale doctrine did cover exported copies made
in the U.S. that are then re-imported back to the U.S. for sale
without the owner’s consent.
While the Kirtsaeng case has obvious connections to
those two earlier rulings, something different is at stake.
According to the SDNY document these books
were printed overseas by Wiley & Sons’ subsidiary Wiley Asia.
These books also included “notices stating that the books are
copyrighted in the U.S.”—these notices were then decided
insufficient “to satisfy” the act. Yet, on the back cover of these
editions it states plainly, “this book may not be
exported….importation of this book to another region without the
Publisher’s authorization is illegal and is a violation of the
Publisher’s rights.” The SDNY court decided for Wiley & Sons
that its copyright was indeed infringed upon by Kirtsaeng,
considering that Wiley still owns the copyright within the overseas
subsidiary.
The Supreme Court will try to further decipher the law and
decide if first sale applies. During the oral argument, the
justices and lawyers walked through a “parade of horribles”—the
moniker the given to hypothetical negative situations that might
occur under different situations. The idea is to show the
implications of a ruling that goes one way or another. The
nightmare scenarios ranged from banning the reselling of cars to
preventing libraries from lending books to stopping museums from
buying art from collectors (rather than directly from artists).
Justice Stephen Breyer and Ted Olson, the attorney representing
Wiley, duked it out in a discussion of what “horribles” could
happen if Wiley prevailed (read the
transcript here). Breyer asked Olson whether people would be
able to resell their foreign cars, especially if they are loaded
with copyrighted sound systems and copyrighted GPS systems. “Now,
under your reading,” Breyer asked, “the millions of Americans who
buy Toyotas could not resell them without getting the permission of
the copyright holder of every item in that car which is
copyrighted?”
After multiple attempts, during which they sounded like a
married couple fighting over who left the stove on, Breyer coaxed
an answer of sorts out of Olson:

MR. OLSON: There may be —

JUSTICE BREYER: Is that right?

MR. OLSON: There may be just -

JUSTICE BREYER: Am I right or am I wrong? Am I off base or am I
wrong — am I right?

MR. OLSON: There are other defenses, but that is not this case.
This case is not —

JUSTICE BREYER: Well, how do you distinguish? How do you
distinguish?

MR. OLSON: The government — the government would argue for a
broader interpretation under what was made under this statute,
whether that would include the importation or the distribution in
commerce. That’s an argument that the government makes, but it’s
not necessary to decide this case.

Breyer gave more examples of hypothetical horribles where buyers
might get screwed after buying imported products that contain
copyrighted material. His list included “libraries with three
hundred million books bought from foreign publishers that they
might sell, resell or use” and “museums that buy Picassos.” Olson
replied, “When we talk about all the horribles that might apply in
cases other than this—museums, used Toyotas, books and luggage, and
that sort of thing—we’re not talking about this case.”
On the other side, E. Joshua
Rosenkranz, the attorney for Kirtsaeng, posed the idea of how
this could impact manufacturing jobs. Rosenkranz tried to explain
that a ruling for Wiley & Sons would entice publishers and
copyright holders to keep manufacturing overseas, so they could
control resale rights at a global scale.
“A U.S. manufacturer who wants to sell into the U.S. market has
this incentive to go and send jobs overseas. It’s an irresistible
incentive if the law is — if this Court says the law is.” Justice
Ruth Bader Ginsburg questioned Rosenkranz if this has in fact ever
happened. Rosenkranz swears by it, but came up short on providing a
case.
After all is said and done with the hearing, this case has gone
beyond the walls of the Court of Last Resort. The case has
attracted internet big shots like eBay and Overstock as well as
other stakeholders in second-hand stuff such as The American
Library Association and Goodwill Industries. Together, along with
many other businesses, associations and organizations, they have
created a coalition called the ;Owners’ Right Initiative
(ORI).
If the Court sides with Kirtsaeng, copyright holders could have
a mess on their hands—trying to get ahold of royalties, not only
for publishing companies, but for authors, artists, and content
creators. A snowball effect could occur. If the creators of content
aren’t receiving any royalties due to re-importation, then they
might not be as keen to put out so many versions. But then they may
increase prices to compensate for that lost revenue
stream. ; ;
The resellers could see some major damage too—from cultural
exchange to online businesses. Damn near everyone has resold
something in their lives, at a garage sale or on Craigslist. A
victory for Wiley could mean a bigger snowball could roll down the
hill, running right over eCommerce, small businesses, libraries,
museums, and the lady down the street who is trying to sell foreign
knick-knacks.
Whatever decision is rendered, it seems safe to say that it
won’t be a perfect solution. Who out of the two groups will take a
bigger fall? Publishers, movie studios, and others in the
entertainment industry will suffer by not being able to stop
imports from their cheapest markets abroad. If that happens, we can
expect the price of all licensed goods, from textbooks to DVDs, to
spike as copyright holders try to make as much as possible on
domestic sales. But resellers could have a cliff that is sharper on
the way down.
What needs to change is the mentality around doing business.
Kirtsaeng may seem like a entrepreneurial David taking on a
corporate Goliath, but that’s not quite right in the bigger
picture. You have major companies such as eBay, Google, and Costco
embracing the idea of reselling, while other business, as large or
larger, favor making the practice a crime. Copyright is enshrined
in the Constitution specifically as a means to benefit society, not
particular industries or business models, a point which often gets
lost in legal battles. After decades of copyright-holder-friendly
legislation plainly at odds with technological innovation that
undercuts everybody’s ability to control distribution and
reproduction,
it’s increasingly difficult to argue that consumers are well
served by strict enforcement of existing laws.
The Supreme Court’s decision will be announced sometime in the
coming months. Depending on that decision—and it’s far from clear
how the majority will rule—we may start to see a real-life “parade
of horribles” by the beginning of next summer. And no matter what
this decision says, you can expect to see a flood of similar cases
in the future.

… Read More