Supreme Court Weighing ‘First Sale’ Copyright Doctrine

Photo: Courtesy of Supreme Court

The Supreme Court on Monday will hold oral arguments concerning the global reach of U.S. copyright law, in a case testing whether buyers of foreign copyrighted works may resell them in the United States without the copyright holder’s permission.

The case tests the so-called “first sale” doctrine, which generally allows the purchaser of copyrighted works to re-sell or use the work without the copyright holder’s permission. That’s why used bookstores, libraries, GameStop, video rental stores and even eBay are all legal. But how the doctrine applies to foreign-purchased works — the so-called gray market — has been a matter of considerable debate. And the lower courts are conflicted.

The case the justices will hear Monday concerns textbook maker John Wiley & Sons and California entrepreneur Supap Kirtsaeng, who was reselling on eBay textbooks that were purchased at lower prices overseas — and he found eager buyers in U.S.-based students. The publisher sued, and a New York federal jury agreed with John Wiley & Sons’ position that the first-sale doctrine did not apply, and awarded $600,000 in damages for copyright infringement, a decision affirmed by the 2nd U.S. Circuit Court of Appeals.

And just as the lower courts are conflicted on the issue, so are the Supreme Court’s justices.

The Supreme Court in 2010 said the first-sale doctrine did not apply to overseas purchases of copyrighted works that were imported for resale in the United States. The 4-4 ruling meant Costco was liable for copyright infringement for selling foreign-made watches without the manufacturer’s authorization. However, because there was no majority decision, the ruling did not set a nationwide precedent and solely affirmed a lower court’s ruling.

Justice Elena Kagan recused herself from the Costco case, as she had worked on it when she was solicitor general. She had urged the justices to side with Omega, the watchmaker. The government’s position was, and still is that the U.S. Copyright Act’s first-sale doctrine does not apply to goods produced and copyrighted overseas and imported to the United States — period.  Costco had told the Supreme Court that the decision effectively urges U.S.-based manufacturers to flee the United States (.pdf) to acquire complete control over distribution of their goods in the American market, arguments now being made in the latest case.

To mark Monday’s hearing before the high court, activist group Demand Progress has set up a website,, which has assisted more than 100,000 people in e-mailing their lawmakers in support of the first-sale doctrine. The site has embeddable ribbons and ball-and-chain icons saying “owned” or “you’ve been owned,” and is urging web admins to display it on their sites to protest.

“This vastly under-reported case has tremendous implications for millions of Americans and could undermine our ability to use sites like eBay and Craigslist — or even hold old-fashioned garage sales,” said David Segal, Demand Progress’ executive director.

In many ways, this is a battle over non-digital goods. Most digital goods, like software, e-books and MP3s — because of licensing or sandboxing — cannot be resold. However, a U.S. startup, ReDigi, is testing that theory when it comes to online music.

Stefan Mentzer, a partner of the law firm White & Case, says the outcome could have also wide-ranging ramifications even for the art world.

“The 2nd Circuit’s decision could have serious unintended consequences for the art museum community and the viewing public,” said Mentzer. “If the decision below is upheld, merely hanging a foreign-made painting on the walls of a museum, buying and importing a sculpture that was created outside the country, or loaning either to another institution for exhibition to the public, could give rise to claims of copyright infringement.”

The justices usually rule weeks or months after oral arguments.