US Supreme Court Applies First Sale Doctrine Worldwide

Today, the United States Supreme Court handed US copyright owners a stinging defeat. The decision in Kirtsaeng v. John Wiley & Sons [pdf] dramatically slashes the ability of US copyright owners to control copies of their works. And in so doing, the 6-3 decision blows a huge hole in the global marketing strategy of movie, TV, book and software companies.

US law has long recognised that the rights of copyright owners are limited by the first sale doctrine. Written into Section 109 of the Copyright Act, this doctrine states that notwithstanding the rights of a copyright owner to control the sale, publication or distribution of a work, “the owner of a particular copy [of a work] … lawfully made under this title . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of … that copy.”

The US Supreme Court decision can be found here [pdf].

Many US companies, however, have taken the position that this first sale doctrine applies only to copies made in the US. That was also the position of the US Supreme Court in Quality King v. L’Anza Research International, although the court’s statement in that 1998 case was merely dicta.

This interpretation of the law has become an essential part of the global marketing strategy of US movie, TV, book and software companies. These companies have used copyright law to geographically segment their markets – selling copies of their works at much higher prices in the US than in places like India and China. If someone attempted to resell a low-priced foreign-made copy into the United States, the US copyright owner sued for copyright infringement. And the defendant couldn’t claim the protection of the first sale doctrine because the copy was made outside the US.

That’s exactly what happened in this case. John Wiley published copies of some of its English-language textbooks in Thailand. Supap Kirtsaeng acquired some of these books and resold them at a profit in the US to help fund his university education in the US. These used textbooks were significantly cheaper than the textbooks Wiley published and sold in the US. Wiley sued Kirtsaeng for copyright infringement.

The US Supreme Court held that Kirtsaeng was protected by the first sale doctrine. Writing for the court, Justice Stephen Breyer stated that that Section 109’s first sale doctrine was not limited by geography. So long as a copy was lawfully made with the consent of the US copyright owner, the first sale doctrine applies – no matter where in the world the copy was made.

This ruling will make it much harder for US music, movie and software companies to stop copies intended for foreign sales from being resold into the US and undercutting domestic sales.

Conversely, however, it protects the rights of resellers and consumers to dispose of copies as they see fit. Had the court ruled the other way, clever companies might have used copyright law to prevent resales of many items, simply by having them made overseas. Companies could thus wipe out the market for used books, music, tablets and even cars (which contain copyrighted software).

The Kirtsaeng ruling is at odds with the position taken by the US government in the negotiations for the Trans-Pacific Partnership Agreement (TPP). A leaked text indicates that the US wants the TPP to grant copyright owners the ability to stop imports of works made outside the country. Now that the Supreme Court has decided Kirtsaeng, “the question remains of whether the [US] will continue to push for provisions that are contrary to current U.S. law,” Krista Cox, staff attorney at Knowledge Ecology International, has noted in a blog post.