Opinion analysis: Justices reject publisher’s claims in gray-market copyright case
on Mar 19, 2013 at 12:22 pm
The Court at last seems to have reached a consensus on a seemingly intractable problem of copyright law: whether a U.S. copyright holder can prevent the importation of “gray-market” products manufactured for overseas markets. When the Court tried to address this question two Terms ago – in Costco Wholesale Corp. v. Omega, S.A. – the Court was equally divided (with Justice Kagan recused). However, in today’s opinion in Kirtsaeng v. John Wiley & Sons, Inc., Justice Breyer, writing for a strong majority of six, emphatically rejected the publisher’s control over the importation of such products.
The facts are almost too good to be true. A Thai national (Kirtsaeng) came to this country to study at Cornell and U.S.C. To subsidize his educational expenses, he resold textbooks purchased by his family at bookstores in Thailand. All in all, he sold several hundred thousand dollars’ worth of textbooks imported in this way, reaping a net profit in the range of $100,000. When his activities came to the attention of Wiley (a major American textbook publisher), a suit for copyright infringement predictably ensued. The district court found for Wiley and imposed statutory damages of $600,000. The Second Circuit affirmed.
The case turns on a provision of the Copyright Act that permits the owner of a copy that was “lawfully made under this title” to resell the work. The publisher argues that the Thai books, printed in Thailand, were not made “under this title,” and thus that Kirtsaeng cannot lawfully resell them. Kirtsaeng, on the other hands, argues that the books were “lawfully made,” because they were made under a license from Wiley.
Justice Breyer’s opinion (joined by all the Justices except Scalia, Ginsburg, and Kennedy) directly and emphatically accepts Kirtsaeng’s argument. He starts by characterizing the argument of the publishers, the Solicitor General, and the Second Circuit, as “geographical”: copies are lawfully made “under this title” if they are made in the United States and the first-sale doctrine thus limits the publisher’s control only when copies are made in the United States. He describes Kirtsaeng’s view as a “non-geographical limitation”; the question under that reading would be whether the manufacturing of the copies complied with the requirements of U.S. law. In this case, because the publisher (Wiley) indisputably authorized the making of the copies, the copies were “lawfully made under this title,” so the first-sale doctrine applied.
For a topic that has divided the Justices so evenly for so many years, the vigorous and uncompromising tone of Breyer’s opinion is surprising. In his view, for example, the language of the statute is quite clear, largely because the geographical argument has no answer to the problem that “neither ‘under’ nor any other word in the [statutory] phrase means ‘where.’” He also emphasized the prior version of the statute, which extended first-sale protection to any copy “lawfully obtained.” Because nobody argues that the older version was geographically limited, accepting the publisher’s view required the conclusion that Congress’s revision of copyright law in the 1970s was intended to sharply limit the first-sale doctrine. He also included a substantial section in the opinion contending that the doctrine’s historical roots (dating back to Lord Coke) counsel in favor of a broad reading.
At the oral argument, the Justices (especially Justice Breyer) seemed particularly concerned about what Justice Breyer called a parade of “horribles” that would ensue from adoption of the publishers’ point of view. So if that concern in fact swayed the votes of the central Justices, it should be no surprise that it got extended treatment in Justice Breyer’s opinion for the Court. Among other things, he noted the absurdity of thinking that libraries must obtain licenses to allow the lending of books printed overseas, that owners of foreign-manufactured telephones, laptops, and tablets must obtain consent from software publishers to resell them, or that museums that own paintings of foreign artists need the consent of the artists to display the paintings publicly. The publishers (and Justice Ginsburg in dissent) suggest that those concerns were overstated – emphasizing the lack of litigation to date in those areas – but the Court was less “sanguine” about a ready solution for those problems.
One of the strongest points for the publishers (and the centerpiece of Justice Ginsburg’s dissent) was the Court’s comment in Quality King v. L’Anza Research International that copies made by a British publisher would not be “lawfully made under this title.” All agree that the statement was dictum, but its appearance in an opinion for the Court has understandably given the argument credence with the lower courts. Justice Breyer, however, had no trouble sweeping it away: “[T]he statement is pure dictum. . . . Is the Court having once written dicta calling a tomato a vegetable bound to deny that it is a fruit forever after?” Justice Kagan noted in a concurring opinion (joined by Justice Alito) that she well might go even farther and overrule Quality King entirely.
A common trope says that it is common for a case to be lost at oral argument but rare for one to be won. I am not so sure. This is a subject that has closely divided the Justices for years. As I reported after the argument in this case, Joshua Rosenkranz managed to directly confront, and apparently defuse, the concerns of several Justices who seemed opposed to his position. This well might be the rare case of a victory at oral argument. Even if it is not, however, it is still a victory of which Rosenkranz should be proud.
In Kirtsaeng v. John Wiley & Sons, the Court considered the “first sale” doctrine of copyright law. This is a rule that means that when a publisher sells a copyrighted work once, it loses any right to complain about anything later done with that copy. This is the rule that makes it okay to resell a used book to a used-book store, and for that store in turn to sell used books to its customers.
The issue in Kirtsaeng was whether the first-sale doctrine applies to copyrighted works manufactured overseas. Kirtsaeng bought textbooks in Thailand, where they are cheap, brought them to the United States, and resold them at a large profit. The lower courts said he couldn’t do this, and ordered him to pay damages to the publisher (John Wiley). The Supreme Court disagreed. The Justices said that the first-sale doctrine applies to all books, wherever made. So even if you buy a book made in England, you can resell it without permission from the publisher.