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Orders: One new grant, on copyright

The Supreme Court on Monday agreed to return to the legality of purchasing copyrighted works overseas and bringing them back to the U.S. for resale, without the permission of the copyright owner.  The Court had agreed to rule on that issue in 2010, but wound up splitting 4-4.  The newly granted case is Kirtsaeng v. John Wiley & Sons (docket 11-697)

In other orders, the Court began where it had left off in recent Terms, refusing to be drawn back into legal issues over the rights of detainees at Guantanamo Bay, turning aside the first two of eight new cases now pending.  It also refused to hear a new appeal by the former Enron Corp. CEO, Jeffrey K. Skilling, seeking to challenge anew his conviction on securities fraud charges.  Justice Elena Kagan did not take part in the Skilling order, and was recused in one of the Guantanamo cases (but not the other).  The Court took no action on three new cases seeking to challenge the government’s restrictions on cross-ownership of newspapers, radio and TV stations.

The copyright case the Court agreed to decide (with the case going over to the next Term) gives the Court a fresh opportunity to sort out a conflict among the federal appeals courts over what is called the “first-sale doctrine.”  That is a concept that allows a buyer of a copyrighted work, in a legal transaction, to dispose of that copy without the approval of the owner of the copyright.  Federal copyright law, however, does not define that doctrine, so it has been up to the courts to fill in its meaning, and they disagree.

The outcome of the case is expected to be of major importance to the future of the so-called “gray market” for goods — items bought overseas at prices below their level in the U.S., and then returned to the U.S. for resale.  The market for such goods runs into the tens of millions of dollars annually.  At issue in the newly granted case is a practice of buying college textbooks in their cheaper editions abroad, then bringing them back to sell to students.  This is done under the first-sale doctrine, but copyright owners insist that federal law does not allow it.

With the burgeoning of commercial transactions on the Internet, the “gray market” has become even more active.  Indeed, a number of companies doing business on the Internet joined in urging the Court to hear the appeal of a small-time textbook entrepreneur, Supap Kirtsaeng.   A native of Thailand, he came to the U.S. to attend college.  When entering graduate school in California, he decided he could help pay for his education by becoming a textbook dealer.

His family would buy overseas editions of textbooks in Thailand, at fairly low prices, and send them to him.  He re-sold them to students and made a small profit.   The publisher of those works, John Wiley & Sons, had sold the books overseas through an Asian subsidiary, with 10 percent of the proceeds going to the parent company.   Overall, Kirtsaeng sold $37,000 worth of Wiley textbooks.   Wiley sued him in federal court in New York, and Kirtsaeng sought to rely on the first-sale doctrine.  A federal judge rejected the claim, concluding that the doctrine does not apply to goods made in a foreign country.

The jury found Kirtsaeng liable for infringing copyright on eight books, and found that it was an intentional violation of Wiley’s copyright.  It awarded Wiley $75,000 in damages for each book, for a total of $600,000.  The Second Circuit Court upheld the award, agreeing that the doctrine does not apply to a foreign-made product.

There is now a three-way split among the Circuit Courts: the Second Circuit declaring that foreign-made works can never be resold in the U.S. without the copyright owner’s consent, the Ninth Circuit ruling that such a foreign-made product sometimes can be sold in the U.S. without permission, but only after the owner has approved an earlier sale inside the U.S., and the Third Circuit deciding that such a product can always be re-sold without permission, so long as the copyright owner had authorized the first sale that occurred overseas.

It was the Ninth Circuit’s approach that the Supreme Court had agreed to review two years ago, in the case of Costco Wholesale v. Omega.   Justice Kagan was recused from that case (docket 08-1423), and the other eight Justices split 4-4.  That always results in affirming the lower court decision at issue, but without setting a precedent.  The case was affirmed by the split vote on December 13, 2010.

The Court has now taken on the Kirtsaeng case, to try again.  Justice Kagan will be taking part.

The Court’s denials of review in two new cases from Guantanamo continued the drought in review of cases from that military prison in Cuba into its fourth year.  The Court has not returned to consider the legal rights of prisoners there since its ruling in June 2008, granting them a constitutional right to challenge their detention but leaving the details of how that would work in practice to the lower courts.  The D.C. Circuit Court since then has refused to uphold an order to release any detainee from Guantanamo, prompting the captives’ lawyers to mount a series of challenges in the Supreme Court.  None of those has yet succeeded.

In Monday’s orders, the Court refused — as it has before — to hear claims by former detainees that the conditions of their release have put them under continuing restraints (that was the issue in a case involving two former prisoners, Gul, et al., v. Obama, 11-7827), and by a group of more than 100 current prisoners (Abdah, et al., v. Obama, 11-421), seeking to block their transfer out of Guantanamo to countries where they fear torture or other abuse.  Justice Kagan was recused from the Abdah order but not from the Gul order.

It now seems quite plain that the Court will not reopen the Guantanamo issue in any case unless all nine Justices could participate, indicating that it remains deeply divided on such cases.  There is no purpose in granting a case only to have it end in an inconclusive 4-4 split.

In the new Enron case, former CEO Skilling was asking the Court to clarify whether it is harmless error in a guilty verdict if a jury was allowed to find guilt based upon two legal theories, one of which turned out to be invalid.  The issue is whether the alternative verdict approach undermined the verdict on the value theory after the other theory was overturned.   In the verdict in his case, Skilling was found to have engaged in a criminal conspiracy to defraud, based upon securities fraud claims and claims that he failed to provide honest services.

When Skilling’s case was at the Supreme Court previously, it narrowed the scope of the honest services fraud theory, and found the verdict based in part on that to be flawed, but it did not decide that his conviction should be overturned, at least until lower courts had examined whether the error was harmless.  Lower courts found the error to be harmless, and upheld the conviction.   At one time, Skilling faced a 24-year prison sentence, but he is now due to be re-sentenced.  (The denied case was Skilling v. U.S., 11-674; Justice Kagan was recused.)

The Justices, at their private Conference last week, took their first look at three cases challenging the Federal Communications Commission’s rules — in effect in one form or another since 1975 — restricting ownership of multiple media outlets.  But no order emerged on those petitions Monday.   The Court had been urged by the Justice Department to hold the cases until after it rules on the scope of the FCC’s power over broadcasters, in the pending case of FCC v. Fox TV Stations, et al. (10-1293), argued on Jan. 10 and now awaiting a decision.  Whether the case was put aside for that reason, or for another, is unknown.



Recommended Citation: Lyle Denniston, Orders: One new grant, on copyright, SCOTUSblog (Apr. 16, 2012, 10:02 AM),