Supreme Court delivers landmark Kirtsaeng copyright verdict

The US Supreme Court has delivered its verdict in Kirtsaeng v. John Wiley & Sons, ruling that legally purchased textbooks and other goods can be re-sold online and in discount stores without infringing US copyright law.

In a 6-3 verdict published on Tuesday, March 19, the court dismissed publisher Wiley’s claims against Supap Kirtsaeng, a Thai Cornell University graduate who had been re-selling copies of its books on eBay that his relatives had bought at reduced prices abroad.

Kirtsaeng re-sold $900,000 worth of books and made $100,000 in profit. He was found liable for copyright infringement at New Jersey’s district court in 2009 and a jury awarded Wiley $600,000 in damages. The US Court of Appeals upheld this decision in August 2011.

But in yesterday's judgment, Justice Stephen Breyer cited the first sale doctrine under US copyright law and said that once goods are lawfully sold in the US or elsewhere, copyright protection for those goods is lost.

Quality King

Breyer said the case was similar to Quality King Distributors, Inc. v. L'anza Research International, in which the Supreme Court ruled that the first sale doctrine prevents copyright owners controlling imports of copyrighted goods sold outside the US, “but for one important fact: the textbooks were manufactured abroad”.

In Kirtsaeng’s case, Breyer said the questions the court had to consider were: “Can that buyer bring that copy into the United States (and sell it or give it away) without obtaining permission to do so from the copyright owner? Can, for example, someone who purchases, say at a used bookstore, a book printed abroad subsequently resell it without the copyright owner’s permission?”

“In our view, the answers to these questions are, yes,” he said, adding that to rule otherwise would be to punish booksellers, libraries, retailers and US museums that contain hundreds of millions of books published abroad.

A bold departure

John Wiley & Sons described the ruling as a disappointing loss “for the US economy, and students and authors in the US and around the world”.

In a dissenting judgment, Justice Ruth Bader Ginsburg said the decision was “a bold departure” from Congress’s aim “to protect copyright owners against the unauthorised importation of low-priced, foreign-made copies of their copyrighted works”, and one that places the US “at the vanguard of the movement for “international exhaustion” of copyright—a movement [the US] has steadfastly resisted”.

Her comments were backed by the Association of American Publishers (AAP), which said the decision “ignores broader issues critical to America’s ability to compete in the global marketplace”.

“The court’s interpretation of the ‘first sale’ doctrine … will discourage the active export of US copyrighted works. It will also reduce the ability of educators and students in foreign countries to have access to US-produced educational materials,” said Tom Allen, AAP’s president and chief executive.

An important win

But Sam Israel, a private litigator representing Kirtsaeng, said the court had “restored order” and that “we should all sigh with relief”.

In a statement issued on Tuesday, Joshua Rosenkranz, a partner at Orrick, Herrington & Sutcliffe LLP and counsel for Supap Kirtsaeng, said the decision is “an important win for the American consumer”.

“For 400 years the law has been ‘if you bought it, you own it.’ Somehow, manufacturers managed to persuade a few courts that this sensible rule does not apply to foreign-made goods that have copyright protection – threatening a US market with an estimated value of $60 billion annually.”

“If copyright owners want to gouge US customers with higher prices, they will have to accept the reality that the marketplace will respond – as it always does – by buying the goods where they are cheaper and selling them where they are most expensive,” he added.

Patent concerns

As the first sale doctrine (also known as the exhaustion doctrine) also applies to US patents, the ruling could have an impact on pending patent litigation. In Ninestar Tech v ITC, the Supreme Court has been asked to decide whether “the initial authorised sale outside the United States of a patented item terminates all patent rights to that item”.

Indiana farmer Vernon Bowman is also using the exhaustion doctrine in his case against seed manufacturer Monsanto.

Bowman was sued for patent infringement by Monsanto for making new crops using its Roundup Ready gene despite signing a contract promising not to do so, but argues that under the exhaustion doctrine, Monsanto’s rights to its seeds are lost once those seeds are sold to a farmer.