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Supreme Court Decides the Scope of the Copyright First Sale Doctrine

Intellectual Property Law Update Heather L. Buchta

In their decision issued March 19, 2013 in the case of Kirtsaeng v. John Wiley & Sons, Inc., the Supreme Court has finally decided the scope of the copyright first sale doctrine for copies of works lawfully manufactured and sold abroad but then imported into the United States without the copyright owner's approval.

One of the exclusive rights of a copyright owner is the right to distribute. However, when a copy of a copyrighted work is sold to a consumer in the United States, that consumer is then free to sell that copy to whomever he or she wishes, without the consent of the copyright owner. This concept is known as the "first sale doctrine." The issue becomes more complicated when you factor in international trade and sales outside the U.S.

In 1998, the Supreme Court of the United States ruled, in Quality King Distributors, Inc. v. L'anza Research Int'l, Inc., that if the owner of a U.S. copyright ships abroad from the U.S. copies of the work that were made in the U.S. for distribution, an individual who buys a copy of that work abroad can then import his or her copy of the work back into the United States without any infringement of the owner's copyright. However, Quality King left open two questions: First, does the first sale doctrine apply to copies of copyrighted works that are manufactured abroad? Further, if an individual were to purchase a copy of that work outside the U.S., would he or she first need the consent of the copyright owner to further import the copy of the work into the U.S.? This issue was before the Supreme Court in 2010, in the case of Costco Wholesale Corp.v. Omega S.A., and the court punted, failing to finally resolve the issue in a 4-4 deadlock (Justice Kagan having recused herself).

The Court took up the issue again in Kirtsaeng v. John Wiley & Sons, Inc. The Petitioner in Kirtsaeng came to the U.S. from Thailand to study, and his family in Thailand had purchased cheaper versions of his textbooks in Thailand and shipped the books to him in the United States. Kirtsaeng later resold foreign produced books in the U.S. and kept the profits. John Wiley & Sons brought an action against Kirstaeng for infringement of their exclusive distribution right as copyright holder. The Supreme Court held for Kirtsaeng, confirming that the first sale doctrine even applies to copies of works manufactured overseas if they have been imported into the U.S. without the permission of the copyright owner.

For the owners of copyrighted works in the U.S., Kirtsaeng may have significant implications on distribution channels and foreign sales. Copyright owners must now understand that whether they manufacture copies of their copyrighted work within the U.S. or abroad, as long as that work is lawfully purchased, the purchaser can then import the copy of that work back into the United States and further distribute it without the consent of the copyright owner, without violating U.S. copyright laws. This makes it harder to price discriminate between markets and thus maximize profit. After the ruling in Kirtsaeng, it appears that copyright owners must be even more mindful of the Supreme Court's words in Quality King, that no matter where the buyer or manufacturer of the copies is located, ". . . once the copyright owner places a copyrighted work in the stream of commerce by selling it, he has exhausted his exclusive statutory right to control its distribution."

It is important to note also that Kirtsaeng dealt only with the copyright first sale doctrine. There are other areas of law that may restrict importation of goods into the U.S. For example, the foreign made good may be designed for a foreign market and may not meet U.S. quality control or regulatory standards, giving rise to trademark infringement or regulatory violations if imported.

For more information on the first sale doctrine or related issues, contact Heather Buchta at (602) 229-5228/ [email protected], Cameron Robinson at (602) 229-5285/ [email protected], or your Quarles & Brady IP attorney.

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