Kirtsaeng v. John Wiley & Sons

By Kristin Bergman.

For the second time in the last decade, the Supreme Court was presented with the challenge of ruling on a question of gray market goods in intellectual property law. The case, Kirtsaeng v. John Wiley & Sons, Inc. (No. 11-697), decided March 19, 2013, highlights the tension between Section 602(a)(1) and Section 109(a) of the Copyright Act.

Under Section 602(a)(1), “Importation into the United States, without the authority of the owner of copyright under this title, of copies . . . of a work that have been acquired outside the United States is an infringement.” However, Section 109(a), known as the first sale doctrine, asserts that the “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.” In other words, once a copy has been legally sold, the owner can use and sell the copy without seeking the copyright owner’s permission. The issue presented to the Supreme Court, then, was in resolving these two sections, whether a foreign-made product may be resold within the United States, and if so, under what conditions.

Originally from Thailand, Supap Kirtsaeng came to the United States in 1997 to study. Recognizing the different pricing scheme for textbooks, Kirtsaeng had family and friends in Thailand purchase textbooks at a lower price and ship them to him. Kirtsaeng sold these textbooks on commercial websites such as eBay, eventually accumulating a profit of $900,000 dollars.

In 2008, John Wiley & Sons filed a lawsuit against Kirtsaeng for copyright infringement under the Copyright Act Section 602(a)(1) in the United States District Court for the Southern District of New York, as its subsidiary published eight of these textbooks in Asia. In response, Kirtsaeng invoked the first sale doctrine, from Section 109(a), as a defense. Both the District Court and the United States Court of Appeals for the Second Circuit found for John Wiley & Sons, holding that the first sale doctrine does not extend to goods manufactured abroad and imported into the United States. Kirtsaeng was required to pay $75,000 per infringement, for a total of $600,000 in damages. On April 16, 2012, the Supreme Court granted Kirtsaeng’s petition for a writ of certiorari, and the Court heard oral arguments for the case in late October.

The Supreme Court first considered this topic in Costco Wholesale Corporation v. Omega, S.A., 131 S. Ct. 565 (2010), where an equally divided court (due to Justice Kagan’s recusal) affirmed the Ninth Circuit’s holding. The Ninth Circuit interpreted the first sale doctrine to provide no defense to actions brought under Section 602(a) in cases where the copies at issue are legally-made, foreign copies. As Costco v. Omega provides no binding precedential value, the full Supreme Court had the opportunity to revisit this statutory interpretation of the first sale doctrine in Kirtsaeng. The Court was presented with two options for interpreting Section 109(a)’s “lawfully made under this title” with respect to the first sale doctrine. John Wiley & Sons argued for a plain-language interpretation, wherein “this title” refers to title 17 of the United States Code and only products made in the United States would qualify. The other standard, as Kirtsaeng argued, would interpret this phrase to mean “made wherever, in a way that satisfies U.S. copyright standards” such that it would be “lawful under this title” or, in other words, “in accordance with what this title would require if it applied.”

In a 6-3 decision from March 19, 2013, the Supreme Court of the United States adopted Kirtsaeng’s proposed interpretation, reversing the decision of the Court of Appeals and extending the first sale doctrine to copyrighted products manufactured abroad. Writing for the majority, Justice Breyer characterized these interpretations as “geographical” (John Wiley & Sons) and “non-geographical” (Kirstaeng). In examining the statute’s language, Justice Breyer noted the clarity of the statute, as “neither ‘under’ nor any other word in the phrase means ‘where.’” Considering this language and the prior version of the statute, which extended the first sale doctrine to copies “lawfully obtained,” Justice Breyer found no support for a geographically restricted interpretation of the first sale doctrine.

With $2.3 trillion worth of foreign goods imported to the United States in 2011, the majority opinion takes a rather pragmatic or “common sense” approach, heavily emphasizing the “parade of horribles” discussion that dominated oral argument. Justice Breyer recognized that if the Supreme Court were to adopt John Wiley’s geographic interpretation, there would be significant ramifications beyond the textbook market, reaching used car sales, libraries, museums, and more. As so many products made abroad contain copyrighted elements, to forbid importation and resale unless the copyright owner gave his permission would be absurd. Justice Breyer noted that these practical problems “are too serious, too extensive, and too likely to come about for us to dismiss them as insignificant—particularly in light of the ever¬growing importance of foreign trade to America.” With a concern about selective enforcement to avoid these problems, the Court projected a legislative intent, writing, “We also 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.” Therefore, the Court held that the first sale doctrine applies without reference to geography, such that once a good is sold lawfully, it may be resold in the United States without the copyright holder’s permission.

Justice Ginsburg wrote the opinion for the dissent, joined by Justices Kennedy and Scalia. Justice Ginsburg wrote that the majority overstated the “parade of horribles” and overlooked the problem of market exploitation. In addition, the dissent argued that the majority opinion represents a “bold departure from Congress’s design.”
The full opinion for Kirtsaeng v. John Wiley & Sons, Inc. is available here.

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