Copyright 'First Sale Doctrine' Includes Goods Made and Sold Abroad, says Supreme Court; May be Imported Without Permission
The “first sale doctrine” applies to foreign-made goods, so copyrighted material legally manufactured and sold abroad may be imported and sold in the U.S. without the copyright holder’s permission, ruled the Supreme Court March 19. The 6-3 decision reversed the U.S. Court of Appeals for the 2nd Circuit’s ruling in Kirtsaeng v. John Wiley & Sons, where a Thai student studying in the U.S. was found to have infringed on the textbook company’s copyrights by selling cheaper Asian editions of Wiley’s textbooks in the U.S. without the company’s permission. The Supreme Court’s decision also settled splits between several circuits on whether the “first sale doctrine” applies to goods legally made and sold abroad.
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During oral arguments in October, Justice Stephen Breyer, who wrote the majority opinion, voiced concern that affirming the lower court’s ruling would mean that U.S. copyright holders would maintain control over all sales of copyrighted goods that have been manufactured abroad (see 12103003).
Thai Student Imported Asian Edition Textbooks, Sold on eBay
Supap Kirtsaeng was a Thai citizen who had moved to the U.S. to study mathematics at Cornell University. Kirtsaeng asked his friends and family to buy foreign editions of Wiley’s English-language textbooks in Thailand, and send them to the student in the U.S. He then sold the textbooks on eBay, and kept the profits.
Wiley filed suit, arguing that the first sale doctrine, where copyright is exhausted on the first legal sale of an item, applied only to items made and sold in the U.S. The district court agreed, and Kirtsaeng was ordered to pay $600,000 in damages.
On appeal, the 2nd Circuit affirmed. According to the appeals court, the first sale doctrine at 17 USC 109 applies only to works made and sold in the U.S. Kirtsaeng needed permission to import and sell the textbooks, which he did not obtain, the court said.
Given the wide range of interpretations by the Circuits, the Supreme Court granted a hearing of Kirtsaeng’s appeal. While the 2nd Circuit had ruled that the first sale doctrine only applies to works made and sold in the U.S., the 9th Circuit ruled in 2008 that the first sale doctrine can apply to works made outside of the U.S., but only if the first sale occurs in the U.S. The 3rd Circuit had weighed in on the matter as well, finding in 1988 that the doctrine shouldn’t be limited by national borders.
Case Turned on Geographical Application of First Sale Doctrine
According to the Supreme Court, the case hinged on interpretation of the phrase “lawfully made under this title.” Wiley said the phrase means that the first sale provision only applies to works legally made under the Copyright Act, where the Copyright Act is applicable. To be made “under this title,” a work must be made in the U.S., Wiley argued. The first sale doctrine therefore doesn’t apply to foreign-made works, and Wiley retains its copyright on foreign-made works even when ownership is transferred, it said.
The Supreme Court, however, found that the phrase “lawfully made under this title” does not restrict the first sale doctrine to U.S.-made works. First, works can be made in accordance with the Copyright Act even if manufactured abroad, it said. “Under” in the context of 17 USC 109 can be reasonably interpreted as “in accordance with,” and other provisions of the Copyright Act apply to foreign-made works.
A ruling in favor of Wiley would also be contrary to long held tenets of common law. Where a statute covers an issue previously governed by common law, Congress presumably intended to retain the common law’s substance, the court said.
Finally, a finding that the first sale doctrine would also result in serious practical problems, said the Supreme Court. “Reliance on the “first sale” doctrine is also deeply embedded in the practices of booksellers, libraries, museums, and retailers, who have long relied on its protection,” the court said. Libraries, for example, would have to get permission to lend out foreign-made books. It is unlikely these consequences would prove to be insignificant, the court said, “particularly in light of the ever-growing importance of foreign trade to America.”