Today the Supreme Court handed down its decision in the case of Kirtsaeng v. John Wiley & Sons. The case involves a college student who got sued by a book publisher because the student sold his foreign-made textbooks once he was done using them. (Yes, you read that correctly. He was sued for selling textbooks that were published abroad, but which he used and sold in the U.S. once he was done with them. Sound crazy? Read on...)
Even if you're not into selling textbooks, you should be happy with the decision. Really happy. Like, celebratory-type happy. Why? Because the Kirtsaeng decision clarifies the fact that you're not breaking the law when you sell or buy certain foreign-made goods on sites such as eBay or Amazon.
Here's the story: Kirtsaeng, a citizen of Thailand, came to the U.S. to attend Cornell University (for undergrad), and the University of Southern California (for a Ph.D). While in the U.S., he asked his friends and family back in Thailand to buy copies of foreign edition English language textbooks at Thai book shops--where they sold for low prices--and mail them to him in the U.S. Once he was done with the books, Kirtsaeng sold the books, reimbursed his family and friends, and kept whatever profit remained from the sale.
Enter the book publisher, John Wiley & Sons. Wiley was less than thrilled that Kirtsaeng was selling his foreign-made books, since it prevented Wiley from selling those same books (copies of which Wiley had published in the U.S.) for a higher price. Wiley claimed that Kirtsaeng's importation of its books, and his subsequent resale of those books, amounted to an infringement of Wiley's exclusive right to distribute its books in the U.S.
Ok, let's pause for a moment to consider the law...and to keep score.
Under the Copyright Act, authors posses the exclusive right to control the distribution of their works. (Score one for Wiley).
There is, however, an exception to this exclusive right of distribution, called the "first sale rule." The first sale rule carves out an exception to all three forms of intellectual property protection, (i.e., copyright, trademark and patent). With regard to copyright law, the rule provides that a person who owns a lawfully made copy of a copyrighted work may “sell or otherwise dispose” of that copy without the authorization of the copyright owner. (Score one for Kirtsaeng).
But wait, there's an exception to the exception...or is there? (Stay with me now, because this is the crux of the case.)
The Copyright Act says that the first sale rule applies only to works "lawfully made under this title." But what does that mean?
Wiley argued that the textbooks were made overseas, and were intended to be distributed overseas. Wiley point was this: the books were not 'lawfully made' under the Copyright Act--they were 'made' under foreign law, so the first sale rule didn't apply, and it didn't protect Kirtsaeng. (Hmmm. An interesting point--and one with which many courts across the country agree.)
Kirtsaeng countered that the words "lawfully made" meant "legally made", i.e., the books needed to be authentic and not pirated. Since the books were authentic and "legally made" (albeit overseas), Kirtsaeng argued that the first sale rule applied to his purchase and subsequent sale of the books, and protected him from claims of copyright infringement by Wiley.
In a 6-3 decision, the Supreme Court agreed with Kirtsaeng and held that there is no geographic limitation on the first sale rule. Put another way: it doesn't matter if the item was made abroad and was intended to be sold abroad. In fact, it doesn't matter where the item was made at all. Under Kirtsaeng, when a purchaser buys an item, the first sale rule permits the purchaser to subsequently sell that item in the U.S. without the author's or manufacturer's permission.
So why should you care? Well, let's think about that import disc that you want to sell on eBay. Or that book you bought in Europe that you're selling on Amazon.com. Or any item that may have originally been made and sold in Asia, but made its way to the U.S. In the days before the Kirtsaeng decision, it wasn't clear whether you had the right to sell those items without first getting the original author's or manufacturer's approval. Now, the Supreme Court has made it crystal clear that the first sale rule covers the transaction.
The decision is even more important for technology companies. As Justice Breyer said,
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... Without that permission a foreign car owner could not sell his or her used car.Well said Mr. Justice, well said.