Supreme Court Reverses, Says First Sale Doctrine Applies In Copyright Case

Supreme Court Reverses, Says First Sale Doctrine Applies In Copyright Case

WASHINGTON, D.C. - (Mealey's) A student accused of copyright infringement prevailed March 19 at the U.S. Supreme Court, which held in a divided ruling that the first sale doctrine applies to lawfully made works manufactured abroad and imported to the United States (Supap Kirtsaeng d/b/a BlueChristine99 v. John Wiley & Sons Inc., No. 11-697, U.S. Sup.) [lexis.com subscribers may access Supreme Court briefs for this case]. .

(Decision available.Document #16-130401-004Z.)

Justice Stephen G. Breyer, writing for a 6-3 majority, found no geographical limitation in Section 109(a) of the Copyright Act - which states that "the owner of a particular copy . . . 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" - that prevents application of the doctrine to respondent John Wiley & Sons Inc.' textbooks manufactured in Asia.

Petitioner Supap Kirtsaeng purchased the books legally, via relatives and friends in Thailand, for domestic resale.

"The language of §109(a) read literally favors Kirtsaeng's nongeographical interpretation, namely, that 'lawfully made under this title' means made 'in accordance with' or 'in compliance with' the Copyright Act. The language of §109(a) says nothing about geography. The word 'under' can mean 'in accordance with.' And a nongeograph­ical interpretation provides each word of the five-word phrase with a distinct purpose. The first two words of the phrase, 'lawfully made,' suggest an effort to distinguish those copies that were made lawfully from those that werenot, and the last three words, 'under this title,' set forth the standard of 'lawful[ness].' Thus, the nongeographical reading is simple, it promotes a traditional copyright objective (combatting piracy),and it makes word-by-word linguistic sense," the majority held.

Petition Granted

Wiley sued Kirtsaeng in the U.S. District Court for the Southern District of New York for copyright infringement in 2009. Before trial, the District Court rejected Kirtsaeng's anticipated first-sale defense under Section 109(a) of the Copyright Act. A jury found Kirtsaeng liable for willfully infringing eight works and awarded Wiley statutory damages of $75,000 per work for a total of $600,000. Kirtsaeng was a graduate student at the time with limited income, so at Wiley's request, the District Court ordered Kirtsaeng to give Wiley his golf clubs and his computer and printer.

Kirtsaeng appealed the ruling, and on Aug. 15, 2011, the Second Circuit U.S. Court of Appeals affirmed the District Court's findings in a divided opinion, holding that, based on the Supreme Court's decision in Quality King Distributors, Inc. v. L'anza Research International, Inc. (523 U.S. 135 [1998]) [enhanced version available to lexis.com subscribers] interpreting Section 602(a) of the Copyright Act, Kirtsaeng was not entitled to the first-sale defense under Section 109(a) (John Wiley & Sons Inc. v. Supap Kirtsaeng d/b/a BlueChristine99, No. 09-4896, 2nd Cir.) [enhanced version]. The appellate panel held that "while perhaps a close call, we think that, in light of its necessary interplay with § 602(a)(1), § 109(a) is best interpreted as applying only to works manufactured domestically."

In December 2011, Kirtsaeng filed a petition for writ of certiorari that was granted in April 2012. According to Kirtsaeng's brief on the merits: "The question presented is whether the copyright owner is entitled to control downstream sales just because it opts to manufacture the copies abroad." The Supreme Court previously considered an identical issue in Costco Wholesale Corp. v. Omega S.A. (131 S. Ct. 565 [2010]) ][enhanced version], but the case ended in a 4-4- split. In October 2012, the Supreme Court heard oral arguments in the instant dispute.

Practical Harms

Reversing the Second Circuit, the majority wrote that "in our view §109(a)'s language, its context, and the common-law history of the 'first sale' doctrine, taken together, favor a non-geographical interpretation." The majority expressed "doubt" that Congress "would have intended to create the practical copyright-related harms with which a geographical interpretation would threaten ordinary scholarly, artistic, commercial and consumer activities." Wiley's approach "bristles with linguistic difficulties" in that it "gives the word 'lawfully' little, if any, linguistic work to do," according to the majority, who mused "how could a book be unlawfully 'made under this title'?"

"It imports geography into a statutory provision that says nothing explicitly about it. And it is far more complex than may at first appear," the majority added.

'Ordinary English'

Reading "under this title" to mean "in conformance with the Copyright Act where the Copyright Act is applicable" as advocated by Wiley not only requires emphasis on the word "under" which is not present in the statute, but also requires a second step whereby the statute "is applicable" only in the United States. "One difficulty is that neither 'under' nor any other word in the phrase means 'where,'" the majority wrote. Yet another "far more serious" difficulty is presented by the second step, however, for it requires an effort to read a geographical limitation into the word "applicable."

"Where, precisely, is the Copyright Act 'applicable'? The Act does not instantly protect an American copyright holder from unauthorized piracy taking place abroad. But that fact does not mean the Act is inapplicable to copies made abroad. As a matter of ordinary English, one can say that a statute imposing, say, a tariff upon 'any rhododendron grown in Nepal' applies to all Nepalese rhododendrons. And, similarly, one can say that the American Copyright Act is applicable to all pirated copies, including those printed overseas. Indeed, the Act itself makes clear that (in the Solicitor General's language) foreign-printed pirated copies are 'sub­ject to' the Act," Justice Breyer wrote.

"The appropriateness of this linguistic usage is under­scored by the fact that §104 of the Act itself says that works 'subject to protection under this title' include un­published works 'without regard to the nationality or domicile of the author,' and works 'first published' in any one of the nearly 180 nations that have signed a copyright treaty with the United States. Thus, ordinary English permits us to say that the Act 'applies' to an Irish manuscript lying in its author's Dublin desk drawer as well asto an original recording of a ballet performance first made in Japan and now on display in a Kyoto art gallery," the majority added.

Because "geographical interpretations create more linguistic problems than they resolve," and citing "considerations of simplicity and coherence," the Supreme Court sided with Kirtsaeng's nongeographical reading of the first sale doctrine. A review of Congressional intent and statutory analysis bolsters such a finding, and to find otherwise could cause serious harm to museums, book sellers, libraries and retailers, the majority held.

Concurrence, Dissent

In a concurrence, Justice Elena Kagan - joined by Justice Samuel Alito - wrote that today's decision, taken in combination with Quality King, could constrict the scope of the ban on unauthorized importation established at Section 602(a)(1) of the Copyright Act.

Furthermore, a dissent authored by Justice Ruth Bader Ginsburg said the "practical problems" cited by the majority were "largely imaginary."

"Congress' objective in enacting 17 U. S. C. §602(a)(1)'s importation prohibition can be honored without generating the absurd conse­quences hypothesized in the Court's opinion," Justice Ginsburg wrote, joined in full by Justice Anthony M. Kennedy and in part by Justice Antonin Scalia.

Counsel

Kirtsaeng is represented by Joshua Rosenkranz of Orrick, Herrington & Sutcliffe in New York. Wiley is represented by Theodore B. Olson of Gibson, Dunn &Crutcher in Washington. Stewart and Donald B. Verilli Jr. of the U.S. Department of Justice in Washington represent the government.

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