It has started already

By now I hope most readers are familiar with the case of John Wiley v. Supap Kirtsaeng, which was argued before the Supreme Court last October.  The case involves the doctrine of First Sale in the United States, which underlies library lending and also allows consumers to buy and sell used books, DVDs, etc.  The Supreme Court is being asked to reconcile conflicting opinions from the lower Courts of Appeal about what kinds of copyrighted materials are subject to first sale — that is, can be lent or resold without the permission of the rights holder.  Specifically, publisher Wiley has asked to Court to uphold the Second Circuit, which ruled that first sale only applied to copyrighted materials that were manufactured in the United States.

If you need more background on first sale and the Kirtsaeng case, check out this page of fast facts from the Library Copyright Alliance.  I have also written about the case before, arguing that in the new environment created when the U.S joined international copyright treaties, interpreting first sale in light of outdated rules about where something is manufactured does not make sense.  But right now I want to focus on a specific argument made by the publishers before the Court, in light of two experiences I have had in the past 24 hours.

The Library Copyright Alliance filed an excellent brief with the Supreme Court in this case, arguing that a ruling limiting first sale to works manufactured in the U.S. could have devastating effects on libraries.  The Court seems to have spent a lot of time discussing this “parade of horribles,” and I hope that whatever decision is finally made by the Court, allowances are made to protect libraries.  But the response from the publishers in regard to these putative threats was to simply assert that they would not happen.  The law, they argued, already allows enough room for libraries to go about their business, and we publishers have no interest in disturbing the practices that have been in place for years.

These are comforting reassurances, suggesting that publishers, like most of the rest of the American population, likes libraries and wants to see them flourish.  But can we really rest assured?

Yesterday one of our librarians came to me about a film we had bought.  In response to a faculty request, we purchased a DVD of this film through an ordinary commercial channel.  Going directly to a retail outlet in this case was the fastest way to fulfill the request, as librarians will surely understand.  But somehow the film’s producer found out that our library owned a copy of this film, and they have been asserting to us that we need to buy an additional license, at three times the retail price we paid for the DVD, in order to lend the film.  The argument is incorrect, of course.  The copyright law allows us to lend any lawfully made copy that we acquire, without permission or a lending license.  This is not the case in every country; some nations grant to the copyright holder a “public lending right” that forces libraries to pay extra fees.  But no such right exists in the U.S., and first sale allows us to lend the DVD we bought.  Also, there is no indication that the DVD was manufactured abroad, so even an adverse decision in Kirtsaeng would not change our situation.

Then this morning I had a conversation with a lawyer at another institution about an analogous situation.  A donor to their library had given them some books, amongst which was a copy of a specialized textbook that is currently in use at the school.  Subsequently, the library has been contacted by the publisher of the textbook who has told them that they are not permitted to place the copy of the book that they were given in their library.  The reason given for this prohibition is apparently because they do not want copies of the book lent, and because students might make photocopies rather than each buying their own copy.  The publisher further told the school that they would never sell a copy of the textbook to a library.

Publishers are free to discriminate on prices of course, and even to refuse to sell to libraries.  But to do so they have to lock down channels of acquisition.  We bought our film from a retail website because, as I said, it was the quickest way to fill a faculty request.  Obviously the site made no attempt to determine what “kind” of customer we were, and the producer had clearly decided to use this retail outlet.  The text book at the school I spoke with was a donation.  The answer to the rights holder trying to restrict lending in both cases is the same — tough luck.  First sale covers these situations and allows libraries (and everyone else) to lend lawfully made materials without permission.

In light of Kirtsaeng it is important to note that in neither case is there any indication that the works in question were manufactured abroad.  But if the Supreme Court does decide that only materials manufactured in the U.S. are “lawfully made” for purposes of first sale, I think two things are obvious, based on these two experiences and many others like them.

First, publishers are anxious for an excuse to charge libraries a differential price to obtain books that will be lent.  They already do this with journals, so the claim that they do not want to do it for books is simply incredible.  And even before a final decision in Kirtsaeng, some publishers are already trying to bully libraries into paying more.  As long as retail channels are available to us and first sale protects lending, those efforts will fail.  But if publishers cannot lock down and segregate their distribution channels, they may be able to undermine first sale.

That brings me to the second obvious thing.  If the Supreme Court does hold that first sale applies only to copyrighted works made in the U.S., publishers will have a strong incentive to move their manufacturing operations off-shore.  In making its ruling in Kirtsaeng the Second Circuit admitted as much.  If a publisher has its books printed or its DVDs pressed in the U.S., it will be very difficult for it to implement truly tiered pricing.  But if it moves those operations overseas, it might be able to stop libraries from lending materials without a separate, expensive license.  It might also be able to forbid libraries from lending certain books entirely, like textbooks.  It might even be able to stop students from selling their textbooks second-hand to the next crop of students taking the course.  The experiences libraries have had with e-books proves that these goals are important to publishers.  So do the two experiences outlined above.

In spite of assurances made to convince the Supreme Court to rule in its favor, this “parade of horribles” is really quite likely if first sale is restricted.  Indeed, I am very sure these things will be attempted in that event.  Such efforts have started already.