First Sale Doctrine as A Defense to Copyright Infringement (Ch 12)

When you purchase a book, you can read it, then resell it to someone else. There's quite a traffic in used books. Other copies of works subject to copyright may be resold, such as a CD containing a sound recording.

In Brilliance Audio, Inc. v. Haights Cross Communications, Inc. ---F.3d ---, 2007 WL 188103 (6th Cir. 2007) a case discussed on the Patry Copyright Blog, the Sixth Circuit analyzed the first sale doctrine in both the trademark and the copyright context. Brilliance produced audiobooks. Haights Cross purchased a copy of Brilliance's sound recording. It then repackaged the copy, and offered the copy for rental.

Generally speaking, one may rent a copyrighted work that one has purchased. The two exceptions, elaborated at 17 U.S.C.A. Section 119 involve sound recordings and software. In other words, if you buy a musical recording or a copy of Microsoft Office, you can't rent those copies out.

The Sixth Circuit found that on the trademark claims, the plaintiff's actions fell within two exceptions to the trademark first sale doctrine: (1) the plaintiff alleged a repackaging without adequate notice to the consumer and (2) the repackaged materials using the plaintiff's trademark were materially different from those produced and labelled by the plaintiff.

The Sixth Circuit also found that Section 119's rental exception to the first sale doctrine did not apply to sound recordings based on literary works, but only sound recordings based on musical works. The lone dissenting judge pointed the majority to the plain language of Section 119 which appears to ban rentals of all sound recordings.

The Sixth Circuit noted that this was a case of first impression. It will be interesting to see whether a rental market will suddenly spring up around the works of Bill Cosby, George Carlin, Richard Pryor, Robin Williams and other works of comic genius that do not incorporate music.

Procedural Note: The District Court dismissed plaintiff's claims on a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure "because the defense of first sale appeared on the face of the complaint." The Sixth Circuit construed the complaint broadly and in the light most favorable to the plaintiff and reversed. The Sixth Circuit did not criticize the maneuver of moving to dismiss under Rule 12(b)(6) based on a defense appearing on the face of the complaint.

Practice Tip: Where your client has legally purchased copies of works that were manufactured with the authority of the copyright holder, you may assert the first sale doctrine. If factual allegations appearing on the face of the complaint support assertion of the first sale doctrine, consider a motion to dismiss. NB. Be careful about resales in the U.S. of products manufactured abroad. The first sale doctrine may not in certain circumstances extinguish all distribution rights of the copyright holder in these products.