First Sale Doctrine

Everything That Can Be Digital Will Be

February 22, 2014
Intellectual Property

Dylan J. Quinn, MJLST Staff

This past spring, the Supreme Court delivered a landmark decision in regard to the first sale doctrine by reversing the Second Circuit in John Wiley & Sons, Inc. v Kirtsaeng. The First Sale Doctrine allows a buyer or recipient of a copyrighted work to dispose of, lend, or distribute that copy as they see fit. In Wiley, the Court ruled in favor of the Defendant – who bought books in another country at a lower cost, imported them to the U.S., and then re-sold them at a higher market rate – thereby solidifying that the doctrine applies to copies of a copyrighted work lawfully obtained abroad.

A year prior to the ruling, in Volume 13, Issue 2, of the Minnesota Journal of Law Science & Technology, Benjamin Hamborg critiqued the Second Circuit for ruling against the Defendant, arguing that the Supreme Court needed to overturn the decision because the Circuit Court failed to give proper weight to the legislative history of the first sale doctrine and the negative public policy implications that would arise from affirming the ruling. The Supreme Court was in agreement with Hamborg, and seemingly eliminated those public policy concerns and the uncertainty surrounding the doctrine.

Hamborg discussed the potential dangers posed to libraries if they were not allowed to distribute works that were manufactured abroad, and while Wiley seemed to put an end to those issues, the movement of libraries into a more digital age has raised recent concerns about libraries’ ability to lend or distribute e-books and other digital works. Currently, redistribution of a digital work is not given the same “first sale” protection from copyright infringement claims because digital works do not decay over time and copies are just as valuable as the original – thereby having unknown consequences on the market for the copyrighted works. As libraries convert more and more of their collections into digital formats, we could be moving into an era where a dispute over a licensing agreement removes a large portion of a library’s collection instantly.

The recent concerns over libraries by no means represent the first discussion about a potential “digital” first sale doctrine, however it is just another example of the pressure pushing down on Congress to address the proper application of the first sale doctrine in a digital age. Back in 2001, the Copyright office addressed proposals for a digital first sale doctrine, and responded that “there was no convincing evidence of present-day problems” and that no expansion of first sale would be recommended. In the years since, there have been few developments that suggest Congress is ready to address the issue, until recently.

In the last two years, the Department of Commerce solicited comments on a possible digital first sale doctrine, the Director of the Copyright Office discussed possible options Congress could weigh if addressing the issue, and a court ruled against expanding the first sale doctrine into the digital sphere – stating that it is an issue for Congress. The recent resurgence of concerns over libraries is just another indication of the pressure facing Congress to address the application of the first sale doctrine on the internet.

While the issue clearly impacts libraries, the issue has massive implications on the entire online market place. It is a tall order to address such a large issue, but eventually something has got to give. At some point there needs to be alternative legislation or expansion of the first sale doctrine on the internet. The slogan surrounding the early days of internet sums it up best: everything that can be digital will be.

Supreme Court to the Rescue: The First Sale Doctrine Survives

April 9, 2013
Intellectual Property

by Benjamin Hamborg, UMN Law Student, MJLST Articles Editor

As predicted inJohn Wiley & Sons, Inc. v. Kirtsaeng: The Uncertain Future of the First-Sale Doctrine, the Supreme Court last month held, by a 6-3 margin, that the first sale doctrine does apply to works lawfully made outside of the United States. The first sale doctrine, which allows the lawful owner of a copyrighted work to dispose of that copy as he or she sees fit, was in danger of disappearing as applied to works manufactured overseas after the Second Circuit decided in August of 2011 that the doctrine only applied to works made in America.

Hailed by many as a victory for American consumers, See Gary Shapiro, Supreme Court Gives American Consumers Victory Over Copyright Owners in Kirtsaeng vs. John Wiley & Sons, FORBES (March 20, 2013, 9:16 AM), the decision also represents an important victory for American manufacturing. A decision to the contrary by the Supreme Court would have given companies in the United States, particularly publishing companies, an incentive to move manufacturing plants oversees in order to gain unlimited control over the resale of their products. In fact, any company would have been able to gain such control simply by affixing a copyrightable image or other work to an uncopyrightable product, such as a watch. Of course, as pointed out in Kirtsaeng v. John Wiley & Sons: No Good Deed Goes Unpunished, it remains to be seen whether this decision has a negative impact on the rest of the world, as publishers now have a disincentive to sell textbooks at a discounted rate in impoverished countries. See Roy Zwahlen, Kirtsaeng v. John Wiley & Sons: No Good Deed Goes Unpunished, PATENTLY BIOTECH (March 26, 2013).

The Supreme Court to Decide the Fate of the First-Sale Doctrine in Kirtsaeng

October 11, 2012
Intellectual Property, Litigation

by Benjamin Hamborg, UMN Law Student, MJLST Articles Editor

Later this month, the U.S. Supreme Court is scheduled to hear oral arguments in Kirtsaeng v. John Wiley & Sons, Inc., a case which should decide once and for all whether the first-sale doctrine applies to works manufactured outside of the United States. As I described last spring in volume 13 of the Minnesota Journal of Law, Science & Technology, the case arises from Supap Kirtsaeng’s attempt to take advantage of the disparity in pricing between textbooks manufactured for sale in the United States and those manufactured and sold internationally. Kirtsaeng’s plan involved purchasing textbooks published by John Wiley & Sons, Inc.’s wholly-owned subsidiary John Wiley & Sons (Asia) Pte Ltd., then reselling the textbooks online to consumers within the United States.

While textbooks published by John Wiley & Sons, (Asia) Pte Ltd. for the international market are nearly identical in terms of content to their U.S. counterparts, the international versions sell for significantly less due to differences in quality and design. When John Wiley & Sons, Inc.–as the registered copyright holder of the United States editions of the works sold by Kirtsaeng–sued for copyright infringement, Kirtsaeng based his defense on the first-sale doctrine, which allows “the owner of a particular copy [of a copyrighted work] . . . lawfully made under this title . . . to sell or otherwise dispose of the possession of that copy” without the permission of the copyright holder.

The question the Supreme Court will face on October 29th is whether the first-sale doctrine applies to works manufactured outside of the United States, a question which the Second–in John Wiley & Sons, Inc. v. Kirtsaeng–and Ninth Circuits have already answered in the negative. The prospect of nationwide denial of the first-sale doctrine to works manufactured outside of the United States has broad implications with regard to the sale of gray-market goods within the United States. Many large United States retailers, particularly online retailers, use gray-market goods to deliver products to customers at a substantial savings. In fact, there exists “an estimated $63 billion annual market ‘for goods that are purchased abroad, then imported and resold without the permission of the manufacturer.'”

Narrowing of the first-sale doctrine may even affect the ability of libraries in the United States to lend foreign manufactured books. As Andrew Albanese recently pointed out, “if a library bought a book in the U.S. from a U.S. publisher, and that book happened to be printed in China . . . . the uncertainty the Second Circuit interpretation [of the first-sale doctrine] would create for libraries could deter many libraries from lending [the] materials in question.” Finally, if the Second Circuit’s holding is affirmed by the Supreme Court, companies that manufacture copyright-protected goods within the United States will have an incentive to move their manufacturing plants abroad so as to gain greater control over the sale of their products.

First Sale Doctrine

Contact Information