The quest for “super-property”

Before yesterday’s ruling in the Kirtsaeng v. John Wiley & Sons Supreme Court case, I had written a post about the oddity that copyright law is the only form of property right that does not include a specific mechanism by which the rights holder can lose their rights if they do not use the property for a long period of time.  In this way copyright violates one of the principal reasons that property rights are granted, to encourage the efficient use of resources.

In thinking about the Kirtsaeng case — the decision is here, there is a Chronicle of Higher Education story about the ruling here, and Kenny Crews of Columbia offers a detailed analysis of the decision here — I have come to realize that the same issue of whether or not copyright should behave like other forms of property was in play in this litigation.  In short, by trying to enforce a “geographical” reading of the doctrine of first sale, publishers were attempting to create a “super” property right that would gave them a level of control that other property owners do not get.

On a trip to Turkey two years ago, I purchased a silver and onyx ring while in Cappadocia, where onyx is mined in large quantity.  My wife and I also purchased a carpet for our dining room.  Both items could have been purchased in the U.S., but both were less expensive in Kaymakli than they would have been had we done our shopping in Raleigh.

I mention this small shopping spree to make two points.  First, the sale of these goods at lower prices in other countries than are available in the U.S. does not, apparently, make it impossible for U.S. merchants to sell at higher prices to shoppers here at home.  Price discrimination, as it is called when vendors adjust their price structure to take account of local market conditions, does not depend, apparently, on an absolute prohibition on importation or cross-border sales.  Second, now that we own the ring and the carpet, we are free to do with them what we like.  No one can tell us where to place the carpet, or to what events I may or may not wear my ring.  And we can resell either item if we wish.

What publishers wanted from the Supreme Court was an unprecedented level of control that no other property owner gets — the right to control the use of a copy that was manufactured in another country (i.e. whether or not it could be lent) and to control any resale of that copy.

Let’s think back for a minute to the Costco v. Omega case from a few years ago that also dealt with unauthorized importation of copyrighted goods.

First, it is interesting that that case involved copyright at all, since the goods in question were watches, which are not copyrightable subject matter.  Omega was able to bring the suit only by registering a small emblem on the back of the watches for U.S copyright protection.  They had to do this, of course, because simply being the owner of a batch of watches would not have given them control over the importation of legally purchased watches to the U.S.  They resorted to this ploy to take advantage of the unique feature of copyright that they believed gave them more control than “mere” property ownership did.  They were trying to exploit the “super” property features of copyright.

Second, even though Omega got a tie from the Supreme Court that left in place a favorable decision for them from the Ninth Circuit, they were ultimately unable to take advantage of that quasi-victory.  On remand, the District Court granted summary judgment to Costco because, it held, Omega was trying to misuse its copyright to prevent perfectly legal importation.  In spite of that ruling (which is under appeal), I am pretty confident that Omega still sells watches for less in South America than it does in North America.  Again, an absolute ban on importation is not a prerequisite to price discrimination; while there is always some “leakage” of “grey market” goods, price discrimination works well enough that all kinds of businesses that sell different types of property depend on it anyway.

So the outraged threats that are being heard from publishers about how U.S. market prices will now have to be charged for copies sold in the developing world are simply ridiculous.  One extremely vocal advocate for the publishing position puts the claim this way, in a comment to the Chronicle story linked above:

The only practical effect of the decision will be to stop the practice of publishers licensing the sale of U.S. works for sale in foreign countries in cheaper editions, thus greatly inhibiting the flow of knowledge to underdeveloped countries.

If academic publishers were really to do this, it would be a crime against their self-declared mission of making knowledge available.  It would also be bad business; a self-defeating fit of pique that would cost them a lot of money.  But no, I am confident that publishers will still sell books at prices adjusted for market conditions, unless they are even worse businesspeople than I think they are.  Perhaps it will be necessary to adjust prices to account for that leakage which the Supreme Court has said cannot be choked off entirely, but I actually suspect that that small loss is already built in to decisions about pricing.

One way to think about what was being considered in the Kirtsaeng case is to look at it as a tariff — an attempt to guarantee extra, post-sale income from goods when they were imported into the United States by forcing purchasers to license certain uses of those goods they had already bought.  The U.S. disfavors tariffs, and where they do exist the money is paid to the government, which is trying to protect specific domestic industries.  If Kirtsaeng had gone the other way, however, there would have been, in effect, a tariff on importing books and films that would have been an entirely private benefit.  From this perspective, as from that of property rights as a general notion, what was being sought by the publishers in Kirtsaeng was unprecedented, as well as unwise.

[By the way, Mike Masnick of TechDirt also uses this analogy with tariffs in one of his comments on the case, and his post is an indication that the publishers are already beginning to pull strings to try and get Congress to give them the extraordinary benefit that the Supreme Court has just denied them.]

One argument that the publishers have made and continue to make is that the “parade of horribles” that was predicted by libraries and many others in the Court would not have actually come about; they frequently say that what they were asking for was actually the state of the law for the past thirty years, and things have run pretty smoothly up till now.  But to make that claim is to beg the question of why the case had to be brought at all.  Libraries did not sue over first sale; neither did Supap Kirtsaeng.  It was publishers who decided that they needed to go to court because, obviously, they wanted to change the conditions that actually have been in place up till now.  Publishers were seeking a “new deal,” a super-property right that is unprecedented in any other market place.  And what libraries “won” (remembering that no library was a party to the case) was simply the right to proceed as we have been for many years.  I have no doubt that if the lower courts had been upheld in this case, publishers would begin to demand “public lending fees” from libraries whenever a book was printed in another country, and would have moved operations offshore to increase the situations in which they could demand such a fee (as the Second Circuit Court of Appeals acknowledged was a likely outcome).  It is an overstatement to call this a victory for libraries; it was merely a successful defense of what we have done for many years, which, it turns out, is something that our courts really value and appreciate.