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.

Landmark Gene Patenting Case Heading Back to the Supreme Court

The protracted battle over the patenting of the BRCA breast cancer mutations witnessed another volley in late November the Supreme Court granted certiorari (in part) to take up the case against Myriad Genetics, the Utah-based biotechnology firm who holds the patent. The case stands to have a major impact on the emerging field of personalized medicine, where physicians armed with complete genetic data on patients can tailor treatment plans to match an individual’s specific physiology. The patent system has long upheld the idea that “laws of nature” cannot be patented, however our growing technical and scientific abilities have increasingly blurred the critical distinction between patentable innovation and unpatentable discovery. Laying Claim to a Genetic Variant

At its heart, this case hinges on the patent claims of Myriad Genetics, which include a claim to the BRCA1 and BRCA2 mutations, two genetic variants which are known to significantly increase a woman’s probability of developing breast and ovarian cancer. The application of this patent by Myriad Genetics has created a monopoly on screening for this variant, with the patent-holder’s lab being the only one in the nation performing all commercial tests for the BRCA mutations. Though this claim has been challenged, the US Court of Appeals for the Federal Circuit affirmed the validity of the patent in July of 2011, holding that the complimentary DNA developed to interact with this variation was an invention, and sufficiently distinct from the underlying natural processes to be patentable. Ass'n for Molecular Pathology v. U.S. Patent & Trademark Office, 653 F.3d 1329 (Fed. Cir. 2011). Following the denial of two requests for a rehearing the case seemed settled until  the  of 2012.

A Ray of Hope for Opponents of Gene Patenting

The Supreme Court’s recent decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc. appeared to be the signal that detractors of gene patenting were looking for. That case, decided in March of 2012, struck down a patent on a technique for calibrating dosage of an autoimmune medication, holding that the patent did not diverge sufficiently from the underlying law of nature, and as such was not patentable. On it’s face, this case bears a striking similarity to the case against Myriad Genetics. In both instances, observations of underlying facts of biology serve as the lynch pin for the claimed patient.

With this in mind, the ACLU, who is trying the case on behalf of a host of plaintiffs, filed a petition of certiorari, asking the court to take up the Myriad Genetics case in light of their findings in Mayo Collaborative Services. The court apparently agreed, as they vacated the Federal Circuit Court of Appeals decision and asked that court to revisit the case in light of the Mayo decision. Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 132 S. Ct. 1794, 182 L. Ed. 2d 613 (2012).  Given the court’s decision to remand the case, it seemed certain that Myriad’s patent would be invalidated. Nevertheless, the Court of Appeals essentially reaffirmed their previous decision, claiming the case was distinguishable from the Mayo Collaborative case, while both tests involved the observation of natural reactions, the Myriad technique uses man-made cells in the testing process, rather than observing purely natural metabolism. This ruling fundamentally upholds the right to patent genes, and reinforces the exclusive right of Myriad to test for the BRCA variation.

Following the Federal Circuit Court of Appeals Court’s ruling, the ACLU again petitioned the Supreme Court for certiorari. Representatives of the ACLU stated that they believe the appellate court failed to “fully consider or correctly apply” the Mayo Collaborative case. The court granted certiorari in part to answer the principle question of the appeal: Are human genes patentable?  Ass'n for Molecular Pathology v. Myriad Genetics, Inc, 133 S. Ct. 694 (U.S. 2012).

Assessing the Potential Impact of Myriad Genetics

The potential impact of the Myriad Genetics case is difficult to understate. Genes are the fundamental blueprints for human physiology, and we are only beginning to unravel the vast complexity of their application. By allowing private organizations to patent genes or gene variants, we run a serious risk of inhibiting discovery in this critical field by instilling a fear in scientist of facing patent infringement litigation as a result of their work.

On a more practical level, the diagnostic monopoly being enforced by the court allows Myriad Genetics to charge over $3,000 for the test. In contrast, many predict that scientists will be able to sequence an individual’s entire genome for a mere $1,000 in just a few years. The ability to access this incredibly valuable diagnostic information could be hindered if gene patents continue to be enforced. For example, if a patient’s whole genome is sequenced, it may be the case that her physician can’t share the results of the screening in terms of any BRCA outcomes without paying Myriad Genetics for the right to do so. Multiply this result by the thousands of genes that have been patented to this point, and the development of inexpensive full-genome screening could be undermined entirely, depriving the medical field of a critical diagnostic tool.

To date, the damage incurred by enforcing Myriad’s BRCA patent has been relatively minimal. Nevertheless, as the industry continues to grow and more and more genes are patented, this question is likely to arise more and more, with potentially greater consequences than we have seen in this case. Now that the Supreme Court has chosen to hear the case against Myriad Genetics, we may see the first definitive ruling on the patentability of human genes as early as this summer. We will continue to track this case on the blog through the Supreme Court arguments this spring and the ruling this summer. To track these and other interesting developments in the IP world, subscribe to the blog using the link to the right.