The first sale doctrine provides that once sold, a copy of a copyrighted work can be resold without the authorization of the copyright owner. Consumers can legally buy books, for example, without fear of copyright infringement. The doctrine applies only when the copyrighted work was “lawfully made under [the Copyright Act].”
The question arose, in order for the doctrine to apply, does the copyrighted work have to have been manufactured in the U.S.? In KIRTSAENG, DBA BLUECHRISTINE99 v. JOHN WILEY & SONS, INC., the U.S. Supreme Court decided yesterday that the first sale doctrine applies no matter where the copyrighted works are manufactured. (Read the case headnote.)
Kirtsaeng, a Thai native, moved to the United States to pursue advanced education. Because textbooks were produced and priced cheaper in Thailand, he had his friends and family buy texts there, ship them to the U.S. for sale on EBay. As reported in this blog in 2011, Wiley sued him for copyright infringement, and won a judgment that was later upheld by the Second Circuit. Kirtsaeng’s defense was that his action fell under the First Sale doctrine, so that is the issue before the U.S. Supreme Court.
The USSC ruled that the first sale doctrine applies to authorized copies of U.S. works manufactured overseas. Under the 6-3 ruling, books by U.S. authors printed overseas for sale in foreign territories — and, by extension, music, videos, video games, and other physical media — can be purchased in those territories and legally resold in the U.S. without the copyright owner’s permission. The immediate effect of the ruling is to open a legal loophole in the Copyright Act’s prohibition on parallel imports. But the implications of the act for rights owners across the media spectrum are potentially much larger. The ability of resellers to purchase copies in foreign territories for sale in the U.S. will make it much riskier for rights owners to charge different prices in different territories based on local market conditions. Without that ability, the long-standing practice of licensing rights on a territory-by-territory basis is now at risk.
What did the decision do to IP value? Dennis Crouch, in his analysis on PatentlyO, discussed that:
The court did recognize that the decision weakens the value of the given intellectual property right. In that regard, the court basically said "tough luck" – writing that "the Constitution's language nowhere suggests that its limited exclusive right should include a right to divide markets or a concomitant right to charge different purchasers different prices for the same book, say to increase or to maximize gain."
The Licensing Letter and BVR are putting together a team to deep-dive into the far-reaching effects of this ruling on rights holders and analysts alike. For example, there are two patent cases awaiting the court that could be directly affected by this ruling. The BVR Webinar is tentatively set for Friday, March 29. Monitor this website for firm scheduling information.