On Monday, October 29, 2012 the U.S. Supreme Court heard oral arguments on an action involving a college student who sold overseas editions of college textbooks to help finance his education.
While attending graduate school at the University Of Southern California, Kirtsaeng, a Thailand native, resold $900,000 worth of textbooks manufactured overseas on eBay for a higher price.  Court records show Kirtsaeng received roughly $1.2 million in revenue.  Of the textbooks resold on eBay, “eight of these books were published by the Asian subsidiary of publishing company John Wiley & Sons,”  which was successful in a copyright infringement suit against Kirtsaeng in May of 2010. Wiley sued Kirtsaeng in district court under Section 602(a)(1) of the Copyright Act, which makes it unlawful to import a work “without the authority of the owner.”  At issue is the first-sale doctrine which allows individuals to sell works without the copyright owner’s consent. Kirtsaeng asserted a defense under Section 109(a) of the Copyright Act which provides:
“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 [emphasis added].” Specifically, Kirtsaeng argues that you can sell a legally purchased copyrighted work without the permission of the copyright owner. Wiley, however, argues under Section 602(a)(1) that the section of the statute stating “lawfully made under this title” refers to “in the United States,” and not abroad. Section 602(a)(1) states that “[i]mportation into the [U.S.], without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the [U.S.]” 
The district court held Kirtsaeng’s argument is inappropriate to goods manufactured outside of the United States. Kirtsaeng subsequently appealed to the United States Court of Appeals for the Second Circuit, and a majority held that Section 109(a) applies to works that are made in the United States, and does not apply to works manufactured abroad. Kirtsaeng then appealed the appellate court’s decision.
At issue On Monday, October 29, 2012 was what “lawfully made under this title” means. Kirtsaeng’s lawyer, E. Joshua Rosenkrantz, argued that if individuals were not permitted to resell works in the United States that were manufactured abroad “…secondary markets (eBay, craigslist, garage sales) would be shut down, and that people wouldn’t be able to resell cars because there are so many copyright-protected components contained within (GPS systems, stereo systems, etc).”  Wiley’s counsel, former Solicitor General, Ted Olson, argued that the Court already concluded in Quality King Distributors, Inc. v. L’anza Research Intern., Inc., that Section 602 trumps Section 109(a). In Quality King the Court held that a copyright owner is not able to restrict re-importation of copyrighted works and Justice John Paul Stevens stated,
“The 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.”
At oral argument on October 29th, Justice Breyer posed several hypothetical questions including “Does that mean consumers violate copyright law when they resell their cars?” In addition, Justice Ruth Bader Ginsburg suggested that it would be unfair for copyright owners “to lose their rights in the U.S. solely because they sold similar products in overseas markets.”  The case will be a close-call, and a ruling is expected in the coming months.
Please check back to read updates on the Supreme Court’s ruling.
If your institution has any further questions or concerns about Copyright issues in higher education, or education law related matters, please email James G. Ryan at email@example.com or call him at (516) 357-3750.
A special thanks to Laura DeLuca, a law clerk at Cullen and Dykman LLP, for help with this post.