You Bought It, Now Dispose Of It How You Please

The Supreme Court recently ruled in the case of Kirtsaeng v. John Wiley & Sons, Inc. (Docket No. 11-697) that the copyright “first-sale” doctrine trumps a copyright holder’s right to control distribution of products embodying copyright protected material. The decision has received a fair amount of attention in the legal sphere but less so in the broader media, which is unfortunate considering how much copyright law impacts the every day lives of everyday people.  The impact of copyright law on our content driven, 24/7 media culture is fairly obvious in many ways, but most people don’t realize that copyright law can be and is used to control the flow of physical goods that don’t fit the traditional copyright paradigm. Recall that the Kirtsaeng decision resolves a question the Supreme Court first considered (but did not definitively decide) in the case Omega S.A. v. Costco Wholesale Corp. in which Omega sought to exclude wristwatches lawfully purchased in Europe from resale in the U.S. by asserting a copyright claim in a design on the back of each watch. Copyright protection is available for (among other things) literary, pictorial and graphical works such as the instruction and training manuals and packaging materials that accompany physical goods. Excluding the copyrighted packaging  has the effect of excluding the packaged product as well.

So how does the Kirtsaeng decision change this? Some background first: Wiley, is of course a publisher of global reach and a more than 200 year history which includes the works of Baltimore favorite Edgar Allan Poe but which more recently focuses on academic, technical and professional publishing including many textbooks.  Wiley publishes considerably less expensive but very similar editions of its textbooks in overseas markets.

Supap Kirtsaeng is a Thai citizen who came the U.S. as a student and who found himself in a Ph.D. program at USC after graduating from Cornell.  Kirtsaeng also found that his family could buy foreign additions of the books he needed back home and mail them to him for much less than he could buy them in the U.S.  It didn’t take a degree from Cornell to figure out that he cold make a lot of money buying lawfully published but cheaper foreign textbooks and reselling them here for a profit, which he did to the tune of close to a million dollars.

Wiley sued asserting that importing and selling foreign editions of its copyrighted works violated its right to control distribution of the works. Remember, Kirtsaeng didn’t actually make any copies of the books he was selling, he only purchased lawfully made copies and resold (i.e., distributed) them. In his defense, Kirtsang asserted the first-sale doctrine which provides that once a copyrighted work is lawfully sold, the copyright owner’s interest in the physical object in which the work is embodied is exhausted and the now owner can dispose of it as he sees fit – including reselling it.

The District Court – affirmed by the Second Circuit – held that Kirtsaeng could not assert this defense because the doctrine did not apply to goods manufactured abroad and the jury found Kirtsaeng liable for copyright infringement. The Supreme Court reversed, however, finding that the first-sale doctrine applies to copies of a copyrighted work wherever made.

So what does this mean? In the narrow context of textbooks and content, I would expect a continued and perhaps accelerating transition towards electronic textbooks that are leased or licensed rather than purchased outright. Electronic textbooks can simply disappear when the semester ends with no secondary market for the publisher to worry about. This solution will not work for packaging and training materials so that global manufacturers have lost one tool in the IP arsenal that allowed them to create artificial divisions in the marketplace. A win in many books for American consumers.

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