Supreme Court Gets It Right In Kirtsaeng: You Can Resell Things You Bought Abroad Without Infringing

Copyright

from the phew dept

For a few years now, we’ve been following the Kirtsaeng case, in which a student was sued by publisher John Wiley & Sons for buying cheap (legal) textbooks abroad, and then reselling them in the US for profit. Wiley claimed this was copyright infringement, while the student, Sudap Kirtsaeng, argued that the first sale doctrine applied. First sale gives you the right to resell, say, a book that you legally bought without having to get permission from the copyright holder. Under copyright law, it says that the first sale doctrine applies to any product “legally made under this title.” Wiley argued that goods made abroad were not legally made under US law since they were made abroad (even though, obviously, it wanted the rest of copyright law to apply to it once those works came to the US). We were guardedly optimistic after the oral hearings at the Supreme Court, in which the Justices explored the “parade of horribles” that might happen if Wiley won. And while what happens at oral arguments frequently doesn’t seem to have any bearing on the eventual situation, in this case, the Supreme Court has ruled in favor of Kirtsaeng, saying that it is silly to interpret the first sale doctrine the way Wiley does, and that there is no evidence that such “geographical restrictions” make sense, or that Congress intended such a result.

In our view, §109(a)’s language, its context, and the common-law history of the “first sale” doctrine, taken together, favor a non-geographical interpretation. We also doubt that Congress would have intended to create the practical copyright-related harms with which a geographical interpretation would threaten ordinary scholarly, artistic, commercial, and consumer activities…. We consequently conclude that Kirtsaeng’s nongeographical reading is the better reading of the Act.

To get technical, the key issue in the dispute was that two different sections of copyright law could be read to conflict. Section 109 defines the First Sale doctrine while Section 602 defines importation of works. Kirtsaeng focused on 109, while Wiley insisted that 602 is more important. The Supreme Court — by a six to three margin — side strongly with Kirtsaeng. The majority was written by Justice Breyer, who is consistently good on intellectual property issues, while the dissent was led by Ginsburg, who is consistently bad on copyright issues (Scalia and Kennedy sided with Ginsburg). Thankfully the “good” side won out today.

The language of §109(a) read literally favors Kirtsaeng’s nongeographical interpretation, namely, that “lawfully made under this title” means made “in accordance with” or “in compliance with” the Copyright Act. The language of §109(a) says nothing about geography. The word “under” can mean “[i]n accordance with.” 18 Oxford English Dictionary 950 (2d ed. 1989). See also Black’s Law Dictionary 1525 (6th ed. 1990) (“according to”). And a nongeographical interpretation provides each word of the five-word phrase with a distinct purpose. The first two words of the phrase, “lawfully made,” suggest an effort to distinguish those copies that were made lawfully from those that were not, and the last three words, “under this title,” set forth the standard of “lawful[ness].” Thus, the nongeographical reading is simple, it promotes a traditional copyright objective (combatting piracy), and it makes word-by-word linguistic sense.

The geographical interpretation, however, bristles with linguistic difficulties. It gives the word “lawfully” little, if any, linguistic work to do. (How could a book be unlawfully “made under this title”?) It imports geography into a statutory provision that says nothing explicitly about it. And it is far more complex than may at first appear.

To read the clause geographically, Wiley, like the Second Circuit and the Solicitor General, must first emphasize the word “under.” Indeed, Wiley reads “under this title” to mean “in conformance with the Copyright Act where the Copyright Act is applicable.” Brief for Respondent 15. Wiley must then take a second step, arguing that the Act “is applicable” only in the United States. Ibid. And the Solicitor General must do the same. See Brief for United States 6 (“A copy is ‘lawfully made under this title’ if Title 17 governs the copy’s creation and the copy is made in compliance with Title 17’s requirements”). See also post, at 7 (GINSBURG, J., dissenting) (“under” describes something “governed or regulated by another”).

One difficulty is that neither “under” nor any other word in the phrase means “where.” See, e.g., 18 Oxford English Dictionary, supra, at 947–952 (definition of “under”). It might mean “subject to,” see post, at 6, but as this Court has repeatedly acknowledged, the word evades a uniform, consistent meaning. See Kucana v. Holder, 558 U. S. 233, 245 (2010) (“‘under’ is chameleon”); Ardestani v. INS, 502 U. S. 129, 135 (1991) (“under” has “many dictionary definitions” and “must draw its meaning from its context”).

A far more serious difficulty arises out of the uncertainty and complexity surrounding the second step’s effort to read the necessary geographical limitation into the word “applicable” (or the equivalent). Where, precisely, is the Copyright Act “applicable”? The Act does not instantly protect an American copyright holder from unauthorized piracy taking place abroad. But that fact does not mean the Act is inapplicable to copies made abroad. As a matter of ordinary English, one can say that a statute imposing, say, a tariff upon “any rhododendron grown in Nepal” applies to all Nepalese rhododendrons. And, similarly, one can say that the American Copyright Act is applicable to all pirated copies, including those printed overseas. Indeed, the Act itself makes clear that (in the Solicitor General’s language) foreign-printed pirated copies are “subject to” the Act.

The ruling goes on to lay out historical and logical reasons why first sale should apply. It’s a good read. It looks like Breyer relied, in part, on the American Library Association’s concern for how a ruling against First Sale would cause serious harm to libraries, which would have to somehow figure out ways to get permission on any book they had that was printed outside the US. He similarly cites concerns of used book dealers and the tech industry that this would get in the way of all sorts of reasonable transactions.

Technology companies tell us that “automobiles, microwaves, calculators, mobile phones, tablets, and personal computers” contain copyrightable software programs or packaging. Many of these items are made abroad with the American copyright holder’s permission and then sold and imported (with that permission) to the United States. A geographical interpretation would prevent the resale of, say, a car, without the permission of the holder of each copyright on each piece of copyrighted automobile software. Yet there is no reason to believe that foreign auto manufacturers regularly obtain this kind of permission from their software component suppliers, and Wiley did not indicate to the contrary when asked. Without that permission a foreign car owner could not sell his or her used car.

Breyer dismisses the idea, presented by Wiley, that because this “parade of horribles” hasn’t happened yet, it won’t happen in the future if the ruling had gone the other way. The ruling notes that this is still somewhat unsettled law, but that large parts of the economy clearly rely on the first sale doctrine, and upsetting that apple cart could have dramatic impact. It also rejects other spurious arguments, including a favorite of copyright maximalists, that the first sale doctrine on such works prevents copyright holders from doing differential pricing. The court rightfully questions what this has to do with copyright:

Wiley and the dissent claim that a nongeographical interpretation will make it difficult, perhaps impossible, for publishers (and other copyright holders) to divide foreign and domestic markets. We concede that is so. A publisher may find it more difficult to charge different prices for the same book in different geographic markets. But we do not see how these facts help Wiley, for we can find no basic principle of copyright law that suggests that publishers are especially entitled to such rights.

[….] the Constitution’s language nowhere suggests that its limited exclusive right should include a right to divide markets or a concomitant right to charge different purchasers different prices for the same book, say to increase or to maximize gain. Neither, to our knowledge, did any Founder make any such suggestion.We have found no precedent suggesting a legal preference for interpretations of copyright statutes that would provide for market divisions.

To the contrary, Congress enacted a copyright law that (through the “first sale” doctrine) limits copyright holders’ability to divide domestic markets. And that limitation is consistent with antitrust laws that ordinarily forbid market divisions.

The dissent obsesses over this issue of differential pricing, despite it having little to do with copyrights and simple serves to reinforce the idea — as seen in previous copyright rulings, including Eldred — that Justice Ginsburg seems to have a bit of a blindspot in copyright cases, such that anything that helps copyright maximalists is automatically seen as “good.”

But, perhaps more importantly, Justice Ginsburg repeatedly cites various international trade agreements in arguing that her position is the correct one. With this ruling decided as is, copyright maximalists will no doubt seek to have Congress change the law in their favor — especially now that comprehensive copyright reform is back on the table. But, as a part of that, you can absolutely expect to see this issue pop up in various international trade agreements as well. Copyright maximalists will seek to force Congress’ hand in suggesting that first sale rights do not transfer over for goods made in foreign countries. This is something that we’re all going to have to pay close attention to in the coming years.

Filed Under: copyright, first sale, foreign goods, international exhaustion, kirtsaeng, resale rights, sudap kirtsaeng, supreme court
Companies: john wiley