With the Orphan Works conference taking place last week, there is an awful lot to blog about. I will address the conference in the next couple of postings (unless there is a GSU decision), but for now I want to look at another round in the John Wiley v. Kirtsaeng case.
Lest we have forgotten, Kirtsaeng was the latest in a series of cases asking to what degree the doctrine of first sale, which says that the purchaser of a lawful copy of a work may further distribute that copy as she pleases, applies to copies of works that were manufactured and sold abroad. In 2010 the Supreme Court looked at this issue in Costco V. Omega. In that case, Justice Kagan recused herself because she had worked on the case as Solicitor General for the Obama administration, urging a ruling in support of Omega watches over Costco, which was importing watches purchased cheaply overseas and underselling the MSRP in the US. The Ninth Circuit agreed with SG Kagan and ruled against Costco, holding that the US doctrine of first sale did not apply when an item was made and purchased overseas. The Supreme Court, without now-Justice Kagan, split 4-4, a vote which left the Ninth Circuit’s ruling in place but did not make it binding precedent for the rest of the country.
Then, in 2011, the Second Circuit upheld a lower court in ruling that Mr. Kirtsaeng was an infringer for reselling copyrighted textbooks that his family members bought in Thailand and sent to him in the US, where he could get a higher price for them than had been paid. The Second Circuit handed down a sweeping ruling, which I criticized here, in which the two-judge majority went further than Costco and maintained that first sale would not apply even if the work that had been manufactured abroad was sold in the US with the authorization of the rights holder. As I said in my earlier post, this created a situation where the copyright holder could knowingly and deliberately take advantage of all the protections of US law without being subject to one of its most important limitations.
Now the Supreme Court has agreed to review the case, and many people hope that they will correct the overly broad ruling made in the Second Circuit.
One of the things that often leads the Supreme Court to agree to hear a case is a split amongst the Circuit Courts of Appeal on a particular point of law. Here such a split is very clear. The Second Circuit holds that a foreign-made work can never be resold in the US by any purchaser without the consent of the rights holder. The Ninth Circuit, in the Costco case, says that such a work may be resold in the US, but only after an authorized “first sale” in the US. And the Third Circuit believes that a US resale is alright anytime the original sale was authorized by the rights holder, even if that sale occurred outside the US (so that both the resales in Costco and Kirtsaeng would be legit). Given Justice Kagan’s position in the Costco case, I would guess, if I had to guess, that the Court would opt for the Ninth Circuit rule, which mitigates the absurd results from Kirtsaeng but still narrows first sale considerably over what the Third Circuit would allow.
I hope that as the Justices consider this case they will recall that, by adhering to the Berne Convention and the WTO’s TRIPS agreement, nearly all countries now extend “national treatment” to the citizens of every other signatory nation. This means, I believe, that we should read the requirement of “lawfully made” quite broadly. As long as a work is not pirated — that is, it is made and/or initially sold with authorization of the rights holder — we should recognize that it is entitled to full protection under US law and therefore ought to be subject to all of the limitations of that law. If rights holders want to practice price discrimination in different countries, they should rely on the cost of exporting to enforce those differentials and accept a certain percentage of “gray market” goods. But that is not what I expect to happen.
If my expectations rather than my hopes are fulfilled, it will be difficult for libraries to be secure in lending any of the works they purchase abroad, especially film. And vendors who sell to libraries might have to bear the extra expense of selling through a US outlet, if libraries become fearful of buying abroad. It is an issue that the library community, which depends for its most fundamental activities on first sale, needs to continue to watch closely.