Ballard Spahr LLP: Second Circuit Ruling Affects Copyrighted Works Produced Abroad

Ballard Spahr LLP: Second Circuit Ruling Affects Copyrighted Works Produced Abroad

By Robert R. Baron, Jr. and Corinne Militello

A recent decision by the U.S. Court of Appeals for the Second Circuit is a victory for copyright owners because it allows those who manufacture outside of the United States to maintain greater control over distribution after the first sale.

By a divided 2-1 panel, the court ruled this week in John Wiley & Sons, Inc. v. Kirtsaeng that copyright's first-sale doctrine does not apply to copyrighted works manufactured outside of the United States. Under the first-sale doctrine, a copyright owner's exclusive distribution right extends only to the first sale of a copyrighted work. After that, the purchaser can re-sell the work freely without infringing on the copyright owner's exclusive rights.

However, retailers and others who sell or distribute copyrighted works should be aware that the court's ruling renders the first-sale doctrine unavailable as a defense to an infringement claim when the copies in question were produced abroad.

In the case, publisher John Wiley & Sons alleged that Supap Kirtsaeng, an individual residing in California, infringed Wiley's copyrights by reselling foreign editions of Wiley textbooks, which had been printed in Asia, without its authority. Kirtsaeng sold the textbooks for a profit in the United States on commercial Web sites such as eBay.com. As a defense to Wiley's infringement claim, Kirtsaeng pointed to the first-sale doctrine.

The decision turned upon the Second Circuit's interpretation of the statutory codification of the first-sale doctrine, 17 U.S.C. 109(a), which provides that the doctrine applies to copies "lawfully made under this title." Both the majority and dissenting opinions acknowledged the ambiguity of that phrase.

The majority interpreted "lawfully made under this title" to mean "made in the United States," where the Copyright Act is law. In a dissenting opinion, U.S. District Judge J. Garvan Murtha argued that such a narrow interpretation would encourage copyright owners to produce their works outside of the United States to avoid the doctrine in order to maintain greater control over distribution.

The case, which raised an issue of first impression in the Second Circuit, may be appealed by the defendant, and surely will be watched closely by both copyright owners and distributors of copyrighted works. The issue has been examined by the Ninth Circuit, including in Omega S.A. v. Costco Wholesale Corp. [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law]. The U.S. Supreme Court reviewed that case in late 2010 and, in a divided 4-4 decision (due to a recusal), affirmed without further analysis.

For more information on this ruling and how it might affect your business operations, please contact Robert R. Baron, Jr., at 215.864.8335 or baron@ballardspahr.com, or Corinne Militello, at 215.864.8145 or militelloc@ballardspahr.com.  


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