This is a guest post by Perry S. Bechky, Visiting Scholar at Seattle University School of Law and Senior Attorney at Dorsey & Whitney LLP.
If you buy a book (or other copyrighted work), where does your right to resell it end? Does the answer depend on whether the resale crosses national borders? This, essentially, was the issue in Kirtsaeng v. John Wiley & Sons, Inc., decided yesterday by the U.S. Supreme Court: http://www.supremecourt.gov/opinions/12pdf/11-697_d1o2.pdf
The case turned on a close reading of the U.S. Copyright Act. This post doesn’t dwell on the IP issues at the heart of the case, highlighting only a few points relevant to IEL. More general discussion of the case is available here: http://www.scotusblog.com/2013/03/opinion-analysis-justices-reject-publishers-claims-in-gray-market-copyright-case/
First, some background: The case began when Supap Kirtsaeng, a Thai national, was a student in the United States. Wiley had differential pricing, selling the same textbooks in Thailand for far less than in the US. Kirtsaeng arranged for family and friends to buy Wiley’s textbooks in Thailand and ship them to him in the US, where he resold them for a profit. Each book indicated that it was “Printed in Asia” and had copyright language stating:
This book is authorized for sale in Europe, Asia, Africa, and the Middle East only and may be not exported out of these territories. Exportation from or importation of this book to another region without the Publisher’s authorization is illegal and is a violation of the Publisher’s rights.
Wiley sued Kirtsaeng for copyright infringement and won statutory damages of $600,000. The Supreme Court reversed, 6-3.
Although the Copyright Act generally allows the copyright holder to control distribution, Section 109(a) provides that “the owner of a particular copy or phonorecord lawfully made under this title . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord” (emphasis added) http://www.law.cornell.edu/uscode/text/17/109. This provision embodies the traditional “first sale” rule, the key to the market in used books because the sale to a first customer ends a copyright holder’s control over distribution of each book. The issue before the Court was whether books lawfully printed outside the US benefit from the first sale rule. Otherwise, with three exceptions, Section 602(a) bars imports of foreign-printed books without the copyright holder’s authorization. http://www.law.cornell.edu/uscode/text/17/602
The key five-word phrase is ambiguous. Does “made under this title” mean “made in the US”? The Court said no, giving the phrase a “nongeographical construction.”
In an opinion by Justice Breyer, the Court recognized “the ever-growing importance of foreign trade to America.” It discussed, and seemed to accept at face value, amicus briefs by “[a]ssociations of libraries, used-book dealers, technology companies, consumer-goods retailers, and museums” describing the burdens a ruling against Kirtsaeng would place on their activities involving imported works. It expressed concern that clarifying the ambiguous language to exclude foreign-printed books could prompt “dramatic change” in the marketplace with “intolerable consequences.”
The Court did not apply (or even mention) the “presumption against extraterritoriality,” which it sometimes uses (in varying ways) to limit US statutes to domestic concerns. Might other presumptions have influenced the Court, albeit silently? Perhaps a presumption in favor of freedom of commerce, transferability of physical property, or even free speech. Does the Charming Betsy rule – that “an Act of Congress ought never to be construed to violate the law of nations if any other possible construction remains” – do any work here? Is there a national treatment issue lurking here? That possibility is suggested by the Court’s comment that a ruling against Kirtsaeng would lead to the “absurd result that the copyright owner can exercise downstream control even when it authorized the import or first sale.” In other words, the Court gave the statute a construction that avoided placing post-import restrictions that did not apply to domestic like products on sale, distribution, and use of imported works. (GATT III:4).
The Court effectively adopted a clear statement rule: if Congress wants to restrict international trade in used books (or other copyrighted works), it is free to do so, but it must speak clearly because the Court would not construe ambiguous language in that way.
The Court can therefore also be seen as kicking the ball over to Congress. Surely, this is a statute in need of updating. While the facts of this particular case centered on books, a venerable product, the larger issues affect all copyrighted works. Amici supporting Kirtsaeng included Google and eBay. The Court called attention to the fact that modern “automobiles, microwaves, calculators, mobile phones, tablets, and personal computers contain copyrightable software programs or packaging.” A provision dating to 1976 – a provision old enough to use the word “phonorecord” – can’t be expected to regulate trade in copyrighted works appropriately in the age of Internet downloads and software-heavy automobiles.
Congress should take the Court’s (implicit) invitation to revisit the Copyright Act. When it does so, it should consider whether greater restrictions are warranted on resales of foreign-printed books than domestic books. It may be that some greater restrictions are warranted in some circumstances. For example, the concern is often raised that allowing the free importation of foreign-printed books will cause publishers to abandon the discounts they currently offer on book sales in developing countries. Justice Ginsburg’s dissent noted this concern, stating, “Such an outcome would disserve consumers—and especially students—in developing nations and would hardly advance the ‘American foreign policy goals’ of supporting education and economic development in such countries.” Perhaps Congress can assess this concern and develop a legislative solution well-crafted to address it without unduly burdening other trade in copyrighted works.
Last, the WTO made a rare appearance at the Supreme Court. Justice Ginsburg’s dissent cited TRIPS (as well as the WIPO copyright treaty) to show that the US government has not agreed to extend the first sale rule to foreign-made works, supporting her argument that the majority’s construction of the statute is at odds with US policy. A word search shows this is only the fifth time a Supreme Court opinion has mentioned the WTO, along with Crosby v NFTC (2000), JEM Ag Supply v Pioneer Hi-Bred (2001), United Haulers v Oneida-Herkimer (2007), and Golan v. Holder (2012). Two more cases mention GATT during the WTO era: Boeing v US (2003) and J. McIntyre Machinery v Nicastro (2011). Several of these mentions are fleeting. The last three mentions have all been by Justice Ginsburg, twice in dissent. Perhaps Justice Ginsburg is idiosyncratic in her willingness to mention the WTO in her opinions. Or perhaps, recalling the Court’s observation about “the ever-growing importance of foreign trade to America,” we might see more mentions of the WTO in future opinions.