Will copyright’s first sale doctrine deter the American Consumer?

by shotce on October 27, 2012

On October 29, 2012, the US Supreme Court will decide the case Kirtsaeng v. John Wiley & Sons, Inc., that could forever change the way the US consumers buy and sell goods made outside of the US.  In the US, we are free to sell just about anything–whether on eBay, Amazon, Craigslist, the thrift shop, or a community garage sale- and consumers are eager to purchase just about anything. Oddly, this rather simple and intuitive form of exchange is actually protected under the U.S. Copyright Law’s first sale doctrine.  The  first sale doctrine, codified at § 109(a), allows the owner of a copy, lawfully

made under this title, to sell or otherwise dispose of the copy without the copyright owner’s permission.

what is first sale
The first sale doctrine limits the scope of copyright protection afforded to authors of original works in terms of distribution. Copyright law ensures that the intellectual property rights remain with its creator.  In order to place logical restrictions on copyright protection, the Court in Quality King Distributors, Inc. v. L’anza Research Int’l, Inc., 523 U.S. 135 at 152 (1998) reasoned:  “(t)he whole point of the first sale doctrine is that once the copyright owner places a copyrighted item in the stream of commerce by selling it, he has exhausted his exclusive statutory right to control its distribution.”  Without the first sale doctrine, those pre-owned items sold at garage sales could only be offered for sale if the seller first receives the consent of the copyright holder.

what does copyright law protect
Copyright is an exclusive right and gives its creator, the sole right to:

  •  reproduce the copyrighted work
  • prepare derivative works
  • distribute and sell any copies of the copyrighted work
  • perform or display the copyrighted work publicly

Foreign copyright law also gives the special privileges regarding display of the copyrighted work.

To illustrate copyright protection in practice, see Warner Bros. Entertainment, Inc. and
J. K. Rowling vs. RDR Books
(575 F.Supp.2d 513).  In RDR Books, its client purchased copies of each book in the Harry Potter series and spent seven years developing a lexicon. While RDR Books’ client owned the physical copies of the books, he certainly did not own the contents of the books.  A copyright lawsuit was brought by media company, Warner Bros. and Harry Potter author J. K. Rowling against RDR Books, an independent publishing company.  Lawyers for Rowling and Warner Bros. argued that RDR’s attempt to publish for profit a print facsimile of The Harry Potter Lexicon, a free online guide to the Harry Potter fictional universe, constituted an infringement of their copyright and was not protected by the affirmative defense of fair use. The United States District Court for the Southern District of New York blocked publication of the lexicon and rejected RDR Books’ defense citing the fair use doctrine.

how does Harry Potter apply to me buying pre-owned goods?

Although Rowling owned the content and was protected under U.S. Copyright Law, under the first sale doctrine, RDR Books’ client could resell his books on eBay or at his garage sale, without first seeking permission from Rowling. Further, once the books are resold, Rowling is not entitled to any royalty or other compensation because, as the Court announced in Quality, “…once the copyright owner places a copyrighted item in the stream of commerce by selling it, he has exhausted his exclusive statutory right to control its distribution.”  This first sale doctrine permits all of us to resale just about anything that we bought.

the Kirtsaeng question

While in college, Kirtsaeng noticed that his textbook, published by Wiley, were much cheaper in his native Thailand. He lobbied his relatives and friends to buy the books and send them to U.S. Kirtsaeng’s family and friends dutifully shipped the foreign editions of the textbooks to Kirtsaeng who then sold them on sites likes eBay-making a substantial profit.   The Supreme Court’s order granting Cert. indicated that it will consider

the following:

Whether such a foreign-made product (1) can never be resold within the United States without the copyright owner’s permission; (2) can sometimes be resold within the United States without permission, but only after the owner approves an earlier sale in this country; or (3) can always be resold without permission within the United States, so long as the copyright owner authorized the first sale abroad.

Colette Shotton is the managing member of Transaction Law Group (TLG). Colette has extensive experience in a broad range of complex, high-value transactions, specializing in intellectual property, technology, and software based transactions. Based in Washington, D.C., TLG represents a $2B global company that develops technology and manufacturers equipment for the rail and transit industries.

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