2nd Circuit: Publishers can control resale of copyrighted works if manufactured abroad

It’s not often that a court decision about copyright law expressly acknowledges that the decision will be controversial.  However, the U.S. Court of Appeals for the Second Circuit did just that in John Wiley and Sons Inc. v. Kirtsaeng (No. 09-4896, 2nd Cir. Aug. 15, 2011).

The decision related to the “first sale” doctrine under copyright law, which permits the owner of a lawfully purchased copyrighted work to resell it without limitations imposed by the copyright holder.   As codified in the Copyright Act at 17 U.S.C. 109(a):

the owner of a particular copy  . . . lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of possession of that copy

The first sale doctrine has been applied to permit resales and rentals of videos and DVDs, resales of certain copies of software (such as software that is bundled with hardware), and other products.  In the John Wiley and Sons case, the Court considered whether copyrighted goods manufactured outside of the United States are subject to the first sale doctrine, and it concluded that the answer was “no.”

In the case, an Asian-based company manufactured books that John Wiley and Sons intended to distribute outside of the United States.  The books were marked with a legend listing the countries in which resale was authorized.  Supap Kirtsaeng was a college student who funded his college education with a textbook resale business.  Kirtsaeng had family members purchase textbooks made by the Asian company and ship him the books.  He then resold the books on commercial websites such as eBay.  John Wiley and Sons sued Kirtsaeng for copyright infringement, among other things.

In response, Kirtsaeng argued that his sales were permitted by the first sale doctrine, since the textbooks were lawfully purchased from the Asian manufacturer.  Wiley countered that the first sale doctrine did not apply to works manufactured abroad.   Specifically, Wiley argued that section 109(a)’s “lawfully made under this title” clause should be read as “lawfully made in the United States.”

The Court’s analysis found that “The relevant text [of Section 109(a)] is simply unclear” and that the particular clause was “utterly ambiguous.”  So, it tried to reconcile Section 109(a) with Section 602(a), which prohibits the importation into the United States of copies of copyrighted works acquired abroad without authorization of the copyright holder.  In doing so, the Court concluded that

in light of its necessary interplay with Section 602(a)(1), [the first sale doctrine of] Section 109(a) is best interpreted as applying only to works manufactured domestically.

The Court acknowledged that controversy and unintended policy consequences (such as encouraging publishers to manufacture goods abroad) may surround its decision and noted:

We freely acknowledge that this is a difficult question of statutory construction.  . . . If we have misunderstood Congressional purpose in enacting the first sale doctrine, or if our decision leads to policy consequences that were not foreseen by Congress or which Congress now finds unpalatable, Congress is of course able to correct our judgment.


							

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