Archive for the ‘First Sale Doctrine’ Category

Kirtsaeng Wins Before the Supreme Court!

Thursday, March 28th, 2013

copyright If you’re a regular reader of our newsletter, you may recall in 2011 our writing about Supap Kirtsaeng’s legal problems when he was sued by John Wiley & Sons, Inc. (“Wiley”) for selling text books on e-bay.¬† Kirtsaeng, a Thai national, opened a used textbook business in 2009 to support his educational studies in the United States.¬† He enlisted his friends and family in Asia to buy textbooks and ship them to him in the United States for resale on e-Bay.¬† Kirtsaeng was later sued by Wiley – the copyright owner – in federal court for copyright infringement.¬† Wiley based its lawsuit on Section 109(a) of the Copyright Act, which prohibits the importation of copyrighted works created outside of the United States without the authorization of the copyright holder. The language of Section 109(a) is important.¬† It provides that:

the owner of a particular copy … 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 . . . .

The first sale doctrine permits owners of copyrighted works, even if they are not the creators, to resell copyrighted works without fear of lawsuit by the creators.¬† Copyright owners, such as Wiley, argue that the “lawfully made” language, quoted above, only applies to works that are manufactured in the United States.¬† Assuming that is correct, then the first sale doctrine would not apply to works manufactured outside of the country.¬† Therefore, Kirtsaeng’s importing and reselling of foreign purchased textbooks would not be exempted by the first sale doctrine.

At trial, the federal district court prohibited Kirtsaeng from raising the first sale doctrine as a defense to copyright infringement and as a result, the jury found in favor of Wiley and awarded it damages for intentional copyright infringement.¬† Since our newsletter was published, the Court of Appeals for the Second Circuit affirmed the lower court, concluding that ¬ß109(a)’s “lawfully made under this title” language indicated that the “first sale” doctrine does not apply to copies of American copyrighted works manufactured abroad.

Kirtsaeng did not take “no” for an answer and appealed the Circuit Court’s decision to the United States Supreme Court, which issued its opinion on March 19, 2013.¬† The Court reversed, holding that the¬† first sale doctrine applied to any work whether it is published in the United States or abroad. The¬† Court’s opinion was based largely on statutory interpretation.¬† Here are the highlights:

  • Section 109(a) says nothing about geography, the lower courts’ reading “bristles with linguistic difficulties”;
  • Historical and statutory context indicate that Congress did not have geography in mind when it drafted the current statute;
  • The common law “first sale” doctrine did not embrace a geographical component and, therefore, one must assume that the statutory version retained the common law given no evidence to the contrary;
  • imposing a geographical component to Section 109 would not further the constitution directive of “promot[ing] the Progress of Science and the Arts;”

Justice Breyer delivered the opinion of the Court.  If you would like to read the entire opinion, click here.

— Adam G. Garson, Esq.

First Sale Doctrine Goes Digital — or Does It?

Sunday, October 28th, 2012

copyrightHere’s another example of the “if value, then right” approach.¬† You may recall that the first sale doctrine permits an owner of a copyrighted work to sell, transfer, loan, or even dispose of the work without infringing the creator’s distribution rights.¬† So, for example, if you were to purchase a music CD or a book, you have the right to resell or transfer it without infringing on the artist’s copyright in the work itself.¬† It is important to remember that the first sale doctrine is solely an exception to the right of distribution.¬† It does not place any limitations on the right to copy a work.¬† One who acquires a work, even by resale, does not have the right to copy it.Technological changes are stressing long held assumptions about the first sale doctrine.¬† A recent case filed in federal court in New York City by Capitol Records (“Capitol”) against ReDigi Inc. (“ReDigi”) is testing the limits of the doctrine.¬† The case has profound economic ramifications not only for the resale of digital works but also for cloud computing.

ReDigi is an online music reseller, which provides a market place for owners of digital media to resell their mp3’s and other digital files.¬† Capitol sued ReDigi for copyright infringement demanding injunctive relief and statutory damages.¬† ReDigi, of course, claims that it is not infringing copyright but is simply reselling works as permitted by the first sale doctrine.¬† To sell a work on ReDigi’s web site requires a user to upload music files to the ReDigi server.¬† ReDigi claims that its software verifies the legitimacy of the uploaded file and when sold to a buyer, it transfers the file without copying.¬† Capitol, on the other hand, asserts that digital files are not like physical objects.¬† Moving digital files requires the act of copying and there is simply no way to verify that the owner of the work has deleted the original purchased files. The court has yet to decide the case although it denied — without opinion — Capitol’s¬† motion for preliminary injunction.

The ReDigi case has implications that go beyond the viability of the first sale doctrine.¬† Cloud computing companies such as Google and Amazon have a huge stake in the court’s decision.¬† Google and Amazon store millions of files belonging to others on their servers.¬† The right to hold those files and to transfer them depend upon an untested assumption that transferring digital files by service providers represents an exception to principles of copyright law that prohibit unauthorized copying.

The European High Court has already made a ruling on a similar issue involving used software licenses.¬† It has held that software vendors such as Oracle have no right to block resale of “used” software licenses by companies such as UsedSoft.¬† The U.S. version of this case will be an interesting one to watch.

— Adam G. Garson, Esq.