Supreme Court Expands The "First Sale Doctrine" in Kirtsaeng v. John Wiley & Sons

On Tuesday, the Supreme Court ruled in Kirtsaeng v. John Wiley & Sons, No. 11–697, 2013 WL 1104736 (U.S. Mar. 19, 2013), to limit copyright protection by extending the “First Sale Doctrine” to include copyrighted works lawfully manufactured outside the United States. The doctrine permits owners of individual copies of a copyrighted work to sell that copy without the consent of the copyright holder. By extending the doctrine to include copies manufactured outside the United States, the Court has permitted importation of these copies, which often sell for significantly less in foreign countries than in the United States. Kirtsaeng involves copies of textbooks published and sold in Asia by publisher John Wiley & Sons, then resold in the United States by Supap Kirtsaeng, a Thai national studying mathematics in the United States. Wiley sued for infringement, and won in both the Southern District of New York and in the Second Circuit Court of Appeals, both of which found Kirtsaeng’s assertion of the First Sale Doctrine to be prohibited because it did not apply to goods manufactured overseas.  In addition to reversing the decisions of the courts below, the Supreme Court’s ruling in Kirtsaeng overturns similar decisions in the Ninth Circuit and the Eastern District of Pennsylvania.

This decision further expands upon Quality King Distributors v. L’anza Research Int’l, 118 S.Ct. 1125 (1998), in which the Court held that copies manufactured in the United States, sold legally overseas and then resold in the United States, were subject to the First Sale Doctrine. The Kirtsaeng Court takes this concept one step further, applying the doctrine to copies manufactured overseas. The Court’s rulings in both Quality King and Kirtsaeng would seem to contravene the plain language of 17 U.S.C.A. § 602(a)(1), which expressly prohibits importing copies of copyrighted works acquired overseas without the copyright holder’s permission. However Justice Breyer, writing for the majority in Kirtsaeng, relied on the Quality King decision in finding that § 602(a)(1) incorporated the limitations that apply to the copyright holder’s exclusive distribution right, including the First Sale Doctrine.

Though the facts of Kirtsaeng apply directly to publishing, its effects are sure to be felt throughout the universe of copyright-protected works. For example, geographic price discrimination is common in the DVD market, where studios have relied on §602(a)(1) (as well as the relatively meager technological protection of regional codes) to prevent copies sold at low prices in developing nations from driving down prices in the United States market. The Court’s ruling in Kirtsaeng leaves studios with a potential dilemma: continue to sell DVDs at low prices in developing nations to avoid forsaking important markets, or raise prices to maintain margins in developed nations. Music labels face a similar predicament with CDs sold overseas. Only time will tell how markets for copyrighted consumer goods will ultimately react to Kirtsaeng.