Supreme Court Holds Copyright “First Sale” Rules Cover Sales Made in Foreign Countries

On March 19, 2013, the U.S. Supreme Court issued a 6-3 decision holding that the “first sale” doctrine applies to copies of a copyrighted work lawfully made abroad. As a result of this decision, it is possible to purchase a copyrighted work, such as a book, in another country and resell that book in the U.S. without infringing the copyright.

The copyright owner, John Wiley & Sons, Inc. is an academic textbook publisher that assigned to its foreign subsidiary (Wiley Asia) the rights to publish, print, and sell Wiley’s English language textbooks outside the U.S. Wiley Asia’s books were sold at lower prices than their United States counterparts, but stated that they were not to be taken into the U.S without permission. The Petitioner, Supap Kirtsaeng, imported the cheaper English language textbooks sold by Wiley Asia and resold them in the U.S. at a profit.

Wiley filed a copyright infringement suit, claiming that Kirtsaeng’s unauthorized importation and resale of its books infringed Wiley’s exclusive right to distribute (under 17 U.S.C. § 106(3)), as well as violated the import prohibition (under § 602). Kirtsaeng replied that because his books were acquired legitimately abroad, the “first sale” doctrine (under § 109(a)) permitted importation and resale without Wiley’s permission. The District Court held that Kirtsaeng could not assert this defense because the doctrine does not apply to goods manufactured abroad. The jury then found that Kirtsaeng had willfully infringed Wiley’s U.S. copyrights and assessed damages. The Second Circuit affirmed, concluding that § 109(a)’s “lawfully made under this title” language indicated that the “first sale” doctrine does not apply to copies of American copyrighted works manufactured abroad.

The Supreme Court reversed, holding that the “first sale” doctrine applies to copies of a copyrighted work lawfully made abroad. In reaching its decision, the Court first established that a copyright owner’s “exclusive rights” granted by § 106(3) are limited by the “first sale” doctrine under § 109, which provides that “the owner of a particular copy or phonorecord 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.” The Court then went on to discuss § 602(a)(1), which states that “[i]mporting a copy made abroad without the copyright owner’s permission is an infringement of § 106(3).” Citing its decision in Quality King Distributors, Inc. v. L’anza Research Int’l, 523 U. S. 135 (1998), the Court concluded that the import prohibition under § 602(a)(1) is also limited by the “first sale” doctrine because § 602(a)(1) expressly derives its authority from the exclusive rights granted under § 106(3).

The Court remarked that Wiley’s position (i.e., that the “first sale” doctrine does not apply to goods manufactured abroad) would likely require library associations, used-book dealers, consumer-goods retailers, and museums to obtain permission before circulating the many books in their collections that were printed overseas.

In a dissenting opinion, Justice Ginsburg chastised the Court for adopting an interpretation of the Copyright Act that she claimed was at odds with Congress’ aim to protect copyright owners against the unauthorized importation of low-priced, foreign made copies of their copyrighted works. According to Justice Ginsburg, Congress’ objective in enacting § 602(a)(1)’s importation prohibition could be honored “without generating the absurd consequences hypothesized in the Court’s opinion.”

The Supreme Court’s decision in Kirtsaeng could impact the similar question of international patent exhaustion recently examined in U.S. courts. In Ninestar Tech. Co. v. Int’l Trade Comm’n, No. 09-1549 (Fed. Cir. Feb. 8, 2012), the Federal Circuit affirmed an assessment of penalties against Ninestar for its importation of patented products purchased abroad in violation of an International Trade Commission exclusion order. Following its ruling in Kirtsaeng, the Supreme Court denied certiorari in Ninestar, leaving open the question of international patent exhaustion for lower courts to consider in light of the Court’s decision in Kirtsaeng.