Textbook Copyright Case Questions the Nature of Ownership

By Ryan Conley, staff writer – December 6, 2012

The US Supreme Court is expected to rule early next year on a pivotal intellectual property case between a textbook publisher and a college student who profited from reselling textbooks purchased cheaply abroad. The case could fundamentally change what it means to purchase a copyrighted work.

Supap Kirtsaeng came to the US from his native Thailand in 1997 to attend Cornell University and the University of Southern California, earning a PhD in mathematics. During that time, in 2007 and 2008, he bought textbooks from Thailand and resold them in the United States on eBay, grossing some $1.2 million.

John Wiley and Sons sued Kirtsaeng for copyright infringement, arguing that he infringed on the company’s exclusive right of distribution to the works.

Kirtsaeng’s defense hinges on the “first sale” doctrine, an important limitation on copyright that allows owners of individual copies of protected works to sell, rent, give away, or lend them as they desire. It affords copyrighted works a secondary market in places like thrift stores, online auction sites, libraries, and even garage sales. Companies like eBay and Goodwill are concerned about what a loss for Kirtsaeng might mean for their business models.

The case represents the copyright holders’ toughest test to date of the first sale doctrine, a check on their exclusive right of distribution that becomes more a thorn in their sides as the world becomes more connected. Copyright holders have argued that charging different prices in different countries is crucial to their bottom line, and the first sale doctrine and globalization threaten to undermine their ability to do so. Powerful interests in publishing, movies, music, and software are looking for a Wiley victory. Amicus briefs filed on both sides total nearly 30 in number. [1]

Speaking with reporters, lawyers for resellers said a win for Wiley would represent a sea change not just in U.S. copyright law, but in the concept of ownership.

“This case is an attempt by some brands and manufacturers to manipulate copyright law, to control the distribution and pricing of legitimate, authentic goods,” said eBay counsel Hillary Brill. “When an American purchases an authentic item, he shouldn’t have to ask permission from the manufacturer to do with it what he wants.” [2]

“When we purchase something, we assume it’s ours,” said Mark Griffin, general counsel at Overstock.com. “What is proposed is that we change the fundamental notion of ownership rights.” [3]

If Wiley prevails, the ruling could have far-reaching effects. It could discourage the domestic manufacture of copyrighted products if foreign production were seen to allow the circumvention of the first sale doctrine. [4] It could even prevent the resale of consumer electronics because most of them are foreign-made and contain copyrighted software. [5]

The world of copyright law has been heading to this case since the rise of the global Internet marketplace, led by companies like Amazon and eBay. At the same time that comparison-shopping across oceans became faster even than driving across town, consumers became empowered as global middle-men, reselling products to anyone with Internet access.

The college textbook industry was one of the first to see its international price differential eroded at the hands of consumer-resellers. Students have long complained about textbook prices, and are particularly Internet-aware.

Foreign students, in particular, were among the first to recognize the profits to be had by importing works from abroad. They realized that in their home countries, textbooks could be had much cheaper than in American schools and stores. These books may differ in their cover text and construction quality, but are often identical in content.

By the early 2000s, the importation of foreign-made textbooks was far too big for the publishers’ liking. But their hands appeared to be tied by the first-sale doctrine, which had already been tested and affirmed in the 1998 Supreme Court case Quality King v. L’Anza, which involved the importation of hair products with copyrighted labels. In that case, the Court ruled unanimously that the first-sale doctrine protected the re-importation of copyrighted goods produced in the U.S. and then exported. [6]

Importantly, however, Quality King left open the question of whether such protections applied to foreign-made products that were imported to the U.S. At issue is whether such products are covered by the copyright laws of the U.S. or those of the country in which they are created.

This question received a Supreme Court preview in the 2010 case of Omega v. Costco. U.S. retailer Costco was importing Omega’s Seamaster wristwatches and undercutting Omega’s suggested retail price by several hundred dollars. [7]

In order to obtain a copyright on the watches, Omega began imprinting a tiny stylized globe logo on the back of the watches.

Justice Elena Kagan, having previously argued the case on behalf of Omega as Solicitor General, took no part in the proceedings. The remaining justices split 4-4, and no opinion was published. [8]

The Supreme Court’s 4-4 split left intact the Ninth Circuit’s decision against Costco, but upon remanding, the court granted summary judgment to Costco, saying that Omega’s practice constituted copyright misuse. [9]

Despite Costco’s eventual victory, Kirtsaeng’s supporters cannot be encouraged by Omega. Four justices in the case sided with the copyright holder even though the copyright itself barely held water; the ‘swing vote’ is Justice Kagan, who supported Omega as Solicitor General.

Lower court rulings so far in related cases likewise lend little hope to a Kirtsaeng victory. In addition to Kirtsaeng’s earlier losses, in which he was found guilty of copyright infringement and liable for $600,000 in damages, a ruling upheld 2-1 in appeals court, at least three other student-resellers have already lost to publishers in New York federal courts. [10]

The Kirtsaeng case threatens to upend the world of intellectual property, global price differentials, and online marketplaces. But no matter which way the Supreme Court ruling goes, the fight may ultimately end up in the halls of Congress.

“I think the likelihood of a crystal clear decision by the court is not high, and we want to be prepared for that,” Overstock.com’s Mark Griffin. “And if they decide for Kirtsaeng, I wouldn’t expect [the other side] to sit back and do nothing.” [11]

Sources:

1. http://arstechnica.com/tech-policy/2012/10/a-supreme-court-clash-could-change-what-ownership-means/
2. http://www.ft.com/cms/s/0/9e2421a6-211b-11e2-babb-00144feabdc0.html#axzz2EFTLEFZ9
3. http://www.law.com/corporatecounsel/PubArticleCC.jsp?id=1202577265944&Supreme_Court_Copyright_Case_Could_Change_Nature_of_Ownership
4. http://en.wikipedia.org/wiki/First-sale_doctrine
5. http://arstechnica.com/tech-policy/2012/10/a-supreme-court-clash-could-change-what-ownership-means/
6. http://en.wikipedia.org/wiki/First-sale_doctrine
7. http://arstechnica.com/tech-policy/2012/10/a-supreme-court-clash-could-change-what-ownership-means/
8. http://arstechnica.com/tech-policy/2012/10/a-supreme-court-clash-could-change-what-ownership-means/
9. http://en.wikipedia.org/wiki/Omega_S.A._v._Costco_Wholesale_Corp.
10. http://arstechnica.com/tech-policy/2012/10/a-supreme-court-clash-could-change-what-ownership-means/
11. http://arstechnica.com/tech-policy/2012/10/a-supreme-court-clash-could-change-what-ownership-means/