KEI Files Brief in Kirtsaeng v John Wiley & Sons (copyright first sale doctrine case)

Today, July 9, 2012, Knowledge Ecology International (KEI) filed an amicus brief in the Supreme Court of the United States in support of neither party in the case Kirtsaeng v. John Wiley & Sons.

Krista Cox, day of filing brief in Kirtsaeng case
KEI staff attorney Krista Cox, after filing the brief.

A copy of the brief is available here.

This case involves a number of important issues about the first sale doctrine for copyright, both within the United States and as regards parallel trade in copyrighted works between counties. The dispute arises from the parallel trade in textbooks from Thailand to the United States, a situation that KEI acknowledges may justify on policy grounds some narrow restrictions on parallel trade to protect lower prices of copyrighted works in lower income countries.

In general, KEI reminds the court that restrictions on parallel trade require the United States to pay a higher price for a copyrighted work than other countries.

The KEI brief says that the U.S. statute provides for considerable freedom to engage in parallel trade in copyright works, and that the United States should not impose limits on parallel trade for all works, all uses and all countries, or deny the use the first sale doctrine within the United States when copies of works are manufactured in a foreign country.

KEI advocates for a policy that recognizes the general freedom to engage in parallel trade for copyrighted works, subject only to narrowly drawn restrictions on that freedom, when higher prices in the United State serve a legitimate public interest, such as to expand access to copyrighted works used by consumers in low income countries.

KEI argues that the remedy proposed by the Second Circuit in the Kirtsaeng case is not justified by the US statute, and would apply very broadly to eliminate the first sale doctrine for all works in all countries if the work was manufactured outside of the United States, creating considerable damage to the interests of the U.S. public as consumers and workers.

The KEI brief explains several areas where the first sale doctrine, including international parallel trade, is important, including for the use of works in libraries, to facilitate access to special format materials for persons who are blind or have other disabilities, and for museums.

The following are Krista Cox's notes about the brief


The Kirtsaeng case, previously heard by the Court of Appeals for the Second Circuit, involves the issue of parallel importation of copyrighted goods and whether the first sale doctrine applies to copies of works manufactured abroad. The petitioner, Supap Kirtsaeng, moved from Thailand to the United States to attend college. While studying in the United States, he had family and friends in Thailand buy copies of textbooks and ship them to him in the United States where he then sold them on eBay. A jury found Kirtsaeng guilty of infringement, awarding Wiley & Sons statutory damages in the amount of $75,000 per work. The Second Circuit, in a divided 2-1 decision, upheld the decision. According to two of the three judges hearing the case, the first sale doctrine will never apply to those copies of works manufactured in a foreign country. The Second Circuit, interpreting the term "lawfully made under this title" to mean "lawfully made in the United States," held that the a copyright owner will hold indefinite rights to distribution for any copy made abroad.

This decision contrasts with the Ninth Circuit's holding in Costco Wholesale Corp. v. Omega, S.A., where the court found that the first sale doctrine applies to foreign manufactured copies, but only after the copyright owner has authorized a domestic sale. Until an authorized sale in the United States occurs, the first sale doctrine will not apply. However, once the copyright owner authorizes a sale in the United States of a foreign manufactured copy, he no longer possesses the right to distribution and subsequent owners may sell, transfer, give or loan the copy to others.

Both the Second Circuit and Ninth Circuit decisions also differ from the Third Circuit which previously held that the first sale doctrine applies regardless of place of manufacture. Although the Third Circuit case involved a different set of facts where "round trip" importation was involved, that is the copy was manufactured in the United States then shipped abroad and returned to the United States, the court there noted the importance of deferring to Congress on important public policy matters such as parallel importation.

The Supreme Court accepted writ of certiorari in Kirtsaeng on April 16, 2012. The question presented before the Supreme Court is as follows:

This case presents the issue that recently divided this Court, 4-4, in Costco Wholesale Corp. v. Omega, S.A., 131 S. Ct. 565 (2010). Under § 602(a)(1) of the Copyright Act, it is impermissible to import a work "without the authority of the owner" of the copyright. But the first-sale doctrine, codified at § 109(a), allows the owner of a copy "lawfully made under this title" to sell or otherwise dispose of the copy without the copyright owner's permission.

The question presented is how these provisions apply to a copy that was made and legally acquired abroad and then imported into the United States. Can such a foreign-made product never be resold within the United States without the copyright owner's permission, as the Second Circuit held in this case? Can such a foreign-made product sometimes be resold within the United States without permission, but only after the owner approves an earlier sale in this country, as the Ninth Circuit held in Costco? Or can such a product always be resold without permission within the United States, so long as the copyright owner authorized the first sale abroad, as the Third Circuit has indicated?

In KEI's amicus brief, we assert that the language of the Copyright Act does not support limitations on parallel importation and that the Second Circuit opinion would result in numerous unintended consequences. Because the Second Circuit decision would result in giving greater copyright protection to copies manufactured abroad, copyright owners will have an incentive to manufacture their copies outside the United States. This preferential treatment is likely to harm American business interests as well as our domestic economy. A copyright owner's monopoly power would therefore grow as he would have perpetual rights over distribution of copies of works manufactured abroad and works are likely to be priced at a higher level due to the elimination of competition of secondary markets such as used bookstores.

Additionally, the Second Circuit decision is likely to have a negative impact on persons who are visually impaired or have other disabilities by prohibiting the distribution of accessible format works if such copies are manufactured abroad. Collections of accessible format works in the United States are therefore unlikely to include many copies of works made in languages other than English, harming those members of the blind community who do not speak English or who wish to learn a language other than English. Libraries are also likely to be impacted as they will have to ascertain the location of manufacture of each copy of the works in their collection; if the copy was made abroad it will be unable to lend that copy without infringing on the copyright.

The Second Circuit decision could also have unintended consequences for museums. Because the language of the limitation on a copyright owner's right of display uses the same language as the first sale doctrine's limitation on the right of distribution ("lawfully made under this title"), the Second Circuit's ruling could prevent museums from displaying works it has acquired if those works are made in a foreign country.

In our opinion, the Second Circuit decision leads to a number of absurd results that will threaten the domestic economy, access to knowledge and the public interest.

KEI notes that restrictions on parallel importation are appropriate public policy in limited circumstances. We note that there is a distinction between limiting parallel trade between high-income and low-income countries and restrictions between countries of similar economic backgrounds; we do not support restricting parallel trade between countries of similar economic backgrounds, for example between Australia, Canada, the United States and the United Kingdom. Any restrictions that are implemented should be limited to only those cases where public policy justifies that consumers in the United States pay a higher price than other countries. KEI advocates for a general rule for freedom to engage in parallel trade for copyrighted works, with narrowly drawn restrictions. Although KEI acknowledges that public policy may support some restrictions on parallel trade, the creation of and scope of such restrictions are best left to Congress and a judicial solution is unwarranted.

The Table of Contents of the Argument section of our brief is reprinted below:

ARGUMENT
I. UNITED STATES COPYRIGHT LAW LIMITS A COPYRIGHT OWNER’S EXCLUSIVE RIGHTS, INCLUDING THE RIGHT OF DISTRIBUTION
  • A. The Purpose of the Copyright System Is To Promote Progress and Must Consider the Public Interest
  • B. The Right of Distribution, Including the Right to Control Importation is Limited by the First Sale Doctrine Which Does Not Depend on Location of Manufacture
  • C. The Second Circuit’s Opinion in the Present Case Greatly Expands the Rights of a Copyright Owner With Respect to Foreign Made Works
  • D. The Ninth Circuit, in Omega v. Costco, Provided an Unworkable Standard
  • E. The Third Circuit’s Decision Provides Appropriate Deference to Congress’ Power to Make Laws

II. THE SECOND CIRCUIT’S EXPANSIVE RULING HAS NEGATIVE AND UNINTENDED IMPACTS FOR UNITED STATES BUSINESSES, CONSUMERS AND THE DOMESTIC ECONOMY

  • A. The Second Circuit Decision Produces Manifestly Absurd Results by Providing Greater Copyright Protection to Foreign Made Works
  • B. Blanket Prohibition Against Parallel Trade Fails to Distinguish Between Different Classes of Copyrighted Works and Uses and Can Put Consumers and Businesses in the United States at a Disadvantage

III. THE SECOND CIRCUIT DECISION HAS NEGATIVE IMPACTS ON CONSUMERS AND THE PUBLIC INTEREST

  • A. Blanket Prohibition Against Parallel Trade Could Impact Legitimate Existing Limitations and Exceptions, Including for Accessible Format Works for the Visually Impaired
  • B. Limiting the First Sale Doctrine Would Hamper Libraries
  • C. Museums May Not Be Able to Display Foreign Works that Remain Under Copyright
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TextBooks in Thailand

The irony of Mr. Kirtsaeng's actual activities is that the authorized sellers of the John Wiley & Sons textbooks in Thailand were probably happy to have Mr. Kirtsaeng and his associates as bulk purchasers of the legitimate hard-copy versions of Wiley textbooks in Thailand.

From the International Intellectual Property Alliance (IIPA) 2012 Special 301: Thailand Page 108:

-- Book Piracy, Including Production for Export and Unauthorized Photocopying: The book and journal publishing industry continues to face the following problems in Thailand: print piracy, illegal photocopying, unauthorized translations, and online piracy, though the latter is not yet a significant threat. Of these, unauthorized photocopying of educational materials, in and around universities, remains the predominant form of book piracy in Thailand. Copy shops continue to copy books for students, increasingly on a “made to order” basis to avoid keeping infringing stock on site.