Second Circuit: First Sale Doctrine Does Not Apply to Foreign-Made Works - Importer Is Copyright Infringer

In John Wiley & Sons Inc. v. Kirtsaeng, 09-4896 (2d Cir. August 15, 2011), the Second Circuit decided a case of first impression, with a powerful dissent from Judge J. Garvan Murtha of Vermont.

Facts:  Foreign student residing in US has family members purchase English-language textbooks from foreign country and ship them to US where he resells them on Ebay.   The textbooks are substantially similar to those sold in the US, although of inferior quality of manufacture (thinner paper, fewer inks).   The manufacture and distribution of the textbooks in the foreign country was authorized by the US copyright owner, but importing them into the United States was not.

Issue:  Where a US copyright owner permits textbooks to be lawfully manufactured and distributed in a foreign country, can the US copyright owner charge persons importing such lawfully-made textbooks with copyright infringement?

Answer:  Yes.

The Second Circuit upheld a judgment against the student for hundreds of thousands of dollars following a jury trial.

The statutes at issue are 17 USC 602(a) which refers to copyrighted works lawfully "made" under the Copyright Act and

The "first sale doctrine" which is embodied in 17 USC 109(a)

 § 109. Limitations on exclusive rights: Effect of transfer of particular copy or phonorecord42



(a) Notwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord. [...]

Essentially, the Second Circuit determined that a copy made in a foreign country was not lawfully made under the Copyright Act.    I commend Judge Murtha's dissent for careful study, the decision is embedded below.

More on the first sale doctrine and the Costco/Omega case here.

John Wiley & Sons v Kirtsaeng


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Copyright and Fine Art Webcast CLE: 10/28 By West Legal Ed

Copyright Issues Related to Fine Art

Content Partner: West LegalEdcenter (R)
Price: $135.00*
Description: Since the advent of the Internet, most of our friends, family, and clients have become global publishers, copying and repasting copyrighted works of others on a daily basis. At the same time, contemporary art has skyrocketed in economic and symbolic importance in modern society, with a greatly expanded collector base. Changing media, modes of production, and a general lack of transparency in the art world have created a special realm of problems for both casual participants and seasoned art world veterans alike. Ray Dowd, author of Copyright Litigation Handbook (West 2010), teams up with New York and L.A.-based fine art attorney Amy Goldrich to provide the tools necessary to advise clients navigating these issues.

Among the topics to be discussed:
• Overview of copyright and special problems posed by fine art
• Basic copyright concepts generally applicable to fine art
• Recent cases involving the Visual Artists' Rights Act (VARA)
• Legal relationships in the Art World
• Transfers of possession and title: consignments, private sales, auctions, and unfortunate events
• Copyright Infringement and Fair Use
• First Sale Doctrine
• Work for hire

More information and to attend click here.https://westlegaledcenter.com/search/displayDailyWebcastSearchResults.jsf

Practice Areas: Art Fraud, Copyright Law, Enforcement & Anti-Piracy, Entertainment & the Arts, Intellectual Property Law, International Intellectual Property, International Law & Global Trade, Licensing & Intellectual Property Rights

Online Media Type: Audio
Production Date: 10/28/2010 12:00 PM EDT
Level: Intermediate
Category: Standard
Duration: 1 Hours, 0 Minutes
Online Format:

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Synchronizing Art to a Sound Recording: Do Financial Incentives Demotivate Creativity and Problem Solving?

HT to Mike Masnick of Techdirt.  Not only is Dan Pink's video by RSA Animate (embedded below) thought-provoking and relevant to whether or not money stimulates creative activity.  It is also relevant to the core purpose of the Copyright Act and arguments raised in defense of draconian copyright: whether or if financial incentives stimulate creativity.  Studies by the Federal Reserve and MIT raise the question of whether financial incentives actually decrease creativity.

Anyone trying to get more productivity out of an organization without spending more money ought to take these studies very seriously.

Far Copyleft folks see copyrighted works as mere free raw materials for creating new works.  The far Copyright folks see a copyrighted work as a sacred, inviolable and untouchable iconic thing that may only be accessed when, how, for how long and as often as the copyright owner dictates.

Far Copyright folks see a copyright as a complete monopoly from which windfall profits are to be extracted every time a new technology emerges to make a consumer's old licensed copy of a work obsolete or every time a consumer wants to use or dispose of the copy as he or she sees fit. The first sale doctrine lets us resell a car we've purchased without paying the manufacturer. Restraints on the alienation of property are disfavored in the common law because this blocks free economic activity.

Should we have to pay a German copyright holder because we want to make fun of Hitler using the German copyright holder's ridiculously earnest economic exploitation of the Hitler theme in the film Downfall? Or does the exploiter of a theme have to take crap from people who want to laugh at them or laugh at sometimes serious, sometimes silly themes using them?

The issue I think was wrongly decided in Dr. Seuss v. Penguin Books, a Ninth Circuit case decided in 1997.  Here is how the court handled the issue of parody?
It is the rule in this Circuit that though the satire need not be only of the copied work and may . . . also be a parody of modern society, the copied work must be, at least in part, an object of the parody, otherwise there would be no need to conjure up the original work. . . . By requiring that the copied work be an object of the parody, we merely insist that the audience be aware that underlying the parody there is an original and separate expression, attributable to a different artist.

* * *
We now turn our attention to The Cat NOT in the Hat! itself. The first two pages present a view of Los Angeles, with particular emphasis on the connection with Brentwood, given the depiction of the news camera lights. The story begins as follows:



A happy town Inside L.A. Where rich folks play The day away.
But under the moon The 12th of June. Two victims flail Assault! Assail! Somebody will go to jail!
Who will it be? Oh my! Oh me!


The third page reads: "One Knife? / Two Knife? / Red Knife / Dead Wife." This stanza no doubt mimics the first poem in Dr. Seuss' One Fish Two Fish Red Fish Blue Fish: "One fish / two fish / red fish / blue fish. Black fish / blue fish / old fish / new fish." For the next eighteen pages, Katz writes about Simpson's trip to Chicago, the noise outside Kato Kaelin's room, the bloody glove found by Mark Fuhrman, the Bronco chase, the booking, the hiring of lawyers, the assignment of Judge Ito, the talk show interest, the comment on DNA, and the selection of a jury. On the hiring of lawyers for Simpson, Katz writes:


A plea went out to Rob Shapiro Can you save the fallen hero? And Marcia Clark, hooray, hooray Was called in with a justice play.
A man this famous Never hires Lawyers like Jacoby-Meyers. When you're accused of a killing scheme You need to build a real Dream Team.
Cochran! Cochran! Doodle-doo Johnnie, won't you join the crew? Cochran! Cochran! Deedle-dee The Dream Team needs a victory.
These stanzas and the illustrations simply retell the Simpson tale. Although The Cat NOT in the Hat! does broadly mimic Dr. Seuss' characteristic style, it does not hold his style up to ridicule. The stanzas have "no critical bearing on the substance or style of" The Cat in the Hat. Katz and Wrinn merely use the Cat's stove-pipe hat, the narrator ("Dr. Juice), and the title (The Cat NOT in the Hat! ) "to get attention" or maybe even "to avoid the drudgery in working up something fresh." Acuff-Rose, 114 S. Ct. at 1172. While Simpson is depicted 13 times in the Cat's distinctively scrunched and somewhat shabby red and white stove-pipe hat, the substance and content of The Cat in the Hat is not conjured up by the focus on the Brown-Goldman murders or the O.J. Simpson trial. Because there is no effort to create a transformative work with "new expression, meaning, or message," the infringing work's commercial use further cuts against the fair use defense. 9 Id. at 1171.


So if I want to draw former President George W. Bush as Mickey Mouse and parody him by placing him in a Mickey/Minnie scenario, by this logic Disney can stop me from engaging in this core political speech because I am not making fun of Mickey, only of the former President.

How to permit political speech, promote creativity and maximize economic welfare for both copyright creators and society in general are questions implicated in these debates, with the cultural pendulum slowly swinging towards the Remix culture camp. There are a few signs that legal culture is moving in that direction, with judges taking a more expansive view of fair use.

When the Copyright Society had its convention in New Orleans a few years back, I was struck by the plight of Jazz musicians: they didn't have the right to a compulsory license.   So a bunch of white kids doing an exact cover of a Led Zep tune can force Led Zep to license the song at a cheap rate.  

But Jazz - which remixes, rearranges and is an art form that is derivative - can't get a compulsory license, and the changes and modifications to the original can't be protected without an additional license from the copyright owner - even though a sound recording in a cover song can.

According to the jazz musicians, the licensing practices of copyright owners have put them out of making a living and basically strangled their creativity.  It was a heartbreaking presentation. Jazz and its successors which rely on sampling, borrowing, remixing - all activities emanating from African-American traditions - have been severely penalized, to the point of practical extinction.




The Remix movie- with a white kid p/k/a Girl Talk at its center - shows how new technologies open up new creative possibilities.   And as white kids start looking to play a kind of American jazz with video, it is more likely that the courts will be more reluctant to penalize and criminalize that activity.

The video below is also a great example of using art to make a sound recording come alive through a new layer of creative labor.



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Copyright Act's First Sale Doctrine: Question Presented To The US Supreme Court

Costco Wholesale Corp., v. Omega, S.A., Docket No. 08-1423

Under the Copyright Act's first-sale doctrine, 17 U.S.C. § l09(a), the owner of any particular copy "lawfully made under this title" may resell that good without the authority of the copyright holder. In Quality King Distribs., Inc. v. L'Anza Research Int'l, Inc., 523 U.S. 135, 138 (1998), this Court posed the question presented as "whether the 'first sale' doctrine endorsed in § 109(a) is applicable to imported copies." In the decision below, the Ninth Circuit held that Quality King (which answered that question affirmatively) is limited to its facts, which involved goods manufactured in the United States, sold abroad, and then re-imported.




The question presented here is:

Whether the Ninth Circuit correctly held that the first-sale doctrine does not apply to imported goods manufactured abroad.
 
Source and place to follow case developments ABANet here

Copyright Act and the First Sale Doctrine - SCOTUS to hear Costco-Swatch copyright case | Reuters

I wrote about the Costco-Swatch case here.   It involved a manufacturer of Swiss OMEGA watches authorizing a sale in a foreign country.  The foreign authorized seller sold genuine watches to a person who then imported them into the US and sold them at Costco.

It is significant that the U.S. Supreme Court has taken on this issue of great importance to international trade. From Reuters:

U.S. top court to hear Costco-Swatch copyright case Reuters

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.