U.S. Supreme Court Clarifies "First-Sale" Doctrine's Applicability to Copyrighted Works Manufactured Abroad

by Wilson Sonsini Goodrich & Rosati

On March 19, 2013, the U.S. Supreme Court issued a decision clarifying the bounds of copyright owners' rights in the global marketplace. In Kirtsaeng, dba BlueChristine99 v. John Wiley & Sons, Inc.,1 the Court held that the so-called "first-sale" doctrine applies to copies of a copyrighted work lawfully made abroad. The doctrine, codified at Section 109 of the Copyright Act, allows the owner of a particular copy of a copyrighted work to re-sell, lend, give away, or otherwise dispose of that copy without the copyright owner's permission, as long as the copy was made legally.

The Kirtsaeng case involved Supap Kirtsaeng, a Thai college student studying in the United States, who helped finance his education by re-selling copies of foreign edition English-language textbooks that his friends and family had purchased from Thai bookstores. The publisher of some of those books, John Wiley & Sons, sued Kirtsaeng for copyright infringement in New York federal court. Wiley claimed that Kirtsaeng's importation and resale of its textbooks without its authorization violated its copyrights, including the right of distribution. After the trial court rejected Kirtsaeng's attempt to assert a first-sale defense, a jury found that Kirtsaeng had willfully infringed Wiley's American copyrights and awarded Wiley $600,000 in statutory damages. The Second Circuit affirmed.

On appeal, the Supreme Court's analysis focused on five words in Section 109(a): "lawfully made under this title" (of the Copyright Act). Wiley maintained that those words impose a geographic limitation on the first-sale doctrine, which excluded all copies made outside the United States. Kirtsaeng argued that the phrase means made "in accordance with" or "in compliance with" the Copyright Act, without any geographic restriction. The Court agreed with Kirtsaeng, arriving at its conclusion after examining the language of Section 109(a), an earlier version of the statute and the context in which it was enacted, and the doctrine's "impeccable historic pedigree" at common law.

The Court also was moved by the grave practical harms that could have flowed from adopting the publishers' geographic interpretation of the first-sale doctrine. The Court explained that stripping away first-sale rights from any copy of a work made abroad would potentially be disastrous for libraries, museums, and the vast domestic market for used copyrighted goods made abroad—from books and consumer electronics to foreign automobiles containing copyrighted software. The Court observed that Congress, in enacting Section 109(a), could not have intended such consequences and refused to adopt an interpretation that would open the door to such effects.

The Kirtsaeng decision provides certainty and breathing space for companies whose businesses rely on the sale or resale of copyrighted works made abroad. The decision recognizes the crucial role of foreign trade in the American economy and makes it clear that the first-sale doctrine's protections do not turn on where a given copy happens to have been made—at least as long as that copy was made lawfully.

As the Court's opinion acknowledges, Kirtsaeng may make it more difficult for copyright owners to engage in geographical market segmentation simply by charging different prices in different countries for the same item. Rights owners doing business in multiple territories may wish to re-evaluate their foreign sales and pricing strategies and conduct a review of their copyright enforcement policies in light of the Court's decision.

1 Available at http://www.supremecourt.gov/opinions/12pdf/11-697_d1o2.pdf.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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