Second Circuit, in Matter of First Impression in that Circuit, Holds that non-U.S. Production or Use Does Not Trigger “First Sale Doctrine” Contained in the Copyright Act

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In reporting on Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008), aff’d by an evenly divided Court, Costco Wholesale Corp v. Omega, S.A., 131 S.Ct. 565 (2010) — a Ninth Circuit decision affirmed by the U.S. Supreme Court by an evenly divided Court –we have previously posted on the important aspect of international litigation practice in relation to copyrighted works concerning when the U.S. will or won’t protect works first published internationally.  In a related analysis, the Second Circuit addressed Section 109 of the Copyright Act and held that the first sale doctrine, which allows a person who buys a legally produced copyrighted work to sell or otherwise dispose of the work as he sees fit, does not apply to works manufactured outside of the United States.  John Wiley & Sons, Inc. v. Supap Kirtsaeng, d/b/a Bluechristine99, Docket No. 09-4896-cv (2d Cir. 2011).

The Circuit reviewed the District Court’s interpretation de novo, since the threshold question presented only a legal issue of statutory interpretation.  The statutory analysis begins with 17 U.S.C. sec. 602(a)(1):

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 first sale doctrine in turn reads that, “Notwithstanding the provisions of section 106(3)[of the Copyright Act], the owner of a particular copy . . . 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”.  In Quality King Distributors, Inc. v. L’anza Research Int’l, Inc., 523 U.S. 135 (1998), the Court’s concurring opinion (of Justice Ginsburg) confirmed that the Court was not resolving “cases in which the allegedly infringing imports were manufactured abroad” (Costco involved a “round trip” case, where copies of the copyrighted material traveled from the U.S. to someplace(s) abroad, and then back again).

In the statutory analysis that followed, the Second Circuit understood that certain provisions of the Copyright Act explicitly do “take account of activity occurring abroad”.  The Court of Appeals could not sustain the position of the copyright holder based on a plain reading of the statute alone.  In fact the Court of Appeals found the statutory language ambiguous.  Still, it came out the way the Supreme Court did, in dicta, in Quality King Distributors, Inc. v. L’anza Research Int’l, Inc., 523 U.S. 135 (1998), without any extensive analysis of extrinsic evidence.