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 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

International Copyright and the First Sale Doctrine: Costco Can't Import Genuine Watches From Switzerland

According to the Omega watch company's website,

"When Daniel Craig reprises his role as James Bond in Quantum of Solace, he will be wearing an OMEGA Seamaster Planet Ocean 600m Co-Axial Chronometer with a black dial [ ...]. Bond fans and OMEGA enthusiasts will know that 007 has been wearing Seamasters featuring blue dials since 1995 so the black watch face on the Seamaster Planet Ocean in Quantum of Solace marks a departure for James Bond. "

The first sale doctrine is codified at 17 U.S.C. Section 109 (a) says that if you own a copy of a copyrighted work "lawfully made under this title", you can sell or "otherwise dispose of" it. Section 109(b) says that even if you own copies of phonorecords or software, you can't rent them.

The language seemed pretty clear. So when Costco bought genuine Swiss Omega watches through someone who purchased them from an authorized dealer in Switzerland, Omega thought it perfectly legal to sell them in the U.S. The U.S. district court judge agreed, awarding Costco hefty legal fees when Omega claimed that such importation of authentic, genuine, non-piratical watches that it owned.

Copyright owners often set up territories throughout the world and appoint distributors for various territories. When a purchaser from a high-cost territory buys the copyrighted work in a low-cost territory, this is known as "gray market" goods. Retailers save money by buying from the lower-cost territory.

In Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008), the Ninth Circuit reversed the district court and found that Omega could use Section 106(3) and 602(a) of the Copyright Act to claim copyright infringement for unauthorized distribution.

For the first sale doctrine to apply, there must be an authorized first sale in the United States. For a copy to be "lawfully made under this title [17 U.S.C.]" - it means made in the U.S.

The result is that even if you buy genuine copyrighted works from a foreign representative of a copyright owner, you infringe copyright if you import and sell them in the U.S. without the copyright owner's permission.

Will James Bond get busted for pawning his Swiss-purchased Omega in the U.S.?