Supreme Court Rules “First Sale Doctrine” Applies to Goods Made Abroad

The U.S. Supreme Court recently announced its long-anticipated decision inKirtsaeng v. John Wiley & Sons, Inc., No. 11-697 (Mar. 19, 2013). The Court decided that the “first sale doctrine” of the Copyright Act applies to goods made abroad.

As we previously discussed on this IP Law Blog, the case involved a Thai textbook dealer (Kirtsaeng) who purchased textbooks overseas and sold them to fellow students to help finance his education.  Following a copyright infringement lawsuit by publisher John Wiley & Sons, the student was ordered to pay damages in the amount of $600,000.

The case required the justices to address the tension between two important aspects of copyright law. The Copyright Act prohibits the importation of copyrighted goods without the authority of the copyright owner. However, the “first sale doctrine” entitles the owner of a lawfully made work to resell the work without the authorization of the copyright owner.

The Supreme Court ultimately concluded that the “first sale doctrine” applies to copies of a copyrighted work lawfully made abroad. As explained in the Court’s opinion, “Both historical and contemporary statutory context indicate that Congress did not have geography in mind when writing the present version of § 109(a) [the “first sale doctrine”].”

The Supreme Court further noted that the alternative interpretation favored by John Wiley & Sons would cause practical problems for booksellers, libraries, museums and retailers, which have long relied on the “first sale doctrine.” Further, the Court stated that the fact that the Copyright Act does not instantly protect an American copyright holder from unauthorized piracy taking place abroad does not mean the Act is inapplicable to copies made abroad.

Thus, under the Court’s holding, once foreign-made goods have been legally sold, whether domestic or overseas, copyright holders have no right to control further resale of those goods.  This means that publishers and other manufacturers that formerly exploited copyright to charge different prices to overseas and domestic consumers will have more difficulty doing so, as there will be importers who arbitrage by buying cheaper goods abroad and reselling at the US for prices lower than the manufacturer’s prices.  In essence, the decision legalizes the “gray market” in such goods.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

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