Supreme Court Rules Copyrighted Goods Can be Resold in U.S.-eBay and Others Rejoice

By Peter Bernstein March 20, 2013

The U.S. Supreme Court on March 19 handed down a decision that while it did not get the attention of the major media, was nonetheless a very important ruling. In a six-three decision, the Supreme Court justices over-turned the rulings of the appeals courts that said that copyrighted goods made abroad could not lawfully be resold in the United States without obtaining permission from the copyright holder first.  

In rejecting the previous findings in John Wiley & Sons v. Supap Kirtsaen— a copyright infringement suit that publisher John Wiley & Sons brought against a Thai college student studying in the United States—writing for the majority Justice Stephen Breyer wrote that, "We hold that the 'first sale' doctrine applies to copies of a copyrighted work lawfully made abroad.” 

In short, if you made a lawful copy of something overseas, you were the owner and had a right to sell it in the U.S. without first getting permission from the intellectual property creator to resell it. And, while this case drew the attention of popular auction sites and libraries and was focused on written materials, by extension it had far-reaching impacts for third-party resellers of things like high tech equipment manufacturers who would very likely not be given permission by OEMs to resell equipment they purchased abroad in the U.S., thereby stifling if not entirely destroying the third-party market. Like I said, this is big.

Background on John Wiley & Sons v. Supap Kirtsaen

The Wiley suit against Supap Kirtsaeng was about what the company claimed was copyright infringement they felt occurred when Kirtsaeng started re-selling U.S. copyrighted textbooks made abroad on eBay including those of Wiley for less than the original cost. He had friends and family buy the cheaper English-language copies of textbooks in Thailand and then re-sell them on eBay.

This suit was seen as an attempt to re-write the “First Sale Doctrine” (FSD) which under U.S. copyright law permits the owner of lawfully purchased copyrighted work to resell it without limitation imposed by the copyright holder.  FSD has its origins in a 1908 Supreme Court decision later incorporated in the “Copyright Act of 1909.”

However, as tends to be true in so many instances and why these things end up in court in the first place, there are vagaries in interpretation of the Copyright Act. Wiley argued, and the appellate courts agreed, that FSD can be super ceded in certain instances. Specifically cited was Section 602 of the Copyright Act which states that goods manufactured outside the U.S. and imported into the U.S. can only be imported with the consent of the copyright holder. This is at odds with the FSD in Section 109, which grants the first buyer unlimited rights to resell.

The case had focused on the interpretation of the phrase "lawfully made" found in copyright law. Wiley argued the phrase is defined as "lawfully made under the copyright laws of the United States," therefore Kirstaeng had infringed by not asking permission to resell. Justice Breyer wrote that Kirstaeng's "non-geographical interpretations of the words 'lawfully made under this title' are more persuasive."

A victory for third-party resellers that highlights need for reform

Why this is so important to tech companies is that if the reasoning in Wiley had prevailed, by extension the sale of any goods originally sold overseas that are imported back into the U.S. could, as mentioned above, have been restricted by the copyright holder. It is why original equipment manufacturers (OEMs) have watched this case closely. If the appeals court ruling had been upheld they could have basically been given a license to stifle or destroy the reseller market.  

Needless-to-say¸ copyright reform advocates and Web companies that run online marketplaces, such as eBay and Google, were ecstatic and third-party tech resellers breathed a huge sigh of relief.  

I would be remiss in not noting the dissent by Justice Ruth Bader Ginsburg, along with Anthony Kennedy and Antonin Scalia, who wrote: "The court today adopts an interpretation of the Copyright Act at odds with Congress' aim to protect copyright owners against the unauthorized importation of low-priced, foreign-made copies of their copyrighted workers...The court's bold departure from Congress' design is all the more stunning, for it places the movement for 'international exhaustion' of copyrights — a movement the United States has steadfastly resisted on a world stage."It should also be noted that all parties impacted by the ruling pointed to the decision as highlighting the need for broader copyright reform. As widely reported, Andrew Shore, executive director of the Owners' Rights Initiative (ORI), which has  eBay, Overstock.com, Etsy and the American Library Association as members, said in a statement that,  "This decision is a landmark win for consumers, small businesses, online marketplaces, retailers and libraries nationwide."  He added, “While we are energized by this decision, we expect that some will continue attempts to eliminate owners’ rights, reduce competition in the marketplace and restrict the global trade of authentic goods...ORI will continue to be vigilant and diligent in protecting owners’ rights now and in the future and we expect policymakers to do the same.”Also getting circulation was a statement by Sherwin Siy, vice president of legal affairs at advocacy group Public Knowledge, who said: "We were almost in a situation where anyone that held a garage sale or loaned a book to a friend could be in violation of copyright law...We believe that this is evidence that a larger conversation about copyright reform is in order, to restore the balance of the law between the interests of authors, copyright holders and the public."

The good news here is that it is now safe for you put all of that stuff you no longer want that may have been bought from overseas up on eBay. It also appears, based on third-party resellers interpretation of the decision, that they need not fear not being able to resell “lightly used” equipment purchased abroad without having to get permission from OEMs is legal.

What is not clear is whether this decision will serve as further impetus for more reform of the copyright and patent laws. “Restoring balance,” as this case highlights is important, and there is a crying need for clarification since the current system is clearly broken and is in desperate need of fixing.




Edited by Brooke Neuman
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